Suneet Kamath

Suneet Kamath asked about the lag between strong sales and earnings emergence, seeking a rule of thumb for how long it takes to hit target returns. He also inquired about the macroeconomic environment's impact on recruiting versus discretionary purchases and the expectation for producing agent count growth in 2026. Finally, he asked for an update on the cadence of Bermuda reinsurance transactions.

Answer

CFO Paul McDonough explained that earnings emergence varies by product but confirmed target returns are being met, supporting confidence in the 2027 ROE target and beyond. CEO Gary Bhojwani stated that producing agent count is expected to grow in 2026, but productivity is the primary focus. He noted that economic uncertainty (layoffs) helps recruiting but may hinder discretionary purchases, while Medicare supplements are more resilient. Paul McDonough added that while a second Bermuda treaty was completed, 2026 guidance doesn't include additional treaties, but past cadence might indicate future behavior. Gary Bhojwani emphasized respecting the regulatory process.

Suneet Kamath inquired about the earnings emergence profile for CNO Financial Group's strong sales over the past couple of years, specifically the lag between writing new business and achieving target returns. He also asked about the macroeconomic environment's impact on recruiting versus consumer discretionary purchases, CNO's outlook on producing agent count growth for 2026, and the expected cadence of Bermuda reinsurance transactions.

Answer

Paul McDonough, Chief Financial Officer, explained that earnings emergence varies by product duration but confirmed that current guidance reflects emerging earnings, supporting confidence in the 2027 ROE target. Gary Bhojwani, Chief Executive Officer, stated that producing agent count is expected to grow in 2026, though productivity remains the primary focus. He acknowledged the lack of visibility in the macroeconomic environment, noting that layoffs could aid recruiting but also make consumers more hesitant for discretionary purchases. However, he emphasized the consistent opportunity from 11,000 people turning 65 daily. Regarding Bermuda transactions, Paul McDonough indicated satisfaction with the second treaty and ongoing growth efforts, but the 2026 guidance does not include additional treaties, with Gary Bhojwani adding that CNO respects the regulatory review process.

Suneet Kamath from Jefferies asked about the diversification of Medicare Advantage carriers CNO distributes for and any potential risk from carrier claim payment issues. He also inquired if the record annuity sales were driven by unusual factors and asked about new business spreads.

Answer

CEO Gary Bhojwani confirmed CNO faces no risk from carrier payment issues and uses about 20 different carriers, mitigating concentration risk. He noted that any consumer shift from Medicare Advantage to Medicare Supplement would be favorable for CNO. On annuities, he stated there was nothing unusual in the record sales, though comps will get tougher. CFO Paul McDonough added that annuity spreads are currently stable year-over-year and sequentially, and a potential Fed rate cut is not expected to materially impact demand.

Suneet Kamath asked about the diversification of CNO's Medicare Advantage carriers and any potential risk from carrier claim payment issues. He also inquired if the record annuity sales were driven by anything unusual and asked about new business spreads and the potential impact of Fed rate cuts.

Answer

CEO Gary Bhojwani stated that CNO works with about 20 Medicare Advantage carriers, has no concentration risk, and faces no financial risk from their payment issues. He noted the record annuity sales were not due to unusual factors but reflected strong momentum and persistency. CFO Paul McDonough added that annuity spreads are stable and that potential Fed rate cuts are not expected to materially impact demand from their target market.

Suneet Kamath of Jefferies asked about the diversification of CNO's Medicare Advantage carriers and any potential risk from carrier-specific issues. He also inquired if the record annuity sales represented a new baseline and asked about the spreads on new business.

Answer

CEO Gary Bhojwani confirmed CNO has no direct risk from MA carrier payment issues and works with about 20 different carriers, mitigating concentration risk. He noted that any shift in demand from MA to MedSup benefits CNO. Regarding annuities, he stated the record sales were not unusual but comps will get tougher, while highlighting CNO's low churn. CFO Paul McDonough added that annuity spreads are stable and that potential Fed rate cuts are not expected to materially impact demand.

Suneet Kamath from Jefferies asked about the diversification of CNO's Medicare Advantage carriers and any associated risks. He also inquired if the record annuity sales were driven by unusual factors and asked about new business spreads.

Answer

CEO Gary Bhojwani confirmed CNO faces no material risk from its Medicare Advantage distribution, citing diversification across approximately 20 carriers. He also noted there was nothing unusual in the record annuity sales, attributing them to strong momentum and low policy churn. CFO Paul McDonough added that annuity spreads have remained stable both sequentially and year-over-year.

Suneet Kamath from Jefferies asked for the outlook on the consumer producing agent count, noting a sequential dip, and inquired about the insurance appetite of CNO's target market in a potential recession.

Answer

CEO Gary Bhojwani acknowledged potential quarterly fluctuations but expects year-over-year and full-year growth in agent count. He stated that while not immune to a recession, demand for CNO's products is resilient due to fundamental needs like the 11,000 people turning 65 daily and rising medical costs, citing strong performance through the recent pandemic and inflation.

Suneet Kamath of Jefferies LLC asked about potential cost savings from the $170 million tech investment, how its costs would be accounted for relative to operating results and ROE, and whether there is a risk of the Bermuda reinsurance market becoming saturated.

Answer

CFO Paul McDonough clarified the tech initiative is an investment to enable long-term growth, not a cost-saving play. He explained that while most costs will be classified as non-operating, all guidance metrics, including ROE, are inclusive of the full impact. Regarding Bermuda, McDonough stated he does not foresee saturation being an issue, describing it as an efficient market with a regulatory regime that has significant capacity for growth.

Suneet Kamath sought clarification on the Q4 investment income guidance assumption and asked whether the company's ROE improvement strategy is focused more on the numerator (earnings) or the denominator (equity).

Answer

CFO Paul McDonough clarified that the Q4 investment income guidance is a planning convention with some downside risk. Regarding ROE, he stated that efforts focus mostly on the numerator (earnings) but also include optimizing the denominator. CEO Gary Bhojwani added that improving ROE is the management team's top priority, driven by numerous small, specific initiatives across the business rather than a single large action.

Suneet Kamath questioned the earnings power of RGA's approximately $5 billion in capital deployed since 2023, specifically asking how much of the non-Equitable business ($3.5 billion) is currently at full earnings power.

Answer

EVP and CFO Axel André reiterated the 8%-10% EPS growth target, achievable with approximately $1.5 billion in annual capital deployment, and noted the Equitable transaction's ramp-up into 2026. President and CEO Tony Cheng added that all capital deployments involve a period of asset portfolio repositioning and earnings ramp-up, which is factored into intermediate-term EPS growth targets.

Suneet Kamath asked about the earnings power of the approximately $5 billion in capital deployed since 2023, specifically inquiring how much of the non-Equitable $3.5 billion is currently at its full expected returns. He followed up by asking if the non-Equitable business is fully earning at this point or if there's still more ramp-up expected.

Answer

Axel André, EVP and CFO, reiterated the 8%-10% intermediate-term EPS growth target, achievable with approximately $1.5 billion of annual capital deployment into in-force transactions, along with traditional flow business growth and consistent share repurchases. He noted that the Equitable transaction, occurring mid-2025, contributed to 2025 earnings with further ramp-up expected in 2026. He explained that capital deployment typically involves a period of asset portfolio repositioning and earnings ramp-up, which is factored into the intermediate-term EPS growth target.

Suneet Kamath of Jefferies questioned the conservatism of the assumption-driven $2 billion value of in-force credit. He also asked for commentary on the market perception that RGA's strategy is adding more risk, potentially contributing to a lower stock multiple despite higher targets.

