CNO Financial Group, Inc. (CNO) Q2 2017 Earnings Report, Transcript and Summary

Good morning everyone. My name is Jess, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Second Quarter 2017 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Adam Auvil, you may begin your conference.

Good morning, and thank you for joining us on CNO Financial Group’s second quarter 2017 earnings conference call. Today’s presentation will include remarks from Ed Bonach, Chief Executive Officer; Gary Bhojwani, President and CEO successor; and Erik Helding, Chief Financial Officer. Following the presentation, we will also have several other business leaders available for the question-and-answer period. During this conference call, we will be referring to information contained in yesterday’s press release. You can obtain the release by visiting the media section of our website at www.cnoinc.com. This morning’s presentation is also available in the Investors section of our website and was filed in a Form 8-K earlier today. We expect to file our Form 10-Q and post it on our website on or about August 4. Let me remind you that any forward-looking statements we make today are subject to a number of factors, which may cause actual results to be materially different than those contemplated by the forward-looking statements. Today’s presentation contains a number of non-GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures. You’ll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout this presentation, we’ll be making performance comparisons, and unless otherwise specified, any comparisons made will be referring to changes between second quarter 2016 and second quarter 2017. And with that, I’ll turn the call over to Ed.

Thanks, Adam, and good morning. CNO posted another quarter strong results, as the diversity of our franchise and sound business management continue to drive consistent profitable growth. Our disciplined approach to pricing, underwriting, business priorities and investments has produced gains in both revenues and earnings while maintaining a strong balance sheet. Highlights for the quarter include a 7% increase in total collected premium and a 16% increase in first year collected premium. Annuity account values grew 4% as we continue to benefit from the success of our guaranteed lifetime income annuity coupled with strong persistency. Gary will touch on the primary drivers of our growth in a few minutes. Operating earnings per share increased 29%, driven by favorable underwriting margins, investment income and capital management. We returned $84 million to shareholders in the quarter and $141 million year-to-date, while maintaining strong capital and liquidity. And with that I’ll now turn the call over to Gary to discuss our segment results. Gary?

Thanks, Ed. Moving to Slide 6, Bankers Life collected premiums increased 8%, primarily due to annuities being up 28%. Annuity account values increased 5% and are just below $8 billion. Health new annualized premium or NAP deceased 10% compared to the prior year driven primarily by lower Medicare supplement sales. NAP from life products decreased 17% continuing the shift in purchases, we’ve recently seen from life policies to annuity contracts with living benefits. Customer asset values and registered advisers accounts continue to grow at our broker dealer and registered investment advisor. The last 12 months average first and second year producing agents decreased 10% compared to the prior year, while average producing agents in the third year or later were flat. As mentioned last quarter, we continue piloting various enhancements or agent recruiting and retention models with the primary goal of increasing veteran agent accounts. Turning to Washington National; total collected premiums were up 1% with a 4% increase in supplemental health, partially offset by the continued run-off of the closed Medicare Supplement block. First year collected premiums were flat, primarily due to timing differences between reported NAP and actual cash receipts. This lag is more pronounced with respect to worksite sales which posted strong results in the quarter. Total NAP was up 6% driven by strong worksite NAP which was up 15%. PMA’s worksite sales were up 28% as this channel continues to benefit from initiatives to drive stronger recruiting and improve productivity. Individual NAP was flat and strong hard sales were offset by lower cancer products sales. In an effort to standardize our reporting metrics, PMA producing agent accounts have been restated in 2Q 2017. The new account defined as the number of agents that have submitted at least one policy in a month, now aligns with the Bankers Life definition. We will continue to report the 12-month trailing average producing agent account to remove any short-term or seasonal volatility that might be caused by reporting only end of period or quarterly averages. On net basis PMA average producing agents were flat in the quarter. Moving on to Slide 8 into Colonial Penn, total collected premiums were up 4% due to prior year sales growth and stable persistency. First year collected premiums were down 8% and NAP was down 16% as high demand for television advertising continued in the quarter. This resulted in continued limited inventory of cost-effective TV spots, leading to reduced marketing spend and ultimately lower sales. We remain both disciplined and opportunistic with our marketing expenses and will invest as attractive advertising opportunities become available. Partially offsetting the decline in TV lead volume is our continued progress in diversifying lead generation activity towards web, digital and direct mail marketing activities. Given the reduced television marketing spend year-to-date along with favorable mortality experience in the first half of 2017, we are increasing the full year EBIT guidance range to $15 million to $20 million from $5 million to $15 million for Colonial Penn. I’ll now turn the call over to Erik to discuss our financial results. Erik?

