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CNO Financial Group, Inc. (CNO)·Q2 2025 Earnings Summary

Executive Summary

  • CNO delivered solid Q2 2025 operating results: net operating EPS of $0.87 and total revenues of $1.15B; operating EPS modestly above consensus and revenue materially above consensus, driven by strong insurance margins and investment income, while alternative investments remained below long‑term run-rate expectations . EPS $0.87 vs Wall Street $0.855; revenue $1,151.5M vs $966.8M; Values retrieved from S&P Global.*
  • Production momentum continued: 12th consecutive quarter of sales growth, record annuity collected premiums ($520.5M, +19% YoY), total NAP up 17%, and client assets in brokerage/advisory up 27% .
  • Capital deployment and balance sheet: $100M buybacks in Q2 (2.6M shares at $38.09), RBC 378%, debt-to-capital down to 34.6% after notes repayment; holdco liquidity at $187.1M .
  • Guidance reaffirmed; expense ratio range tightened to 19.0–19.2% (lowered upper bound), EPS range $3.70–$3.90, tax ~23%, excess cash flow $200–$250M, RBC ~375% .
  • Management highlighted durable demand in middle‑income markets, resilient annuity block with low churn, and growing D2C digital momentum (web/digital sales up 39% YoY) as catalysts .

What Went Well and What Went Wrong

What Went Well

  • Sales strength and distribution execution: “12th consecutive quarter of strong sales momentum… record total new annualized premiums… annuity collected premiums hit a new record” . Client assets in brokerage/advisory up 27% to $4.6B; registered agents up 6% .
  • Diversified product margins: Total insurance product margin held resilient with net positive claims experience in health and life; long‑term care favorable claims persisted . Segment margins stable to improving sequentially in health and fixed indexed annuities .
  • Capital discipline and shareholder returns: $100M buybacks, RBC at 378%, debt-to-total capital ex-AOCI reduced to 26.1% after debt repayment .

What Went Wrong

  • Alternative investments below target: CFO noted alternatives at ~6% vs 9–10% long‑term expectation, a partial offset to earnings .
  • Medicare Supplement claims tick-up: management sees modestly higher claims, planning average ~10% rate increases effective 1Q26 timing for most of book (filed now) .
  • Fee income flat and first-half free cash flow below plan due to timing (tax flows impacted by FIA statutory accounting); expect catch‑up in 2H .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$1,066.2 $1,097.2 $1,004.1 $1,151.5
Insurance Policy Income ($USD Millions)$641.5 $643.6 $650.7 $651.3
Net Income ($USD Millions)$116.3 $166.1 $21.5 $91.8
Diluted EPS ($)$1.06 $1.58 $0.21 $0.91
Net Operating Income ($USD Millions)$114.6 $138.0 $81.1 $87.5
Net Operating EPS ($)$1.05 $1.31 $0.79 $0.87
Total Benefits & Expenses ($USD Millions)$915.6 $886.7 $976.3 $1,033.5
Segment Insurance Product Margin ($USD Millions)Q2 2024Q4 2024Q1 2025Q2 2025
Annuity Margin$76.1 $55.0 $54.5 $54.8
Health Margin$135.9 $130.1 $126.2 $134.0
Life Margin$63.1 $68.0 $68.2 $63.6
Total Insurance Product Margin$275.1 $253.1 $248.9 $252.4
KPIsQ2 2024Q1 2025Q2 2025
Total New Annualized Premiums (NAP) ($USD Millions)$102.9 $105.7 $119.9
Annuity Collected Premiums ($USD Millions)$439.1 $442.0 $520.5
Client Assets in Brokerage & Advisory ($USD Millions)$3,626.8 $3,997.9 $4,591.7
Producing Agent Count (Total)4,859 4,820 4,961
RBC Ratio (Consolidated, %)383% (FY end) 379% 378%
Holdco Liquidity ($USD Millions)$372.5 (FY end) $250.0 $187.1
Q2 2025 Actual vs ConsensusConsensusActual
Operating EPS ($)$0.855*$0.87
Total Revenues ($USD Millions)$966.8*$1,151.5
Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating EPS ($)FY 2025$3.70–$3.90 $3.70–$3.90 Maintained
Expense Ratio (%)FY 202519.0–19.4 19.0–19.2 Lowered upper bound
Effective Tax Rate (%)FY 2025~23 ~23 Maintained
Excess Cash Flow to Holdco ($USD Millions)FY 2025$200–$250 $200–$250 Maintained
Consolidated RBC Ratio (%)FY 2025 Target~375 ~375 Maintained
Minimum Holdco Liquidity ($USD Millions)Ongoing$150 $150 Maintained
Target Leverage (Debt/Total Capital ex‑AOCI)Ongoing25–28% 25–28% Maintained
Dividend per Share ($)Next Payable 9/24/25—$0.17 declared Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
D2C life and digital channelsElevated TV ad costs impacted D2C; pivot to digital underway D2C leads down; web/digital 36% of D2C sales, up 28% YoY Web/digital sales up 39% YoY; ~1/3 of D2C; record D2C life sales Improving
Annuity sales and spreadsRecord annuity collected premiums; strong block persistency Annuity collected premiums +12%; strong persistency Record $520.5M; spreads stable; low churn vs industry Strong/Stable
Alternative investmentsContributed in 4Q24 Much improved YoY At ~6% vs 9–10% target; partial earnings drag Mixed
Medicare Supplement claims/pricingRobust MedSupp NAP; annual repricing capability MedSupp NAP +24%; fee income timing noise (MA accounting) Claims tick-up; average ~10% rate filings effective 1Q26 timing Slight pressure; pricing response
Medicare Advantage exposureDistribution-only; diversified carriers MA sales +42%; fee recognition timing ~20 carriers; no direct claim risk; fee sales flat; Optavise Clear launched Managed risk
Technology/AI/automationNoted operating leverage and tech efficiency Accelerated underwriting (87% instant decisions) 89% instant decisions; CRM rollout in worksite; TechMod expense $3.2M Execution progress
Capital & liquidityLeverage adjusted for note repayment; strong RBC Elevated buybacks; holdco liquidity $250M $100M buybacks; RBC 378%; liquidity $187.1M Within targets