Answer

EVP & CFO Axel André defended the VIF credit, citing a strict review process, conservative assumptions, and receiving less than 50% credit for the value. President & CEO Tony Cheng described the 'Creation Re' strategy as a proactive, innovative, and less risky approach than competing on commoditized business, expressing confidence that the market will eventually recognize the value created.

Suneet Kamath asked for an explanation of RGA's strong U.S. mortality experience given recent flu season data and a known large industry claim, and questioned how RGA turns the 'challenged' Equitable block into a high-return business.

Answer

CFO Axel Andre explained that favorable results were driven by lower-than-expected large claims, while smaller claims were slightly elevated, consistent with the flu season. Chief Risk Officer Jonathan Porter confirmed the large industry claim was fully reflected in Q1 results. Regarding the Equitable deal, CEO Tony Cheng highlighted its strategic value, while Axel Andre noted RGA's ability to reprice the business using its extensive data and that the deal only increases RGA's total mortality exposure by about 5%. Jonathan Porter added that capital, expense, and asset-side synergies all contribute to the value creation.

Suneet Kamath inquired about the disconnect between RGA's strong U.S. mortality experience and broader industry trends, and how RGA turns Equitable's challenged business into a high-return one.

Answer

CFO Axel André noted favorable large claims drove U.S. results, with smaller claims aligning with flu season trends. CEO Tony Cheng and CFO Axel André highlighted repricing, data expertise, synergies, and established risk management as key factors for Equitable.

Suneet Kamath asked for a conceptual bridge from the prior quarter's $700 million excess capital figure to the new $1.7 billion deployable capital metric. He also inquired about the timing and scale of the deployment opportunity in Japan related to upcoming ESR changes.

Answer

Chief Financial Officer Axel Philippe Andre confirmed the conceptual bridge was a decent way to think about it, noting the prior metric was conservative. President and CEO Tony Cheng described the Japan opportunity as being in the 'early innings,' explaining that clients tend to execute these transactions in tranches over many years, creating a long-term, sustained opportunity rather than a single event.

Suneet Kamath sought clarification that the decision to recapture a retroceded business block was entirely RGA's choice and inquired about the capital required to back this business and the potential for other sizable recapture opportunities.

Answer

President and CEO Tony Cheng emphatically stated the decision was "more than 100%" RGA's, driven by raising retention limits and the block's strong, seasoned performance. CFO Axel Andre added that the capital impact is marginal, increasing mortality exposure by only 1-2%, and is already factored into the current excess capital figure.

Suneet Kamath questioned the timeframe for Unum to manage down its excess capital, including RBC and holding company liquidity, given the 100% capital return target.

Answer

Rick McKenney, President and CEO, stated that Unum prioritizes growing the core franchise and disciplined acquisitions for capital deployment. He indicated no specific timeframe for managing down capital, as plans are reviewed annually, but emphasized comfort with the current robust capital base and shareholder deployment.

Suneet Kamath followed up on the Long-Term Care (LTC) strategy, inquiring about the current market interest from counterparties for LTC risk exposure and the potential for larger reinsurance transactions. He also asked for a timeframe regarding Unum's plan to gradually manage down its excess capital, including Risk-Based Capital (RBC) and holding company liquidity, to target levels.

Answer

President and CEO Rick McKenney noted continued, albeit ebbing and flowing, interest from various counterparties in both morbidity and asset aspects of the LTC block, confirming ongoing active discussions without anything imminent. He reiterated that the company remains committed to removing legacy exposure in a shareholder-friendly way. Regarding capital, Rick McKenney stated that there isn't a specific timeframe for managing down excess capital, as deployment priorities focus on organic growth and disciplined acquisitions, with annual plans reviewed to maintain a robust capital base.

Suneet Kamath asked for details on the $523 million in premium rate increases related to the reserve review, including how this compares to past requests, the assumed timeframe for approvals, and if a haircut for potential non-approval is factored in. He also inquired about Unum's observations on Group Disability recoveries, given reports from other companies about weaker recovery trends.

Answer

Chief Financial Officer Steve Zabel explained that Unum's approach to rate increases is consistent: assumption changes flow through cash flows to determine actuarially supported increases, then state-by-state experience is considered. The timeframe for approvals is typically three to five years, and Unum has a strong track record of success, often overperforming. President and CEO Rick McKenney added that it's a very mature process. Regarding Group Disability recoveries, Mr. McKenney stated that Unum's team does an excellent job, and recoveries have been strong and stable this year, cautioning against direct comparisons to other companies due to differing dynamics.

Suneet Kamath from Jefferies asked for a detailed breakdown of the $523 million in premium rate increases from the reserve review, including how this compares to past requests, the assumed timeframe for approvals, and if a haircut for potential non-approval is factored into the estimate. He also inquired about Unum Group's observations on Group Disability recoveries, specifically if they are seeing the same weakening trends reported by other companies.

Answer

CFO Steve Zabel explained that their approach to rate increases is consistent with past practices, flowing assumption changes through cash flows and assessing actuarially supported increases state-by-state, with a typical approval timeframe of 3-5 years. He confirmed they aim for a prudent yet reasonable best estimate, having historically overperformed. CEO Rick McKenney added that it's a very mature process. Regarding Group Disability recoveries, McKenney stated that Unum Group's team has maintained stable recovery trends throughout the year, cautioning against direct comparisons with other companies due to differing operational dynamics.

Suneet Kamath questioned the key drivers that support the reaffirmed 6% to 10% EPS growth guidance for the year, given the first quarter's results, and asked about the impact of technology on persistency.

Answer

CEO Richard McKenney and CFO Steven Zabel cited an expected improvement in the group disability loss ratio, normalization of alternative investment income, a favorable operating expense pattern, and momentum from growth and share repurchases. Chris Pyne, EVP of Group Benefits, added that while exact figures aren't disclosed, a significant portion of new business is tied to tech like leave management, which is expected to lift persistency over time.

Suneet Kamath inquired about the possibility of bundling non-LTC business in a risk transfer deal, the amount of capital needed for organic growth, and the potential size of M&A transactions.

Answer

CEO Rick McKenney confirmed that bundling other business lines with an LTC transaction is a possibility and not seen as a constraint. He described the capital required for organic growth as a steady and consistent need, not the largest use of capital. For M&A, he reiterated a focus on smaller, capability-driven transactions in the few hundred million dollar range, rather than large-scale deals, to enhance premium growth.

Suneet Kamath asked about the possibility of bundling non-LTC business to facilitate a risk transfer deal, the amount of capital needed for organic growth, and the potential size of M&A transactions.

Answer

CEO Rick McKenney stated that bundling other good returning business lines is a possibility and not a constraint for a potential LTC transaction. He described capital for organic growth as a consistent and manageable use. Regarding M&A, he reiterated a focus on smaller, capability-driven deals rather than large-scale acquisitions, consistent with prior commentary.

Suneet Kamath from Jefferies asked about the potential impact of a forthcoming industry study on long-term care (LTC) on Unum's Q4 assumption review. He also inquired about any changes in LTC risk transfer conversations and the depth of the counterparty market.

Answer

CFO Steven Zabel stated that Unum feels confident in its own experience data and does not anticipate a new industry study would drive changes in its Q4 statutory review. CEO Rick McKenney affirmed that Unum remains actively engaged in risk transfer discussions with multiple counterparties, seeing continued interest, but reiterated that any deal must be at the right price and structure.