Thanks, Gary. CNO posted another strong quarter on the earnings and capital fronts. We reported net income of $0.48 per share, up 45% from the prior year. Operating earnings per share were $0.45, up 29% from the prior year. Second quarter 2017 results were impacted by favorable underwriting margins and investment results, partially offset by higher corporate segment expenses. Excluding significant items, net operating earnings per share were $0.42, up 24% from the prior year. Lastly, operating return on equity was 9.1%. Turning to Slide 10, and our segment results, CNO posted combined EBIT excluding significant items of $123 million, up 16% from the prior year. Results in the quarter reflect favorable annuity in long-term care margins and higher call prepayment income at Bankers Life; higher supplemental health margins and higher call prepayment income at Washington National; favorable mortality and lower direct marketing spend at Colonial Penn. Our closed block LTC business reported positive earnings slightly better than expectations due to favorable incurred claims. Lastly, corporate segment results were impacted by higher expenses partially offset by higher investment income. Turning to Slide 11, and our key health benefit ratios, Bankers Life Medicare Supplement benefit ratio was 70.4% in the quarter, slightly better than expectations due to favorable incurred claims. As a result of the favorability we have seen in the first half of the year, we are lowering our benefit ratio guidance from the 71% to 74% range to the 70% to 73% range for the remainder of 2017. Bankers Life long-term care interest adjusted benefit ratio, excluding the impact of rate increases and one-time items was 74.4%, better than expectations due to lower persistency and favorable incurred claims. As a remainder, the 2017 interest adjusted benefit ratio reflects no additional future loss reserve accrual as a result of the year-end 2016 loss recognition testing results. Due to the favorability we’ve seen in the first half of the year, we’re lowering our guidance on the LTC interest adjusted benefit ratio from the 77% to 82% range to the 75% to 80% range for the remainder of 2017. Washington National supplemental health interest adjusted benefit ratio was 60.4%, consistent with first quarter of 2017 results and in line with our expectations. We continue to expect this ratio to be in the 58% to 61% range for the remainder of 2017. Turning to Slide 12, and our investment results for the quarter, we put money to work at 4.64%, somewhat lower than in recent periods, and primarily due to lower overall rates in the quarter. Call prepayment activity was heavy in the quarter due to an increase in refinancing activity after our quite first quarter. We continue to experience solid alternative investment results as we are benefiting from higher overall equity markets. Realized gains, losses and impairments continue to be moderate, and we continue to make progress in repositioning the recaptured assets. As of June 30, we had approximately $75 million of assets remaining, down from $88 million at the end of the first quarter. Turning to Slide 13, and our capital position, estimated consolidated risk-based capital was 458%, up 12 points from quarter of 2017. Results reflect approximately $95 million of statutory income, and dividends to the holding company of $49 million. Leverage was steady at 19%. Book value per diluted share was $22.74, up 10% over the prior year. Holding company cash and investments was $278 million, down from $314 million at the end of the first quarter, due primarily to the lower level of statutory dividends paid in the quarter. We repurchased $69 million of common stock in the quarter at an average price of $20.61. Through the second quarter we have repurchased $112 million of common stock. For 2017, we continue to expect to repurchase $200 million to $275 million of common stock, absent compelling alternatives. And with that I’ll turn the call back over to Ed.

Thanks, Erik. Our previously announced CEO succession is proceeding on track for the end of year change over. This transition of the natural evolution of the company and I would like to reiterate that CNO’s strategic priorities remain unchanged. We are committed to serving the middle income market to continuing franchise growth in diversification, maintaining business discipline and reducing our relative LTC exposure. As discussed in detail at our recent Investor Day, our focus on serving middle-income America, diversity of distribution and breadth of product offerings, including both health and wealth, and insurance and security solutions is unique to the industry, and the foundation of our sustainable competitive advantage. This differentiated business model combined with management’s track record of solid execution should continue to produce strong cash flows and deliver long-term shareholder value. And with that we’ll now open it up for questions. Operator?

[Operator Instructions] Your first question comes from the line of Erik Bass [Autonomous Research]. Your line is open. Please ask your question.

