3 Things Unum and CNO Said About You

When many health insurance company executives are talking to securities analysts during conference calls, they sound as if they want to run walk-in clinic companies that focus mainly on telling people to exercise.

Many executives from life insurers seem to want to grow up to be financial planning companies.

(Related: Lower Interest Rates Hurt: Annuity Issuers)

Executives from Unum Group and CNO Financial Group Inc., like executives from Aflac Inc., spend some time talking about how they want to work with live humans to sell insurance products and annuities.

The Earnings

Executives from CNO and Unum talked to the securities analysts during conference calls they held to go over their latest financial results.

CNO reported $38 million in net income for the second quarter on $980 million in revenue, compared with $102 million in net income on $1 billion in revenue for the second quarter of 2018.

Much of the drop in earnings was due to a $36 million change in the fair value of embedded derivative liabilities related to the company’s indexed annuities.

Spending on commission expense and distribution fees increased to $15 million, from $13 million, at the Bankers Life unit, and to $22 million, from $19 million, at the Washington National unit.

The number of quarterly average producing agents increased 3% at Bankers Life, to 4,294, and 7.4% at Washington National, to 726.

Sales of long-term care insurance increased to $4.7 million, from $3.7 million.

Unum reported $281 million in net income for the latest quarter on $3 billion in revenue, compared with $286 million in net income on $2.9 billion in revenue for the year-earlier quarter.

The main U.S. group insurance unit, Unum US, reported $254 million in operating income for the latest quarter on $1.7 billion in revenue, up from $251 million in operating income on $1.6 billion in revenue.

Commission spending increased to $158 million, from $152 million.

The Colonial Life worksite unit reported $84 million in operating income for the latest quarter on $459 million in revenue, compared with $85 million in operating income on $436 million in revenue.

Commission spending at Colonial Life increased to $95 million, from $91 million.

1. CNO wants agents who can help it sell annuities.

Gary Bhojwani, CNO’s chief executive officer, said agent recruiting and retention efforts have helped improve both agent retention and agent productivity.

“Our strategy is to recruit fewer, more productive agents which is translating into stronger sales and better overall retention,” he said.

Executives said keeping agents longer can help improve customer satisfaction as well as agent productivity.

2. Unum’s Colonial Life unit is hungry for good agents.

Unum executives told analysts Colonial Life’s sales were somewhat soft during the second quarter, partly because the company had trouble recruiting new agents.

Timothy Arnold, the president of the Colonial Life unit, said one challenge was that 2018 sales were so strong that agents had to work hard to help set up all of the new cases.

Another challenge has been the low unemployment rates, Arnold said.

When unemployment rates are so low, “recruiting can be a challenge,” Arnold said.

The new agents who are joining Colonial Life are more productive, Arnold said.

3. Colonial Life still has some ideas about what its producers should be like.

Arnold said that, in spite of the recruiting challenges, Colonial Life ended a “very small number of high-volume brokerage relationships” in the second quarter.

The kind of business Colonial Life was getting from those brokers had “very low quality low persistency,” and, in some cases, there were indications that the “brokers, perhaps, valued compensation more than they valued a strong customer experience and value to the customer,” Arnold said.

But eliminating those relationships created headwinds, Arnold said.