Suneet Kamath also asked about the wealth management segment, specifically regarding increasing competition for advisors, the impact of sizable recruitment packages, the breakdown of the 12% growth in wealth planning between external hires and internal promotions, and the target market for advisor practices.

Answer

Nick Lane, President of Equitable Financial, highlighted the strong organic growth rate of $8.4 billion in net flows from existing advisors. He noted Equitable's distinct model for bringing new advisors into the industry, which fuels the growth of wealth planners (up 12% year-over-year and doubled since IPO). He stated that EXP hiring efforts recruited $1.4 billion in assets in 2025, targeting a large addressable market of Series 7 producers. Lane emphasized their disciplined approach and intentionality in targeting advisors, expressing bullishness on organic growth, productivity, and the role of EXPs as a force multiplier.

Suneet Kamath asked about the quality of Equitable Holdings' private credit portfolio, including any watch lists, specific sector focus, and how it contributes to the stock's perceived overhang. He also inquired about competition for advisors in wealth management, the proportion of external hires versus internal promotions for wealth planners, and the target market for new practices.

Answer

Robin Raju, CFO of Equitable Holdings, explained that private credit is 16% of the total General Account, with corporate private placements making up nearly 50% of that. He noted that direct lending is 1% of the total GA, and software exposure within direct lending is immaterial at 15 basis points, being underweight industry benchmarks. Onur Erzan, President of AllianceBernstein, added that AB's private credit is roughly $82 billion, with corporate direct lending being 25% of that, and highlighted zero net losses over a decade in $15 billion deployed with software companies, with only 3% having elevated risk ratings. Robin concluded that private credit is an important asset class for insurance liabilities and AB's underwriting discipline. Nick Lane, President of Equitable Financial, addressed wealth management, citing $8.4 billion in net flows from existing advisors and a 12% increase in wealth planners. He mentioned recruiting $1.4 billion in assets in 2025 through EXP hires and emphasized their distinct model for targeting advisors looking to grow or transition their practices.

Suneet Kamath from Jefferies asked about the sensitivity of Individual Retirement spreads to potential Fed rate cuts and the difference in economics for RILAs sold through affiliated versus third-party channels.

Answer

CFO Robin Raju clarified that RILA profitability is driven more by the 10-year Treasury, volatility, and corporate spreads rather than short-term rates, with pricing consistently targeting a 15% IRR. He and Nick Lane, President of Equitable, confirmed that products sold through their affiliated wealth management channel exhibit better persistency and higher margins.

Suneet Kamath of Jefferies questioned whether the theoretical benefit of RILAs in a volatile market was translating into actual incremental demand in April.

Answer

Nicholas Lane, President of Equitable Financial, confirmed robust sales in April, stating that research shows 70% of people are concerned about volatility's impact on retirement assets. CEO Mark Pearson added that Equitable's "all-weather" product portfolio, including RILAs for capital protection and income solutions, is an advantage in the current environment.

Suneet Kamath of Jefferies questioned whether strong annuity sales were driven by more contracts or market tailwinds and asked about the plan for the significant excess cash at the holding company.

Answer

Nicholas Lane, President of Equitable Financial, and CEO Mark Pearson confirmed annuity growth is from both a 15% increase in policy count and higher balances, supported by strong market fundamentals. CFO Robin Raju explained the excess capital will be deployed in a disciplined, year-over-year manner to fund growth and shareholder returns, not through a large one-time action.

Suneet Kamath asked about the primary drivers behind the sustained strength in industry-wide annuity sales and the biggest risks to this growth outlook. He also questioned if Equitable plans to expand its annuity product lineup beyond its RILA focus.

Answer

Mark Pearson, President and CEO, attributed the sales strength to peaking demographics of retirees and heightened product awareness, with the main risk being a significant drop in interest rates. Nicholas Lane, President of Equitable Financial, affirmed the company's intentional focus on the RILA segment, where its integrated business model provides a competitive advantage, noting the significant opportunity from assets moving out of 401(k) plans.

Suneet Kamath from Jefferies questioned the Group Benefits guidance in light of potential AI-driven workforce reductions, asking about observed customer-level hiring or layoff trends. He also inquired about the impact of unrealized losses in Japan on dividend capacity and the percentage of the Japan book reinsured out of Japan.

Answer

Ramy Tadros, Regional President and U.S. Head of Business at MetLife Services and Solutions, stated that the Group Benefits outlook incorporates observed employment actions, including AI-driven ones, and assumes these trends continue, balanced by strong sales and persistency. John McCallion, EVP and CFO at MetLife Services and Solutions, clarified that while unrealized losses are a factor, MetLife sees no constraints on Japan's dividend capacity, including during the transition to ESR. He added that a portion, but not a majority, of the Japan book has been reinsured, primarily through their Bermuda entity over the past decade.

Suneet Kamath asked for the percentage of MetLife's Japan book that has been reinsured out of Japan.

Answer

John McCallion, EVP and CFO, MetLife Services and Solutions, stated he did not have the exact percentage readily available but noted that reinsurance, primarily through MetLife's Bermuda entity, has been utilized for about a decade, representing a portion but not a majority of the Japan book.

Suneet Kamath from Jefferies asked for clarification on MetLife's 'efficient capital structure' in Japan and whether the reported 170-190% Economic Solvency Ratio (ESR) includes any company-specific adjustments.

Answer

John McCallion, CFO of MetLife, explained that the efficient capital structure leverages MetLife's significant presence in Bermuda for certain products, contributing to a more economic regime. He clarified that the 170-190% ESR range for Japan, expected from March 2026, follows prescribed rules and includes no company-specific adjustments. He also highlighted MetLife Japan's consistent dividend distributions, totaling over $4 billion to the holding company in the past five years.

Suneet Kamath asked if any of the $14 billion in PRT deals were going into Chariot Re, the difference in earnings impact, and for clarification on MetLife's efficient capital structure in Japan and whether the 170-190 ESR range includes any adjustments to FSA rules.

Answer

John McCallion, CFO of MetLife, explained that Chariot Re, launched in Q3 with nearly $10 billion in liabilities, is an ongoing part of their strategy to complement MetLife's capital for retirement business growth, with a temporary earnings impact of $15-$20 million per quarter for a $10 billion deal. Regarding Japan, he noted the efficient structure leverages their Bermuda presence for certain products, and the 170-190 ESR range follows prescribed rules with no adjustments, reflecting MetLife Japan's strong capitalization and consistent dividend distributions.

Suneet Kamath asked about the mixed performance in the Group Benefits sector, specifically regarding elevated claims, and inquired about the outlook for Chariot Re, particularly concerning third-party liability deals.

Answer

Ramy Tadros, Regional President - U.S. Business & Head of MetLife Holdings, explained that the pressure on the non-medical health ratio was not due to a surprising macro trend but rather normal fluctuations where several smaller products moved in the same direction. He expects a two-point improvement in the ratio in Q3 and another two points in Q4. Michel Khalaf, CEO, President & Director, clarified that Chariot Re is intended as a vehicle for MetLife's own originated liabilities to enable growth, not to pursue third-party deals in the near term.

Suneet Kamath of Jefferies asked about the drivers behind mixed results in the Group Benefits sector, questioning if elevated claims were a surprise or just volatility. He also inquired about the outlook for Chariot Re and the potential for third-party liability deals.