In Bankers long-term care, can you just comment a little bit more on what’s driven the favorable variant in the margin year-to-date? And what gives you the confidence to project some of that continuing?

Hi, Erik, this is Erik. And operator, we heard a little bit of background noise there, so if you can make sure all the other lines are muted, we’d all appreciate that. Really there’s nothing really specific to point to in terms of the LTC experience in the first half of the year, again, excluding some of the one-time items that we detailed. Really we’re just seeing slightly favorable incurred claims and slightly lower persistency, which I believe as you know, when you have lower persistency you tend to have more reserve releases, which favorably impacts the benefit ratio. So going forward, it’s just really a continuation of the experience that we have seen.

Got it. And I realize you’re only halfway through the year, but does this suggest also that your reserves are trending favorably versus what’s assumed in your margin?

Well, yes, again, it’s only halfway through the year and still six months to go, and a lot can happen in those six months. So it’s a little too early to make the call on where we expect year-end testing results to come in. But certainly to the extent that we’ve seen favorability here in the first half of the year, that certainly gives me comfort that we’re moving in the right direction.

Thanks. And if I can ask one on Colonial Penn, just could you provide any more details on the sales contribution from non-TV lead generation? I mean, the TV ad pricing environment doesn’t improve. Do you expect to be able to continue growing the inforce a bit?

The lead sources are roughly one-third non-television, two-thirds television. We’d like to continue to grow that. And in terms of the actual television advertising, we will continue to look at that every quarter, frankly every month, and when and where it makes sense we will resume a heavier advertising pace.

Yes. And Erik, this is Ed. Let me add to that your comment on profitability you’re seeing it in the first half of the year. When we spend marginally less on advertising, our earnings grow. We think the collected premiums in total as that grows that should lead to EBIT growth of the inforce.

Yes. Erik, this is Erik. I think more to the heart of your second question is can you continue to grow inforce EBIT with lower levels of sales. The answer is yes, albeit at a slower pace and so you can take a look at what happened here in the first two quarters of the year, where sales were down, but sales has defined as NAP, but then look at collective premiums in total and see that those actually went up about $3 million in the quarter. So the answer is yes, albeit at a slower rate.

Got it. Thank you.

Your next question comes from the line of Mr. Randy Binner [FBR & Co.]. Your line is open. Please ask your question.

All right, thanks a lot. So I’m actually going to ask you just a couple on RBC in liquidity. Erik, in your comments, did you say that the dividend upstream in the quarter was lower because that looked down, instead of the upstream from the insurance companies and holdco. Could that actually look in line? But the management fees looked a little bit higher than we’ve seen in the second quarter. Is there any timing issues? And I hear you right on characterizing that is a lower dividend upstream to the holdco.

Hey, Randy, yes, this is Erik. So with respect to the management fees, yes, there is always an element of timing there between when the expenses are incurred, then actually building, then reimbursed, so, yes, absolutely element of timing there. Dividends were a little bit lower than we would have normally expected, largely due because at the end of the first quarter we were at 446% consolidated RBC, and we wanted to nudge that back up above 450%. And so our dividend plan was tied to getting RBC back up to 450%. Now we ended at 458% largely because of the outperformance in income and then the required capital actually cooperate a little bit as well, so that contribute to sort of outperformance on RBC.

All right. So, yes, the timing issue on management fees, was that something that usually would be in the first quarter end up in the second quarter? Or are the things are usually be in the third quarter end up in same quarter?

It’s more of a first quarter, second quarter dynamic.

Okay. And then what was – what cooperated on the denominator there for RBC?

It was really largely on the investment side I believe where just net-net we just had lower sort of C1 related to upgrades and downgrades, and it was just a couple of million dollars. But when you’re targeting 450% RBC, that moves the needle pretty very well.

Okay. So, yes, you’re above 450%, and cash looks pretty good up the holdco, and obviously buybacks are potentially use of the cash. Kind of any update on what compelling alternatives might look like these days?

Yes, Randy, Ed. One of the main compelling alternatives is to reduce risk and exposure on LTC, where I think we’ve said in several different ways. If we’re going to reduce the risk, it’s going to involve parts of the business that have future losses, and that would most likely require a charge and the cash outlay.

Okay. So is that kind of the most probable thing you’re planning for with that extra cash? Is that mean you’re working towards something?

Well, as we’ve commented on before, we are actively engaged with different counterparties, reinsurers to reduce our LTC risk, but that doesn’t mean it’s our soul focus. So we continue to look at investing back in the business, whether that be organically or non-organically as well.

