CNO Financial Group CNO is well-poised to grow on the back of improved annuity premiums, higher direct-to-consumer life sales and a declining level of benefits and expenses.
CNO continues to benefit from strong performances in its consumer and worksite divisions. A strong Medicare supplement enrolment added to the positives. It is a top-tier holding company for a group of insurance companies which develops, administers, and markets supplemental health insurance, annuity, individual life insurance and other insurance products.
Return on Equity (ROE)
Return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 12.7% in the trailing 12 months, better than the industry average of 8.8%.
Zacks Rank & Price Performance
CNO currently sports a Zacks Rank #1 (Strong Buy). Its shares have gained 15% in the past six months against the industry’s decline of 6.4%.
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Optimistic Growth Projections
The Zacks Consensus Estimate for CNO’s 2023 earnings is pegged at $2.69 per share, indicating a 15.5% increase from the year-ago reported figure of $2.33. The same for CNO’s 2023 sales is pegged at $3.7 billion, indicating a 3.5% increase from the year-ago reported figure of $3.6 billion.
The company beat earnings estimates in two of the past four quarters, met once and missed on the other occasion, the average surprise being 14.2%.
In 2022, a significant portion of CNO’s premium collected came from annuities, which improved 14.6% from 2021. The figures are expected to further grow in the coming days due to higher demand.
The integration of agent field force with virtual direct-to-consumer business bodes well for the Consumer division. Improved direct-to-consumer life sales and supplemental health sales are contributing to the strong performance in the Consumer division. Efficiently spending on advertising, solid policy conversion rates and enhancing distribution delivered growth in the direct-to-consumer life sales business.
CNO’s approach to Medicare products and its diverse product portfolio act as a competitive strength. Its omnichannel distribution and the unique ability to combine a virtual connection with the in-person agent force are key differentiators.
The Worksite division, through which the company focuses on high-growth business, is also performing well. Insurance sales were up 20% in 2022 due to stable employee persistency, strong retention of existing employers and higher producing agent counts.
CNO has invested significantly in technology to improve agent productivity, sales and advertising. This is expected to improve the online customer experience and enhance productivity. The company, in its digital health insurance marketplace, namely myHealthPolicy.com, expanded the number of Medicare advantage plans, which will enable consumers to compare plans and enroll online through an agent or over call.
The company also launched a worksite brand, “Optavise”, in mid-2022, which served to unify the company’s worksite capabilities into a single place for employees and employers. The company expects to leverage the capabilities of Optavise and expand its market reach. Using this platform, their agents can connect with employees seamlessly, giving rise to higher attendance and engagement with customers and improving the virtual customer experience.
CNO Financial has also been taking measures to lower costs, which resulted in a decrease of 13.9% in 2022. This decrease resulted from lower insurance policy benefits and other operating costs and expenses.
CNO has worked on both its organic and inorganic growth fronts, as well as on expenses to improve profitability, which poises it well for growth in the future.
The company returned $244.8 million to its shareholders through dividends and share buybacks in 2022. The management also raised its dividend in May 2022, implying that it’s a good buy for an investor looking for returns in the form of dividends.
A Risk to Keep an Eye on
The company’s high leverage, and lower cash and cash equivalents are concerning. Its long-term debt-to-capital stands at 66.5%, significantly higher than the industry’s average of 35.7%. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Other Top-Ranked Players
Some other top-ranked stocks from the Insurance – Multi line space are Goosehead Insurance GSHD, Old Republic International ORI and Oscar Health OSCR. Goosehead and Old Republic International currently sport a Zacks Rank #1, and Oscar Health carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Goosehead Insurance’s bottom line outpaced estimates in two of the trailing four quarters and missed the other two. The average earnings surprise is 79.8%.
The Zacks Consensus Estimate for GSHD’s 2023 earnings indicates a 67.3% rise, while the same for revenues suggests 26.6% growth from the prior-year reported figures.
The bottom line of Old Republic International outpaced the Zacks Consensus Estimate in three of the trailing four quarters, while it missed in one, the average surprise being 21.9%. The consensus mark for ORI’s 2023 earnings has moved 7.3% north in the past 60 days.
Oscar Health’s bottom line outpaced estimates in two of the trailing four quarters and missed the other two. The average earnings surprise is 3.4%.
The Zacks Consensus Estimate for OSCR’s 2023 sales indicates a 35.2% rise from the prior-year reported figures.
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