Answer

Ramy Tadros, Regional President - U.S. Business, stated that the pressure on the non-medical health ratio was not surprising and expects a significant improvement in the coming quarters. He attributed the Q2 result to a rare instance where multiple smaller product lines moved adversely at once, rather than a macro trend. CEO Michel Khalaf clarified that Chariot Re is primarily a vehicle to support MetLife's own growth with MetLife-originated liabilities, not for pursuing third-party deals in the near term.

Suneet Kamath asked about the share buyback pace, contrasting the strong first quarter with a more modest April, and questioned if any blackouts were in effect. He also asked how market volatility is affecting activity in the Pension Risk Transfer (PRT) market.

Answer

CEO Michel Khalaf clarified that the strong Q1 buyback was to catch up after being restricted in Q4 and that a more measured pace should be expected going forward, with no blackout periods affecting April's activity. Executive Ramy Tadros noted that while extreme volatility can be a distraction, the jumbo PRT plan sponsors MetLife targets are typically well-hedged, so they do not anticipate a significant change to the transaction pipeline.

Suneet Kamath inquired about the pricing strategy and competitive landscape for the Group Benefits segment, particularly in dental, and asked for the drivers behind the improved Value of New Business (VNB) metrics, including IRR and payback period.

Answer

Ramy Tadros, Head of U.S. Business, explained that while the market is competitive, it is not irrational, and pricing actions for dental should restore margins in 2025. CEO Michel Khalaf and CFO John McCallion attributed the VNB improvement to a better business mix towards high-return segments like Group Benefits and LatAm, capital optimization, and unit cost improvements, confirming it points to an upward ROE trend.

Suneet Kamath requested an explanation for the Aflac U.S. benefit ratio guidance of 48%-52%, given recent performance in the mid-40% range. He also asked about the expected impacts of the 'K-shaped economy' on U.S. consumer behavior and agent recruiting potential.

Answer

Max Brodén (CFO, Aflac Incorporated) explained the U.S. benefit ratio guidance is driven by actively increased benefit ratios on cancer and accident products due to low pandemic claims utilization, and a mix impact from the growing proportion of higher benefit ratio group life, disability, dental, and vision businesses. Virgil Miller (President, Aflac Incorporated and Aflac U.S.) reported no material impact from the K-shaped economy on agent recruiting, noting increased career recruiting, higher conversion rates, and enhanced productivity. He also highlighted a 10.5% increase in direct-to-consumer activity.

Suneet Kamath from Jefferies requested a breakdown of the factors influencing Aflac U.S.'s benefit ratio guidance of 48%-52%, given its recent mid-40% range. He also asked about the expected impacts of a K-shaped economy on consumer behavior and agent recruiting potential for Aflac's target market.

Answer

Max Brodén, CFO of Aflac Incorporated, explained the U.S. benefit ratio increase is due to actively raising benefit ratios on cancer and accident products (which were low during the pandemic) and a mix shift towards higher-benefit-ratio group life, disability, and dental/vision products. Virgil Miller, President of Aflac Incorporated and Aflac U.S., reported increased career recruiting and productivity, with no material impact from economic volatility. He also noted a 10.5% increase in direct-to-consumer sales, partly from ACA-affected individuals. Daniel Amos, Chairman and CEO, Aflac Incorporated, attributed past slowdowns in the traditional channel to COVID-related producer attrition, now being addressed by successful recruitment of higher-quality agents.

Suneet Kamath asked for Aflac's perspective on its Economic Solvency Ratio (ESR) calculation methodology and questioned the impact of lapse-reissue activity on the recent surge in cancer sales, asking if the new product targets new or existing customers.

Answer

An unnamed executive stated that Aflac uses the regulatory ESR model with USP (undertaking-specific parameters), which they believe is the right approach as it uses risk factors specific to their business. The executive also noted that lapse-reissue activity is in line with or slightly below internal expectations. A representative from Aflac Japan added that the new cancer product is being sold to both new and existing customers, with a special plan for children attracting younger demographics.

Suneet Kamath of Jefferies asked about Aflac's approach to calculating its Economic Solvency Ratio (ESR) in Japan and questioned the impact of lapse-reissue activity on the recent surge in cancer sales.

Answer

An Aflac executive clarified that the company uses the regulatory ESR model with undertaking-specific parameters (USP), which adds about 30 points and is believed to be more realistic for their business. The executive also stated that lapse-reissue activity for the new cancer product is currently in line with or slightly below internal expectations, while an Aflac Japan executive added the product is successfully targeting both new and existing customers.

Suneet Kamath asked for clarification on the ESR one-way hedge, questioning if it's designed to keep the ratio at its target, and also inquired about the decline in U.S. weekly average producers and the potential issue of agents selling non-Aflac products.

Answer

Max Broden, CFO, explained the hedge program is sized to manage a specific amount of risk (around 40-45 ESR points) and that the current ESR is well above target. Virgil Miller, President of Aflac U.S., noted the producer metric was anecdotal and that overall productivity is up. He highlighted a renewed focus on getting veteran agents to sell Aflac's dental product, which saw a 23% sales increase in Q1.

Suneep Kamath asked about the 2025 Stop Loss block's performance, questioning why it was only 'modestly better' than 2024 despite pricing actions, and if the two-year improvement process was extending. He also inquired about the information gained as claims experience develops from one-third to 90% complete.

Answer

Michael Katz, CFO of Voya Financial, stated that the exact amount of progress for 2026 would be clearer later in the year but reiterated confidence in taking action across pricing, risk selection, and reserving. He explained that the lag between claim events and reporting means that even 2025 claims may not be fully known until 2026, making it prudent to reserve at the higher end of best estimates due to the healthcare backdrop.

Suneet Kamath questioned why Voya Financial's 2025 Stop Loss block was only "modestly better" than 2024, suggesting a longer path to target loss ratios, and asked about the specific information gained as claims experience develops from 1/3 to 2/3 to 90% completion.

Answer

Mike Katz (CFO, Voya Financial) stated that the company is pricing the business to achieve target margins and expects continued progress in 2026, with more clarity by mid-to-late 2026. He explained that the lag between claim events and reporting means that while claims occur in 2025, awareness and assessment of the full range of outcomes become clearer in Q4 and Q1, necessitating a prudent approach to reserving at the higher end of best estimates.

Suneet Kamath of Jefferies revisited the stop-loss topic, asking if observed medical cost trends are consistent with January 2025 pricing assumptions. He also requested an update on retirement plan participant behavior regarding withdrawals and asset retention.

Answer

EVP & CFO Michael Katz reiterated Voya's cautious view on the 2025 stop-loss block, stating it is too early to confirm if claims trends are matching pricing assumptions. On participant behavior, CEO & Director Heather Lavallee noted that previously heightened surrender activity has started to normalize in 2025. She also highlighted favorable trends in transfers to fixed accounts and uptake in products utilizing the general account, which helps moderate outflows. CEO - Workplace Solutions Jay Kaduson added that plan retention remains strong at 97%.

Suneet Kamath from Jefferies questioned if the drive to increase utilization in the Voluntary business was a business decision or a regulatory impetus, and asked for the specific macro rationale behind strengthening reserves.

Answer

CFO Michael Katz confirmed the actions are a deliberate business strategy to increase customer value. CEO Heather Lavallee clarified the 'macro' concern is tied to potential unemployment increases, which can drive higher benefit usage, not market volatility. Katz added that the reserve strengthening was a precautionary measure, not a reaction to current trends, and that the additional IBNR will be held through Q3, pending a Q4 review of actual utilization.

Suneet Kamath asked about participant withdrawal rate trends in Wealth Solutions compared to historical levels and inquired about Voya's strategy for offering in-plan annuities within target-date funds.