All right. I’ll leave it there. Thanks a lot.

Your next question comes from the line of Sean Dargan [Wells Fargo]. Your line is open. Please ask your question.

Yes. Thank you, and good morning. If I could maybe Gary, Randy’s line of questioning bit further. And so if we look at the holding company liquidity, and then I look back at the slide in your Investor Day in which you call out what the margin sensitivity if one assumes more adverse morbidity in a lower interest rate level. If a counterparty wanted – maybe assume those things and wanted more capital that’s more cash than you have currently. What kind of debt to total capital level would you feel comfortable going to if you were to raise the funds such a capital contribution?

Yes, Sean, thanks for the question. I think generally what we have been talking about is we run right now at about 19%. We’ve been targeting – in terms of leverage we’ve been targeting about 20%, so we’re running a little bit below that. I’d say optimally for an investment grade company at the end of the day that has reduced LTC exposure, optimally I think it’s somewhere between 22.5% and 25%, exactly where in that range depends on a lot of factors, but it’s probably in that range.

Okay. Thanks. And I’m just – it looks like the first quarter sales results were restated. I’m just wondering what drove the update.

Sean, I’m sorry. Can you repeat the question?

Yes. So there was a footnote in the supplement, it looked like first quarter sales results were restated. I’m just wondering if there’s something that we should know about that.

Not really, Sean. Again, this is Erik. It was just – we implemented a new commission system at the beginning of the year. And so as data was being passed from our administrative system to that commission system, there was just a glitch in the calculation of the new annualized premiums. And so we actually found that out here in the second quarter, remediated that, and updated what we reported in our first quarter. So it was really nothing more than that, it didn’t impact anything as far as we know anyway with respect to earnings or capital or any other sort of financial metrics.

Okay. Great. Thank you.

Your next question comes from the line of Humphrey Lee [Dowling & Partners]. Your line is open. Please ask your question.

Good morning and thank you for taking my questions. Looking at the LTC reserve releases there’s a component of a shock lapse and the other one is the inforce management. And my understanding is you have a better kind of – the way you look at the DMF and have a better success rate in terms of coming through the policies, like what are you doing differently than what you did in the past? And how much did that kind of inforce management helped you in the current quarter?

Yes, Humphrey, this is Erik. Thanks for the question. So there are really three components of the $9.4 million that we called out; about $1.1 million of that was the shock lapse impact related to the rate increases that you noted, about $1.7 million was related to really just a reserve release related to sort of correction of an administrative year that we had uncovered in the quarter. And then the balance which was about $6.5 million was tied to what you noted which is just – know what I call sort of inforce cleanup. So what we do is every year we go through a process to identify debts related or terminations related to debt. And as you know sometimes those are not reported, and so we started that process in the first quarter looking at our life and annuity policies and then made our way into the second quarter with health policies. So what you see there is largely related to terminations related to the long-term care policies, and it was a little bit bigger in the second quarter, because we had a little bit of a build up in inventory in the first quarter, because of the work we were doing on life and annuity, so it’s a little bit outsize this quarter. To answer your question a bit more specifically than in terms of what we’re doing, we started this process a couple of years ago, and this process has evolved. We’ve done more things and the rest of the industry is actually doing a lot more to get at this. And so we’re using more data that’s out there, and we’re also using more tools, and frankly doing some manual work on our own to do some more intense matching. So that’s basically it.

Okay. But then kind of going forward even though with the refined process that you have probably; did that benefits in the future years is not going to be as big as this year?

Well, it’s difficult to say. I think one thing that we’re looking at is sort of the frequency of when we do these reviews. Right now it’s annual, it’s kind of a heavy lift for the organization, so we’re looking to see if we can do this a little bit more frequently. But not ready to kind of make a call on that quite yet.

Okay. And then maybe a question for Gary. So in the press release you mentioned that there you’ve made some progress on several of the key initiatives. Can you maybe elaborate on that in terms of what you started in terms of the pilot program and where do you stand in terms of the – or when do we expect to see some tangible results?

Hi, Humphrey, this is Gary. Thanks for the question. The bulk of where we put our efforts in terms of pilots and initiatives and so on has to do with Bankers Life. And we see some very early results and I want to emphasize it very early and pertain primarily to the tools we’re using to recruit and retain agents. As we’ve stated a number of times, what we really want to do is drive that retention of the more productive longer tenured agents. And you can see that this quarter that number held flat. I wouldn’t exactly call that an achievement, but I would tell you that that represents progress and we’re continuing to run those pilots. I would say we still need at least three to four more quarters before we’ll see meaningful results that I’d be comfortable calling a trend.