Management Commentary

  • CEO: “We continue to deliver consistent, repeatable results… position us for sustained, profitable growth. Operating earnings per diluted share were $0.87.”
  • CFO: “Insurance product margins continue to benefit from consistent growth… rising book yields… yield on our alternative investments remained below our long-term run rate expectation.”
  • CEO on D2C: “Web and digital sales were up 39% versus the prior year and represented nearly 1/3 of our total D2C sales in this quarter.”
  • CFO on guidance: “We are reaffirming all guidance… lowering the upper bound in the expense ratio range to 19.2% from 19.4%.”
  • Press release: “Strong production; Solid financial results; On track to deliver 2025–2027 ROE targets.”

Q&A Highlights

  • D2C momentum: Management expects continued digital strength; recovery in lead generation; diversified beyond TV .
  • MedSupp pricing: Average requested rate filings ~10%, timing largely effective in 1Q next year; addressing modest claim uptick .
  • Annuity competition/spreads: Heavy industry competition, less in CNO’s middle‑income segment; spreads stable; low churn .
  • Free cash flow timing: First‑half below expectations due to tax timing linked to FIA statutory accounting; expect normalization in 2H .
  • Medicare Advantage exposure: ~20 carriers; distribution-only; no direct claims risk from carrier issues .
  • Bermuda reinsurance: Ongoing regulator discussions; aim to optimize entity; cautious on details until finalized .

Estimates Context

  • Q2 2025: Operating EPS $0.87 vs Street $0.855 (beat); Revenue $1,151.5M vs Street $966.8M (material beat). Values retrieved from S&P Global.*
  • Forward (Q3 2025): Street EPS $0.92; Revenue $973.5M. Values retrieved from S&P Global.*

Implication: Expect modest upward revisions to revenue assumptions and potential adjustments to alternative investment return assumptions; expense ratio tightening supports margins despite MedSupp claims normalization . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Sales engine is robust: Double-digit NAP growth and record annuity premiums signal sustained demand in middle‑income markets; strong distribution productivity and growing registered agent base support continued growth .
  • Earnings quality mixed but manageable: Core insurance margins and book yield expansion offset softer alternative returns; expect 2H free cash flow catch‑up from tax timing .
  • Guidance confidence: Reaffirmed FY EPS and ROE plan; tightened expense ratio reflects operating leverage; capital metrics within targets (RBC ~375%, leverage 26.1%) .
  • MedSupp claims and pricing: Modest claim uptick addressed via rate filings (~10% average) effective next year; product pricing flexibility aids margin stability .
  • D2C digital acceleration: 39% YoY growth in web/digital; CRM rollout and instant underwriting decisions enhance throughput, supporting life sales recovery .
  • Limited MA risk: Distribution-only exposure with diversified carriers; fee income timing noise under ASC 606, but underlying volumes healthy .
  • Capital returns likely continue: $100M buybacks in Q2 and $0.17 dividend declared for September; capacity to lean into buybacks subject to liquidity/RBC targets .