Answer

CEO Heather Lavallee noted that participant surrender rates improved in Q4 but the company remains cautious for 2025. Regarding in-plan annuities, she explained that while Voya has existing capabilities and partnerships, it is an area of strategic focus for future development. She indicated that more details would be shared by the new head of Workplace Solutions in coming quarters, describing it as a 'stay tuned' situation.

Suneet Kamath asked whether the current Stop Loss challenges are a Voya-specific issue, similar to 2017-18, or a broader industry problem. He also requested insight into the historical net flow trends for the acquired OneAmerica business.

Answer

CEO Heather Lavallee explained it's a combination of two factors: Voya-specific underpricing of the 2024 book and a broader industry issue of elevated claim costs due to inflation. Executive Rob Grubka described OneAmerica's recent flow story as "more complicated," with plan retention in the low 90s, but noted Voya is focused on leveraging new relationships and capabilities to drive future growth.

Suneet Kamath requested an update on Ameriprise's Signature Wealth platform, including the percentage of advisors currently using it and any material differences in utilization between franchisee and employee advisors. Suneet Kamath also asked about Ameriprise's organic growth, seeking quantification of the seasonality benefit in Q4 and whether a long-term 4%-5% organic growth rate for Advice & Wealth Management remains a reasonable target.

Answer

Chairman and CEO Jim Cracchiolo reported that the uptake of Signature Wealth is one of Ameriprise's best rollouts, with a good percentage of accounts opened by advisors across both channels. He noted that advisors are in the early stages of adoption, getting comfortable with its comprehensive capabilities like portfolio construction, monitoring, rebalancing, centralized trading, and reporting, with more features like managed SMAs being added. CFO Walter Berman clarified that Q4 didn't have significant seasonality, but acknowledged it occurs in Q1 and Q4. He affirmed that the 4%-5% organic growth range, driven by organic aspects, is appropriate as an annual roll rate, with adjustments for seasonality and one-off events.

Suneet Kamath requested an update on the adoption of Ameriprise's Signature Wealth platform, including the percentage of advisors currently utilizing it and any observed differences in utilization rates between franchisee and employee advisors. He also asked for a quantification of the seasonality benefit in Q4 2025 organic growth and whether a 4%-5% organic growth rate in Advice & Wealth Management remains a reasonable long-term target.

Answer

CFO Walter Berman stated that the uptake of Signature Wealth is among the best for wrap-type advisory programs, with advisors across both channels opening accounts. He described the platform's rollout as being in 'early innings' but progressing well, with continuous additions of new capabilities. Regarding organic growth, Walter Berman confirmed that while Q4 sees seasonality, the 4%-5% range is an appropriate annual roll rate for Advice & Wealth Management, with quarterly adjustments for seasonality.

Suneet Kamath asked about the Comerica relationship following recent M&A, inquiring about its status and the associated assets under management. He also questioned the departure of two sizable practices and whether it indicates an increasingly competitive recruiting environment.

Answer

Chairman and CEO Jim Cracchiolo affirmed an excellent relationship with Comerica, noting strong favorable reviews for Ameriprise's platform and capabilities, and stated they would work with Comerica on future decisions post-acquisition. EVP and CFO Walter Berman added that assets with Comerica are around $15 billion with contractual protections. Regarding advisor departures, Jim Cracchiolo described them as 'one-off' RIA moves, acknowledging competitive offers but highlighting strong recruiting (90 advisors) and a solid organic business.

Suneet Kamath sought confirmation that organic growth from existing advisors, rather than recruiting, is the main growth driver. He also asked a broader question about the board's long-term vision, management succession, and potential strategic shifts.

Answer

Chairman & CEO James Cracchiolo confirmed that core organic growth is the primary driver of the business. He then gave a robust defense of the company's long-term strategy and success since its IPO, highlighting its top-tier performance, the strength of its diversified model, and its strong brand. He assured that the board is confident in its position and that succession planning is a continuous focus.

Suneet Kamath from Jefferies & Company Inc. sought to confirm the primary drivers of growth in wealth management and asked a broader question about the board's long-term strategic vision for the next 5-10 years, including succession planning.

Answer

James Cracchiolo, Chairman & CEO, confirmed that organic growth from the existing advisor base is the primary driver, supplemented by recruiting. He expressed strong confidence in the company's long-term strategy, highlighting its track record of high returns and shareholder value creation. He affirmed that the board feels very good about the company's position and that robust succession plans are in place.

Suneet Kamath inquired about the outlook for Advice & Wealth Management (AWM) net interest income (NII) and the bank's cash levels and earnings. He also asked for details on the new Signature Wealth UMA platform and its potential impact on the asset management business.

Answer

CFO Walter Berman stated that AWM NII should improve due to strategic actions like shifting the portfolio from floating to fixed rates and adding more liabilities to the balance sheet. Chairman and CEO Jim Cracchiolo described the Signature Wealth platform as a comprehensive, state-of-the-art UMA that provides flexibility for advisers to manage various investment models, including those from Columbia Threadneedle, in a streamlined manner.

Suneet Kamath of Jefferies asked about the outlook for Net Interest Income (NII) at the bank for 2025 and whether elevated client cash levels would normalize from 8% back to the historical 4-5% range.

Answer

Executive Walter Berman explained that the bank is well-positioned for 2025 NII after repositioning its portfolio to be 87% fixed-rate and adjusting client crediting rates. Executive Jim Cracchiolo added that while client cash levels are high due to attractive short-term rates, he expects them to decrease over time as money is redeployed, though not dramatically.

Suneet Kamath inquired about strategic initiatives to improve retail flows in Asset Management by leveraging the Advice & Wealth Management (AWM) division and asked for the rationale behind clients shifting cash from term products to money market funds.

Answer

CEO Jim Cracchiolo explained that the Asset Management team is actively working to introduce more products tailored for the AWM channel to increase flows. He noted the shift to money market funds indicates clients are keeping cash liquid for potential redeployment into longer-duration products like wrap accounts, rather than locking into term CDs.

Suneet Kamath inquired about Principal Financial Group's perspective on the private credit market, including performance, competition, and credit quality, and asked for metrics and insights on the wealth management opportunity with plan participants.

Answer

CFO Joel Pitz highlighted low credit losses and a portfolio credit loss below long-term estimates, attributing this to strong underwriting. President Kamal Bhatia noted modest private credit exposure, no direct exposure to recent troubled names, high selection ratios, and low leverage, while cautioning on rapid industry growth. CEO Deanna Strable and President Chris Littlefield described wealth management as a long-term build, reporting 90% plan sponsor adoption, a double-digit increase in advisory/retail customers, and a 20% increase in roll-ins.

Suneet Kamath asked for metrics on Principal Financial Group's wealth management opportunity, specifically regarding the 200 advisors helping plan participants, penetration rates, and asset retention within the franchise.

Answer

CEO Deanna Strable noted it's a long-term build. Chris Littlefield (President, Retirement, and Income Solutions) reported positive early indications: 90% plan sponsor adoption of advisory services, a double-digit increase in advisory and retail customers served through workplace personal investing solutions, and a nearly 20% increase in roll-ins from prior plans into Principal plans. He emphasized these are good early metrics for a long-term strategy.

Suneet Kamath of Jefferies asked for color on the continued negative flows in the Retirement and Income Solutions (RIS) segment despite strong earnings, and the outlook for the rest of the year. He also inquired about the strategy to capture participant rollovers.