Just on that note. So it’s definitely a positive sign to see there’s some stabilizing on the experience of agent accounts. But the new agents are – at least that the young, the more junior agents kind of one to two years do decline notability. Like at some point that’s going to be a negative to your kind of – the build up of your experience agent account. So again, I guess, that the pilots that you’re working on will help kind of soften the attrition there or is there anything else that you’re planning to do to accelerate the efforts or the efficiency you’re recruiting?

Yes, I think the easiest way to explain it in terms of what is the most likely strategy that’s going to work for us, is to change the yield. In other words, I don’t think that we’re realistically going to see a material increase in the pipeline of new candidates that want to become agents. I don’t expect to see a gigantic spike in that number. Rather what we need to continue to experiment with and find better ways to do is bring in agents that are more likely to make it past first that 90-day mark and that 180-day mark and so on. So rather than bringing in 7,000 agency a year, perhaps we’ll only bring in 4,000 agency a year or 3,000 agency a year, and have the yield go up on that. That’s what we need to be able to achieve. And by definition that’s going to take time to bear itself out. So just to circle back to give you a simple answer, I don’t expect to see an increase in the number, the raw number that we’re bringing in as new potential agents. I do expect to see an increase in the yield, in other words, how many of those stick around.

Got it. Thank you.

Your next question comes from the line Dan Bergman [Citi]. Your line is open. Please ask your question.

Thanks. Good morning. Annuity growth was strong in the quarter. I just wanted to see if you could talk about how much of this is coming from your newer lifetime income product. And then I guess as we got further out from that product launch of the deal, our roll is now partially into effect, I just wanted to see if you had any thoughts around, how we should expect annuity sales to trend going forward. I guess how much runway is left for additional incremental growth from current levels?

Okay. First of all, thank you for the question, this is Gary. Couple of general comments and then I’ll try and speak more specifically. First of all, I’d remind everybody that we don’t want to be a specific product focused company. What we really want to do is build products, whatever they are, whether they are annuities or like products what have you, whatever products our middle market need, that’s what we want to build and offer. So we’ve tapped into something here with annuities, and I’ll talk about that in a moment. The second thing I want to just make sure I remind everybody. When we look at CNO holistically, please remember that the DOL rule really isn’t that much of a factor for us, we had to spend money and do certain things particular with respect to our broker deal that we recently established. But if we look at the aggregate business of CNO, the DOL rule doesn’t have an impact. Now speaking specifically to annuities, I think we’ve tapped into something here, if we look at what this middle market consumer needs. We’ve obviously posted very strong sales growth; we’ve been very pleased with it. We’re still only about three quarters and I’d like to have another three or four quarters under our belt to really call it a trend. But we feel very good about what we’ve seen. And I think the reality of what we’ve seen is a middle market consumer that historically hasn’t been called on to provide products or to receive products that can provide a guaranteed lifetime income, and we’re benefiting from that right now. The vast majority of the growth has come from the new product, the fixed index annuity that we’ve launched in Q3 of last year with our first product with a lifetime income benefits and that’s where the growth has come from. We expect to continue to see that and we expect to continue to see that that growth – I don’t know if it’ll be of this magnitude growing at this rate every quarter becomes a pretty tall feat particularly when the comparables catch up with us. But I do expect to see continued strong demand because that’s what this consumer base need. They need products that protect for income accumulation and longevity. We have plans to continue to develop products that go after that particular need. So I would expect to see continued growth there. I’m not in a position to give you a specific forecast. Did we answer your question, Dan?

Yes. That’s very helpful. Thanks. And maybe if I could just switch in gears really quick to Bankers, Medicare supplement, I just wanted to see if you could provide a little more color on what caused the recent favorability there. And really what’s changed or different from your thinking going into the year that’s given you the confidence of the current trends you’re going to persist and costs at lower than the second half benefit ratio guidance.

