5 Clues About Indexed Annuities From CNO's Earnings

CNO Financial hopes to continue to be a publicly traded U.S. company that provides attractive annuity guarantees — by setting up its own reinsurance company in Bermuda.

Executives from the Carmel, Indiana-based insurer talked about their strategy for staying in the non-variable annuity game Tuesday, during a conference call they held to go after first-quarter earnings with securities interest.

Ameriprise and Principal Financial Group also write annuities, and they announced their earnings before CNO, but CNO executives are the first to talk much about the annuity business during their earnings call. What they said might provide some clues about what’s going on elsewhere in the U.S. individual annuity market.

For a look at five things CNO and its executives said in the first-quarter earnings presentation, and during the first-quarter earnings call, see the gallery above.

What It Means

If CNO sets the patterns for the latest round of quarterly earnings releases, the publicly traded companies already in the annuity market seem likely to stay in.

Gary Bhojwani, CNO’s CEO, told analysts during the call that CNO is off to a positive start for the year.

“The fundamental health of the business is solid,” he said.

One fear has been that rising interest rates could lead to disintermediation, or moves by clients to move assets from annuities or other products with relatively low fixed rates into arrangements that appear to offer higher returns.

But, at CNO, “annuity persistency remains within expected ranges,” Bhojwani said. “This is primarily due to our model of distributing annuity products exclusively through our captive agents.”

The Earnings

CNO sells Medicare supplement insurance, Medicare Advantage plans, life insurance and other insurance products aimed at middle-income Americans, in addition to non-variable annuities and long-term care insurance.

After all of the turmoil, CNO reported a $800,000 net loss for the latest quarter on $1 billion in revenue, compared with $183 million in net income on $843 million in revenue for the first quarter of 2022.

But CNO’s net operating income fell only modestly, to $59 million, from $65 million.

Operating income excludes the effects of the new Long Duration Targeted Improvement accounting rules and other “mark to market” rules that now require companies to include changes in the estimated value of insurance benefits promises and derivatives arrangements in their quarterly results.

Sales of non-variable indexed annuities increased to $47 million, from $45 million; total annuity sales increased to $57 million, from $56 million; and the amount of non-variable indexed annuity benefits promised increased to $9.2 billion, from $8.5 billion.

Gary Bhojwani (Photo: CNO)