Answer

President of Retirement & Income Solutions, Christopher Littlefield, explained that elevated markets pressure account value net cash flows, though the trend improved from the prior year. He noted stabilization in withdrawals and strong fee-based deposit growth. Regarding rollovers, he and CEO Deanna Strable described a long-term strategy focused on providing advice to participants along their journey, a shift from the previous education-only model.

Suneet Kamath of Jefferies inquired about sentiment and behavior within the small and medium-sized business (SMB) market amid recent volatility, and asked if choppy markets would lead to lower nominal participant withdrawals.

Answer

CEO Deanna Strable and Executive Amy Friedrich confirmed the SMB market remains resilient, citing a recent survey showing businesses are focused on supply chain and pricing adjustments rather than cutting benefits or staff. On withdrawals, Executive Christopher Littlefield confirmed that just as rising markets increase the dollar value of withdrawals, falling markets would have the converse effect, reducing the nominal amount. He reiterated the business is run for revenue and profit, not flows.

Suneet Kamath of Jefferies asked new CEO Deanna Strable about her M&A philosophy, particularly regarding the potential for large deals versus the stated capital allocation. He also inquired about the company's perspective on the rollout of in-plan annuity products in target-date funds.

Answer

CEO Deanna Strable affirmed that her M&A philosophy is consistent with the past, stating that while the company is inquisitive about opportunities, the bar for deals is high and M&A is not required to meet financial targets. She noted PFG has the capacity for a larger deal if it met all strategic, financial, and cultural criteria. President of Retirement and Income Solutions Christopher Littlefield described in-plan annuities as promising, especially when packaged in target-date funds, but noted that participant utilization is still in its early days despite growing plan sponsor adoption.

Suneet Kamath of Jefferies inquired about the drivers of participant withdrawals in the Retirement and Income Solutions (RIS) segment, asking if the rate was in line with history. He also asked about asset retention rates following a benefit event and plans for in-plan annuity offerings.

Answer

Executive Christopher Littlefield explained that about 75% of the increase in participant withdrawal amounts was driven by higher average account values from strong market performance, with only 25% due to a slight uptick in the withdrawal rate. He noted they retain a 'significant portion' of assets post-benefit event and are developing new retirement income solutions for 2025. CEO Dan Houston added that retained assets generate economics across various Principal business units.

Suneet Kamath first asked for the size and timing of the extraordinary dividend mentioned in the prepared remarks. He then questioned the company's approach to remeasurement and mortality, asking why continued favorable mortality, if expected, would not be incorporated into their best estimates for long-term assumptions.

Answer

Tom Kalmbach, EVP and CFO, confirmed the extraordinary dividend was an $80 million event in 2025. Regarding mortality assumptions, Kalmbach explained that while recent experience is favorable, they prefer to see it emerge consistently quarter-to-quarter before making changes to long-term valuation assumptions, especially given past discussions about potential pull-forward of deaths from the pandemic. Matthew Darden, Co-CEO, added that long-term assumptions are for the life of the business, and while recent experience is more favorable than pre-pandemic levels, they are reluctant to adjust long-term assumptions based on short-term trends.

Suneet Kamath asked for the size and timing (2025 vs. 2026) of the extraordinary dividend mentioned in the prepared remarks. He also questioned why favorable mortality, if expected to continue, would not be incorporated into the best estimates for long-term actuarial assumptions.

Answer

CFO Tom Kalmbach confirmed the extraordinary dividend was an $80 million event in 2025. Regarding mortality assumptions, Kalmbach explained that the company prefers to see favorable mortality emerge quarter-to-quarter before incorporating it into long-term valuation assumptions, given discussions about potential pull-forward of deaths from the pandemic. Co-CEO Matthew Darden added that long-term assumptions are for the life of the business, and while recent experience is more favorable than pre-pandemic levels, the company is reluctant to adjust long-term assumptions based on short-term trends.

Suneet Kamath from Jefferies noted the stock overhang from the ongoing regulatory reviews and asked about the company's strategy to resolve the matter, questioning if there was a proactive plan to conclude the investigations rather than waiting for the government agencies.

Answer

Co-Chairman & Co-CEO J. Matthew Darden responded that the company is engaged in proactive outreach to the agencies to bring the informal investigations to a resolution. He emphasized that while they are not in control of the timing, their goal is to conclude the matter and be able to discuss it publicly.

Suneet Kamath from Jefferies noted the stock overhang from regulatory reviews and asked if Globe Life had a strategy to proactively resolve the matter by year-end rather than waiting for government agencies to act.

Answer

Co-Chairman & Co-CEO J. Matthew Darden responded that the company engages in proactive outreach but is not in control of the timing of the government agencies. He reiterated that they have received no new requests this year and that their goal is to bring the informal processes to a conclusion that can be publicly discussed.

Suneet Kamath of Jefferies noted the stock overhang from the ongoing regulatory reviews and asked about the company's strategy to resolve the matter. He questioned whether Globe Life was proactively trying to conclude the inquiries or simply waiting for the government agencies to act.

Answer

Co-Chairman & Co-CEO J. Matthew Darden confirmed that the company engages in proactive outreach to bring the informal processes to a resolution. While noting that Globe Life is not in control of the agencies' timing and has received no new requests in 2025, he stated that bringing the matter to a conclusion that can be publicly discussed is a definite goal.

Suneet Kamath asked if there is typically a lag between environmental shocks and changes in customer behavior, and also requested an update on the potential for an 'all clear' on the outstanding regulatory reviews.

Answer

Co-CEO James Darden stated that confidence is based on trends seen throughout Q1 and into April, not just one month. He emphasized customer resiliency and the value they place on the product, even in tough economic times. Regarding the regulatory reviews, Darden said the goal is to reach a finalization that can be communicated, but the timing is difficult to predict.

Suneet Kamath of Jefferies asked if potential reinsurance deals are on hold pending the Bermuda subsidiary setup and whether remeasurement gains are factored into the 2025 earnings guidance.

Answer

CFO Thomas Kalmbach stated that while the priority is the Bermuda analysis, the company remains open to other reinsurance opportunities. Co-CEO Frank Svoboda added they might consider an interim deal to bridge the gap. Kalmbach also clarified that the 2025 earnings guidance range is intended to encompass scenarios with or without continued favorable mortality trends, which drive remeasurement gains.

Suneet Kamath from Jefferies questioned if the potential capitalization of a Bermuda entity would use parent company cash flow and sought clarity on whether the 2025 earnings guidance includes assumptions for future remeasurement gains.

Answer

CFO Thomas Kalmbach clarified that the Bermuda initiative is viewed as an opportunity to raise or release capital, not use it, due to its economic valuation framework. Co-CEOs Frank Svoboda and James Darden added that no benefit from Bermuda is in the 2025 guidance and any potential benefit would likely materialize in 2026. Regarding guidance, Kalmbach explained the underwriting margin range incorporates potential fluctuations, and if recent favorable mortality trends continue, remeasurement gains are likely.

Suneet Kamath of Jefferies asked about the status of the unassigned surplus in the Brighthouse Life Insurance Company (BLIC) subsidiary and whether the company still expects to take cash dividends from it. He also questioned the company's competitive position without a Bermuda captive or an alternative asset management partner.

Answer

Executive VP & CFO Edward Spehar explained that the negative unassigned surplus is a technical, not fundamental, issue related to the VA statutory framework and that the company's three-year plan still assumes it will take dividends. President & CEO Eric Steigerwalt added that the company achieves similar benefits through strong reinsurance partnerships and is actively considering its strategy regarding alternative asset management.

