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CNO More Optimistic About Long-Term Care Insurance Deal

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(Related: Bankers Life Faces Sophomore Agent Slump)

An insurer or investor group could soon take at least some Bankers Life long-term care insurance (LTCI) risk off of the shoulders of CNO Financial Group Inc.

CNO executives talked about new opportunities to make LTCI deals Thursday, during a conference call with securities analysts.

Gary Bhojwani, CNO’s chief executive officer, said the company wants to work with a credible counterparty that offers a good deal structure. But he added that CNO sees many interesting “consortiums and other market opportunities” right now.

“I’m very surprised by the number and nature of the parties that are out there, looking to do things,” Bhojwani said.

CNO executives said, several times, that using some capital to transfer LTCI risk to a counterparty is a company priority.

Executives said that the durations of the assets backing the company’s LTCI policies match the durations of the LTCI obligations well, and that good asset-liability matching should make finding a party to assume some of the risk easier.

State insurance regulators also seem to be more flexible, Bhojwani said.

In other sectors, the entity acquiring a company, or a block of insurance policies, usually pays to the seller. In the LTCI sector, because potential acquirers are so worried about LTCI claim risk, the insurer disposing of the LTCI business often has to pay extra cash to the entity assuming responsibility for the LTCI business.

CNO is still interested in offering short-term care insurance, a product that’s similar to LTCI but involves less exposure to the effects of low interest rates on investments. Short-term care insurance policies typically provide benefits that are comparable to  those of stand-alone LTCI policies, but for periods of 12 or fewer months.

CNO executives said they are excited about the results from a company short-term care insurance pilot program.

Bankers Life Agents

Executives also talked about efforts to improve insurance agent retention, especially at Bankers Life.

Analysts noted that some insurers pay agents at least minimum wage. Bhojwani said CNO agents are all commission-only independent contractors.

“You have more folks willing to try a career change like that when you’re talking about an 8% unemployment world than when you’re talking about a 3% unemployment world,” Bhojwani said.

But Bhojwani said that, in the future, Bankers Life might find ways to improve new-agent support, so that the company might bring in 3,000 new agents and end up with 200 or more agents still in CNO’s distribution force three years later.

Today, Bhojwani said, Bankers Life might bring in 7,000 new agents and end up with just 100 left after three years.

“There’s a lot of churn,” Bhojwani said.

One thing CNO is trying to do is to provide more support for agents who reach a certain performance threshold, Bhojwani said.

CNO Results

CNO held the conference call to go over its first-quarter earnings.

The Carmel, Indiana-based company is reporting $84 million in net income for the quarter on $1 billion in revenue, compared with $62 million in net income on $1.1 billion in revenue for the first quarter of 2017.

The Bankers Life LTCI unit collected $110 million in premium revenue, down from $117 million in the year-earlier quarter.

New annualized premiums from LTCI sales fell to $5 million, from $5.7 million.

— For a sampling of our long-term care insurance market coverage, see Long-Term Care Planningon ThinkAdvisor.

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