CNO Financial Group, Inc. (CNO) Earnings

Management highlights

- **Core Competitive Positioning** - The company's exclusive focus on the middle market and captive last-mile agent distribution model creates a durable, hard-to-replicate competitive advantage that drives consistent sales and profitable growth - A diversified product portfolio balanced across customer lifecycle needs and mortality, morbidity, and longevity risk is a unique market strength that supports lasting customer relationships and consistent performance - Medicare remains a flagship door-opening product that helps expand the number of households the company serves, supported by strong demographic tailwinds (11,000 Americans turn 65 daily) - **Operational Shifts and D2C Transition** - The D2C life insurance channel is shifting marketing spend from television to more efficient web, digital, and third-party partner channels; non-television channels now generate 72% of D2C live sales - This transition is expected to create some quarterly sales variability, but management remains confident in the channel's long-term prospects - The worksite division's growth is balanced between geographic expansion and deeper penetration of existing markets, with small-to-mid-sized businesses and associations as the core focus - **Capital Management and Financial Strength** - CNO maintained a robust capital position, returning $77 million to shareholders in the quarter; $60 million was deployed to share repurchases, reducing weighted average diluted shares outstanding by 5% - Book value per diluted share (excluding AOCI) was $39.92, up 5% YoY - The expense ratio for Q2 2026 was 18.4%, reflecting continued favorable expense performance, which management views as a timing difference that will normalize in the second half of the year - **Sales and Distribution Momentum** - The company delivered its 16th consecutive quarter of total sales growth and 14th consecutive quarter of producing agent count growth - Strong agent productivity and retention across both divisions fuels ongoing sales momentum

Guidance

- Management raised full-year 2026 operating earnings per share guidance to a range of $4.60 to $4.80, representing an 8% increase at the midpoint from the prior guidance range - The full-year 2026 expense ratio guidance was narrowed to 18.8% to 19.0%, reducing the upper bound by 20 basis points, driven by improved operating leverage from stronger-than-expected sales; full-year expense dollars remain consistent with original guidance - The full-year 2026 effective tax rate assumption was lowered to approximately 21.5% - All other 2026 guidance metrics (target RBC ratio, holding company liquidity, leverage targets, full-year free cash flow expectations) were reaffirmed - Management expects 2026 operating return on equity to exceed the 12% three-year target previously set for year-end 2027; 12% ROE was a waypoint, not an end target, and management plans to improve ROE annually through 2027 and beyond, with the ultimate goal of reaching top-quartile ROE among peer groups. New ROE targets will be announced in February 2027 per normal planning cadence - Management expects to move closer to target capital levels across operating subsidiaries (including Bermuda) in the second half of 2026, which will support free cash flow generation, subject to customary regulatory approvals

Segment performance

### Consumer Division - Total new annualized premiums (NAP) grew 7% year-over-year (YoY), extending the company's 16th consecutive quarter of sales growth. Key segment results: - Total health NAP: up 17% YoY (16th consecutive quarter of growth) - Supplemental health NAP: up 5% YoY - Long-term care NAP: up 4% YoY - Medicare supplement NAP: up 52% YoY (third consecutive quarter of >50% growth); total Medicare policies sold up 12% YoY - Life NAP: down 9% YoY, driven by lower direct-to-consumer (D2C) sales against a strong 2025 comparable - Annuity collected premiums: $536 million, up 3% YoY (new quarterly record); annuity account values up 7% YoY - Brokerage and advisory: client assets up 24% YoY to a new record, total accounts up 13% YoY - Producing agent count: up 3% YoY (14th consecutive quarter of growth); registered agents up 4% YoY ### Worksite Division - Extended 17th consecutive quarter of sustained sales growth; record life and health NAP up 29% YoY (7th consecutive quarter of double-digit insurance sales growth). Key segment results: - NAP from new clients: up 84% YoY - Life sales: up 44% YoY; hospital indemnity up 33% YoY; accident up 31% YoY; critical illness up 7% YoY - Producing agent count: up 6% YoY (16th consecutive quarter of growth) - The optimized career agency channel generates ~90% of total worksite insurance sales ### Corporate and Overall - Operating earnings per diluted share (excluding significant items): $1.26, up 45% YoY - Net investment income: up 8% YoY (11th consecutive quarter of growth); net investment income not allocated to products up 46% YoY - Trailing 12-month operating return on equity (excluding significant items): 13.1% - Consolidated risk-based capital ratio: 377% (above target)

Risks & headwinds

- The ongoing marketing channel transition in the D2C life insurance business may create additional quarterly sales variability in the near term - Annuity pricing faces competitive pressures and a market "arms race" from new entrants, though management notes CNO's captive distribution and middle-market focus insulate the business from most of this pressure - Large isolated claims on older supplemental health policies negatively impacted margins in the quarter, though management does not expect this to reflect an underlying trend change - The strong recent sales streak creates difficult year-over-year quarterly comparables that could lead to a quarterly sales decline at some point, even with healthy long-term fundamentals - Moving excess capital out of the Bermuda subsidiary and seeding additional blocks of business there remains subject to regulatory approval, with no guarantee of timely or favorable outcomes

Analyst Q&A

• Q: Long-term care margins have improved steadily for years; is the current stronger claim experience sustainable as a long-term level? /

  A: Management reviews long-term care claim assumptions annually in the third quarter, and will conduct a full review of recent trends this upcoming third quarter. Current experience shows modestly lower claims than expected, falling within the favorable end of existing assumptions, and management will share updated results after the annual review on the Q3 earnings call.

• Q: What is driving the strong growth in interest-sensitive life sales in the worksite division? /

  A: The growth comes from a combination of geographic expansion, deeper penetration of existing markets, and multi-year investment in emphasizing life insurance within the worksite channel. It also reflects good market demand, employer encouragement, and a mature, trained sales force that understands how to position these products effectively. Growth comes from consistent incremental execution rather than major strategic or product changes, and management expects this trend to continue.

• Q: What is the size of the recent Medicare supplement reserve release, and what is the expected run-rate margin moving forward? /

  A: The favorable reserve release from better-than-expected Q1 2026 claims development was approximately $4 million. Claims reserves for Medicare supplement develop quickly, so combining the first half results with this adjustment gives a good indication of the product's ongoing run-rate margin.

• Q: How do you think about capital deployment priorities now that the stock trades above book value, and what is the update on moving additional business blocks to Bermuda? /

  A: Capital deployment priorities have not changed: the company first reinvests in growth initiatives (such as the ongoing TechMod infrastructure update), maintains target capital and liquidity levels, evaluates selective inorganic growth opportunities, and returns remaining excess capital to shareholders via dividends and share repurchases. Management still believes the company is undervalued even at current prices above book value. Management declined to share specific details on moving additional blocks to Bermuda, as the process is still subject to regulatory approval, but confirmed that the company is working to address excess capital built up in the Bermuda entity, which will support 2026 second half free cash flow if approved.