Suneet Kamath questioned the outlook for distributable earnings from the BLIC subsidiary in 2025 and asked whether, given the stock's flat performance over seven years, it would make sense for Brighthouse to be part of a larger organization.

Answer

CFO Ed Spehar reiterated that the company's three-year plan anticipates dividends from operating companies but declined to provide an annual forecast. CEO Eric Steigerwalt responded that the company's current strategy is designed to produce shareholder value and that management will continue to execute on it, including pursuing strategic initiatives to unlock capital.

Suneet Kamath inquired if the 'stable RBC' outlook means the ratio will hold at 400% and if it contemplates subsidiary dividends. He also posed a higher-level question about whether it makes sense for Brighthouse to remain a standalone public company given its operational complexity.

Answer

CFO Edward Spehar clarified that 'stable' implies remaining within the target range in normal markets and confirmed the financial plan does contemplate subsidiary dividends after the current year. CEO Eric Steigerwalt addressed the complexity question, acknowledging the challenges but emphasizing the company's long-term strategy to create shareholder value, citing the repurchase of over 50% of shares outstanding as evidence of their commitment to navigating complex periods.

Suneet Kamath questioned the recurring pressure on Brighthouse Financial's Risk-Based Capital (RBC) ratio and asked if the board had considered bringing in more risk management expertise. He also inquired about potentially increasing stock buybacks given the company's valuation.

Answer

CEO Eric Steigerwalt confirmed that Brighthouse has hired external resources and new staff in its hedging and finance areas to address the complexity of managing its VA and Shield hedging programs together. CFO Ed Spehar added that the key change going forward is expected to be less strain from new business, which has been the most significant factor in the RBC decline. Regarding buybacks, Steigerwalt noted the company has been opportunistic and maintains a robust capital position at the holding company while continuing repurchases.

Suneet Kamath of Jefferies inquired about the potential P&L impact from the increasing mix of annuity sales within the ISP segment. He also asked about product features in the annuity market and Primerica's strategy for selecting its product provider partners.

Answer

CEO Glenn Williams and CFO Tracy Tan both stated that the P&L impact is minimal, as profitability across products is similar over the long term, with the main difference being compensation timing. Williams emphasized that Primerica works with a narrow shelf of high-quality partners who avoid market "excesses," and a committee vets all products for suitability.

Suneet Kamath asked for clarification on the term 'resistance' regarding Term Life sales and questioned if the company was considering cost-cutting measures as ISP momentum potentially slows.

Answer

CEO Glenn Williams clarified that 'resistance' refers to a new customer objection stemming from economic uncertainty, which is a difficult hurdle for salespeople, particularly new ones. He noted this 'wait-and-see' attitude also affects some potential recruits. Regarding costs, Williams stated that while ISP momentum has slowed from Q1 levels, April was still strong with no 'cliffs in sight.' He emphasized that Primerica runs a lean organization, and while a cost-reduction plan exists, it is not a primary focus at this time.

Suneet Kamath questioned the disparity between the 7% growth in life representatives and only 1% growth in policies issued. He also asked about the rationale for the lower 3% agent growth guidance for 2025 and whether the company sells RILA products.

Answer

CEO Glenn Williams explained there is a natural lag in new agent productivity and that improving it is a key focus for 2025. He described the 3% growth guidance as a conservative 'reverting to the mean' after a strong 2024. He also confirmed Primerica sells index-linked variable annuities, with its sales mix shifting towards that product in line with industry trends.

Suneet Kamath of Jefferies inquired about the drivers behind strong annuity sales, whether product providers were showing irrational behavior, and asked for clarification on the status of the share buyback program.

Answer

CEO Glenn Williams attributed the annuity sales strength to attractive product features, an aging client base shifting to decumulation, and improved rep effectiveness, confirming that partners are acting rationally. CFO Tracy Tan stated that the $425 million share repurchase authorization for 2024 has been completed, with a 2025 program to be discussed soon.

Suneet Kamath questioned the capital efficiency of the new RILA product with 100% principal protection. He also asked if Jackson risk-manages its RILA and legacy VA blocks together and whether the Brook Re captive structure could be used for inorganic growth, such as acquiring a VA company.

Answer

CFO Don Cummings clarified that the new RILA product remains capital-light and the protection feature is common in the industry. He stressed that Jackson manages its VA and RILA blocks separately, although natural risk offsets create hedging efficiencies. Cummings confirmed that Brook Re could be leveraged for M&A to acquire complementary blocks of business, enhancing capital generation and providing optionality for capital deployment.

Suneet Kamath of Jefferies questioned the capital efficiency of the new RILA product with 100% principal protection. He also sought clarity on whether Jackson risk-manages its RILA and legacy VA blocks together and asked if the Brook Re reinsurance structure could be utilized for inorganic growth, such as acquiring a VA company.

Answer

CFO Don Cummings clarified that the new RILA product remains capital-light and its principal protection feature, while new to Jackson, is common in the industry. He confirmed that the RILA and VA blocks are managed separately, although their opposing equity risk profiles create natural hedging efficiencies. Cummings also affirmed that the Brook Re structure could potentially be leveraged for M&A to acquire complementary blocks of business, enhancing capital generation.

Suneet Kamath of Jefferies questioned the capital efficiency of the new RILA product with 100% principal protection. He also sought clarity on whether Jackson risk-manages its RILA and legacy VA blocks together and asked if the Brookree reinsurance structure could be used for inorganic growth, such as acquiring a VA company.

Answer

CFO Don Cummings explained that the new RILA product remains capital-light and that the principal protection feature is not unique in the industry. He clarified that Jackson manages its VA and RILA blocks separately, though there are natural hedging efficiencies. Mr. Cummings confirmed that the Brookree structure could potentially be leveraged for M&A to acquire complementary blocks of business, a decision that would be weighed against shareholder returns.

Suneet Kamath inquired about Jackson's M&A philosophy, its competitive strategy in spread-based products without an alternative asset manager, and the drivers behind the growth in fee-based advisory annuity sales.

Answer

CEO Laura Prieskorn stated that any potential acquisition would be evaluated against the value of share buybacks or balance sheet strengthening. On spread products, she emphasized a disciplined approach but openness to new strategies. CFO Don Cummings added that RILA is a key spread product seeing success without a formal partnership. Scott Romine, President of Jackson National Life Distributor, explained that growth in the fee-based channel is driven by providing adviser choice, building out financial planning tools, and the expansion of the RIA space.

Suneet Kamath requested information on what regular disclosures Jackson could provide to give investors comfort in Brooke Re's capitalization. He also asked why the company is not returning more of its significant excess capital to shareholders, given its high RBC ratio and holding company cash levels.

Answer

CFO Don Cummings stated that Jackson reviews Brooke Re disclosures quarterly and will share information on capital movements and provide a year-end summary, emphasizing its long-term, self-sustaining nature. Regarding capital return, he reiterated the company's "earn it and pay it" philosophy, noting the need for a capital buffer for market sensitivity and ongoing regulatory discussions. He suggested the high RBC ratio would likely decrease gradually over time rather than through a single large action.

Suneet Kamath of Jefferies asked about the difference between the over $1 billion in year-to-date capital generation and the lower level of holding company dividends, questioning if $1 billion is the expected annual distribution. He also inquired if RILA pricing incorporates diversification benefits and about the impact of basis risk from concentrated S&P 500 performance.

Answer

CFO Don Cummings clarified that 2024 distributions were unique due to the initial funding of Brooke Re. He noted that while he anticipates an increase in capital return for 2025, future distributions will depend on business performance. Cummings confirmed RILA is priced on a stand-alone basis without VA diversification benefits. He also stated that basis risk has been modest year-to-date due to a rigorous approach to fund management and the use of multiple hedging indices.

