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May 04, 2022 at 04:37 PM
What You Need to Know
- Life and annuity issuers depend heavily on investments in bonds and similar instruments.
- Rates on new bonds are higher they were.
- The new rates are just starting to rise over the average yield CNO is earning on its assets.
Low interest rates weighed down investment earnings at CNO Financial for years.
In the middle of the first quarter, rates increased enough to stop acting like a bag of investment earnings lead, and to start acting like investment earnings helium.
Eric Johnson, CNO’s chief financial officer, talked about the lead-to-helium transition Tuesday, during a conference call the company held to go over its latest results with securities analysts.
Different pools of investments back different products, and that means the crossover points will be higher for some of the products than for others, Johnson said.
For some health lines, and for fixed annuities, “we’ve crossed over for those,” Johnson said. “In general, and on average, I think we’re probably pretty much there now.”
What It Means
Life insurance, annuities and disability insurance might once again become something that even publicly traded financial services companies really want to sell, not something that they apologize to securities analysts for offering.
You might be able to help clients find products with better benefits guarantees, with more rate stability.
Because a life and annuity issuer invests something like a big, long-lived retirement saver, CNO’s analysis might have some bearing on what happens to clients who buy and hold bonds and other long-term fixed-income instruments to maturity.
If those clients began building their portfolios in the early 2000s, they might be starting to get new-money rates that beat the rates on the products they already own.
The Earnings
CNO is a Carmel, Indiana-based company known for selling life insurance, annuities, supplemental health insurance products, and long-term care insurances with relatively short benefit periods.
The company is reporting $112 million in net income for the first quarter on $843 million in revenue, compared with $147 million in net income on $1 billion in revenue for the first quarter of 2021.
Annuity collected premiums increased to $369 million, from $325 million.
Long-term care insurance sales increased 6%, to $6.8 million.