Suneet Kamath of Jefferies questioned the drivers of Lincoln's strong RILA sales amid rising competition and asked about the reasons for lower year-over-year net flows in the product. He also asked if the Bain Capital infusion should lead to an upward revision of the 2026 free cash flow conversion target.

Answer

CEO Ellen Cooper attributed strong RILA sales to their second-generation product's unique features and expanded distribution. CFO Chris Nezepore explained that higher RILA outflows are a natural result of the product block aging. Regarding free cash flow, Nezepore expressed confidence in the 45%-60% target for 2026, clarifying that while the Bain capital will boost long-term conversion, its deployment over the next 18 months means the full impact will be realized after 2026.

Suneet Kamath of Jefferies Financial Group Inc. questioned the rationale for issuing new equity to Bain Capital, given Lincoln's stated robust capital position, and asked where the annuity business's return on assets (ROA) might stabilize.

Answer

Chief Financial Officer Christopher Neczypor stated that issuing new equity directly to Bain Capital was crucial for creating strategic alignment and providing dedicated growth capital to accelerate the company's strategic priorities, particularly the expansion of spread-based products. He acknowledged the annuity ROA is declining due to the mix shift towards RILA and fixed annuities, which have better risk-adjusted returns, but did not provide a specific target for where the ROA would stabilize.

Suneet Kamath inquired whether the Bermuda-based reinsurer, Alpine, will primarily support new sales capital strain or be used for in-force block transactions. He also asked for a target for the company's expense ratio, which appeared flat throughout 2024.

Answer

CFO Chris Neczypor clarified that Alpine's immediate focus is on maximizing capital efficiency for new business, particularly fixed annuities and potentially retail life products, to grow spread-based earnings. Regarding expenses, he noted that the full benefits of 2024 cost actions will materialize in 2025, and while some savings will be reinvested for growth, investors should expect to see improvement in operating margins rather than just a decline in absolute G&A expenses.

Suneet Kamath inquired about Lincoln's year-to-date free cash flow performance relative to its 2026 targets and questioned the drivers behind the strong Q3 annuity sales, asking if it was a pull-forward effect from rate expectations.

Answer

CFO Chris Neczypor stated that free cash flow is tracking above expectations and the company is on target for its 2026 goals, detailing uses of cash like debt repayment and capitalizing its Bermuda subsidiary. CEO Ellen Cooper addressed annuity sales, attributing the strength to favorable demographics and higher interest rates, while emphasizing a strategic focus on profitable growth over sheer volume.

Suneet Kamath asked about the timing of elevated surrenders in Individual Retirement and the company's retention success. He also questioned the drivers behind the plan to grow the historically flat cash generation by 10%.

Answer

CEO Kevin Hogan acknowledged that higher volumes of annuities will exit surrender charge periods, mainly in the second half of 2025, but noted that attractive new business conditions should allow for continued growth of the general account. CFO Elias Habayeb clarified that the post-IPO strategy is to grow earnings to support a 60-65% payout ratio, and they are targeting 5-10% growth in insurance company dividends for the year, with continued growth expected over time.

Suneet Kamath from Jefferies asked for help sizing the potential impact of surrenders in Individual Retirement in 2025 and questioned the reason for the sequential decline in fixed annuity sales versus the industry.

Answer

CEO Kevin Hogan and CFO Elias Habayeb reiterated that while surrender volumes may rise, strong new business sales are expected to result in continued positive net inflows to the general account in 2025. Regarding fixed annuity sales, Hogan explained that the company prices dynamically on a weekly basis to focus capital on the most attractive risk-adjusted returns, which can cause short-term deviations from industry trends.

Suneet Kamath from Jefferies asked about the sustainability of strong industry-wide annuity sales into next year and requested more detail on the potential pressure on base spread income.

Answer

CEO Kevin Hogan stated that underlying demand drivers for annuities remain strong and the 5-10 year part of the yield curve is still supportive of attractive products. CFO Elias Habayeb clarified that a 25 basis point rate cut would impact base yield by less than 2 basis points, an effect that can be mitigated over time, and reiterated confidence in long-term spread income growth despite potential short-term pressure.

Suneet Kamath of Jefferies LLC asked about the drivers behind the significant sequential increase in the fixed annuity crediting rate, specifically the balance between old business roll-off and new business competition. He also questioned if the current high level of sales is necessary to sustain growth in base spread income.

Answer

President and CEO Kevin Hogan clarified that after adjusting for one-time items in previous quarters, nominal spreads were sequentially flat. He explained that the cost of funds is increasing as new business is written at higher rates than the lower-cost in-force business that is surrendering. An executive then added that spread income growth is driven by both new business and reinvesting at higher rates, noting the 130 basis point differential between new money and roll-off yields provides a tailwind, meaning record sales levels are not required for continued growth.

Suneet Kamath inquired about the strategic value of the individual life insurance business and asked for more details on the trend of surrenders in Japan, including any offsetting fees.

Answer

CEO Andy Sullivan defended the go-forward life insurance business as core to Prudential's purpose, capital-efficient, and a source of mortality balance, leveraging brand and underwriting strengths. CFO Yanela Frias noted that while Japan surrenders are stabilizing, they remain a headwind with an estimated $100 million impact to 2025 earnings, and most contracts are past the period for surrender fees. Mr. Sullivan added that they are mitigating this by diversifying products.

Suneet Kamath inquired about Prudential's 2025 annuity sales growth outlook in light of potential industry-wide declines and asked about the capacity for the Prismic reinsurance platform to pursue third-party deals in Japan following its recent internal transaction.

Answer

Caroline Feeney-Pfundstein, Head of U.S. Businesses, expressed confidence in annuity sales, citing nine consecutive quarters of growth, strong market tailwinds, and a diversified product portfolio that is capturing a shift towards RILAs. Vice Chairman Rob Falzon added that Prismic has a significant growth opportunity in the underserved Japanese reinsurance market, aided by the new ESR regime, and that the recent internal deal enhances its credibility for pursuing third-party business.

Suneet Kamath asked about the profitability of new retirement products in Japan compared to legacy protection products and questioned the sources and sustainability of the record annuity sales in the U.S.

Answer

Andy Sullivan, Head of International Businesses, responded that Prudential does not expect an impact on margins from the product mix shift in Japan and sees a long-term growth opportunity in retirement products. Caroline Feeney, Head of U.S. Businesses, attributed strong U.S. annuity sales to a diversified product portfolio and demographic tailwinds, expressing confidence in the franchise's sustainable outlook.

Suneet Kamath asked whether the recent decline in the 10-year Treasury rate might dampen demand for annuities and how Prudential is approaching pricing in this environment. He also followed up on Prismic, questioning if the next transaction would be smaller and whether the company is leaning towards a specific use case like in-force blocks or new business flow.

Answer

Caroline Feeney, Head of U.S. Businesses, acknowledged that while a rate decrease could cause a pullback in fixed annuities, Prudential's broad and diversified product portfolio mitigates this risk. She emphasized that customer demand for protected income remains a long-term driver and that the company can nimbly adjust pricing. Controller and Principal Accounting Officer Rob Axel clarified that the size of the next Prismic deal will be determined by the underlying liabilities, not by capital constraints. Vice Chairman Rob Falzon added that balance sheet optimization is the highest priority for Prismic, followed closely by new business flow and third-party deals.