Yes, Dan, this is Erik. Thanks for the question. Really nothing specific to point you in terms of our first half favorability, we just have seen lower incurred claims. I think what’s changed is over the past couple of years, so thinking back to kind of 2015 and 2016, we did see an uptick in incurred claims, it wasn’t necessarily unexpected. But if you go back even before that we were experiencing sort of outsized favorability in our margins there. And so we were taking less by way of premium rate increases in 2015-2016. And so naturally the benefit ratio was moving up a little bit more towards where we price the product. And so when we went into 2017 we started to take a little bit more by way of our premium rate increases. And so that has helped to stabilize the benefit ratio. Now beyond that we have seen a little bit of favorability in incurred claims, so we’re doing a little bit better than expected, but that’s really it.

Got it. Thank you.

Next question comes from the line of Mr. Ryan Krueger [KWB]. Your line is open. Please ask your question.

Hey. Thanks. Good morning. I had a quick follow-up to Sean’s question, I guess for Erik on – in a similar scenario where you were able to achieve your risk reduction target for long-term care, can you talk about where you would see, I guess, your kind of pro forma targets for a holding company liquidity, and the RBC ratio, I guess, relative to kind of the 450% you’ve been targeting, and I guess kind of that $250 million to $300 million holdco liquidity target that you’re at now.

Sure, Ryan, could talk a little bit about that. I mean, we’ve had an objective at the holding company to maintain at least $150 million at all times, and we’ve talked in past quarters about more practically that we’re going to run north of that just because we like to have dry powder on hand. So I don’t know that I necessarily see that $150 million target changing in sort of a post LTC risk reduction scenario. Likewise with consolidated RBC our target currently is 450%. Arguably you could probably run slightly lower than that, but I think to the extent we can run lower, will depend on how much of the LTC risk reduction has been achieved. So certainly you know for – only reducing it by a quarter or third and we’re probably going to run closer to that 450% if we’re reducing it by – in a very extreme scenario 100% and maybe we could get comfortable running something closer to 425%. So that’s kind of generally how I think about it.

Thanks. That’s helpful. Just a quick follow-up on the target holdco liquidity would you no longer feel the need to kind of run with a buffer above 150% in the scenario?

Again, I think the key is we’d like to have dry powder on hand at all times, dry powder that’s available for sort of opportunistic deployment. I think maybe a different way to answer it is I would feel a lot more comfortable running down to 150% in a post LTC risk reduction scenario.

Got it. Okay. Thanks a lot.

Next question comes from the line of Thomas Gallagher [Evercore ISI]. Your line is open. You may ask your question.

Hi. Just another follow-up on the long-term care risk transfer side. And if the compelling alternative to buyback is long-term care risk transfer and something that could be meaningful this year, would it make more sense for you guys to not buyback stock to build capital? So just curious how to think about that in the context of you continuing to buyback stock here with the possibility of near term risk transfer, how are you balancing that?

Yes, Tom, good question. I think two things; I mean, one, refer back to Erik’s comments on, we’ve already got buffers to our targets in both RBC and liquidity, so there is some of that already. And the other thing is that we do generate roughly $25 million a month of excess cash capital with our ongoing operations. So when and if we have a transaction or reduced LTC risk we see the timing between having a deal and principle in closing that deal offering us some months in between to them add to our buffer and liquidity and to our capital.

Got you. And I guess there’s a NAIC initiative going on for potential long-term care risk transfer solutions. Just curious what you think of that. Is that something that you think could be the catalyst for you from a risk transfer standpoint? Or is that something that’s still not in a tendency in terms of you being able to have that be the vehicle for you?

Yes. I think, Tom, it’s – in our view definitely the latter. This is very early stages of discussion. We welcome that and think it’s good in general for the marketplace if there are other potential alternatives to managing LTC business, but at the same time because of the infancy and the opportunities we believe are still there for us to work with the private markets. We’re not slowing down anything because of that.

Got it. And then I just want to make sure I follow kind of where are the annual cash flow is going here and as that translates into your returning capital. Ed, you’ve mentioned the $25 million a month is how much you generate in terms of excess cash, which gets you to a little under, I guess, $300 million a year. Is that a pretty good run rate going forward? Or what percentage of that still benefits from NOL which may get used up? Like how do I think about that as a run rate for cash generation here if I think out over the next one year to three years? Is that going to meaningfully change? Or is that a pretty good run rate?

Yes, Tom, this is Erik. I’ll fill that one. And I think this $25 million a month or $75 million per quarter or $300 million annually is a pretty good run rate here for the next couple years.

And Erik, even if – even considering the usage of NOL and that expiring still – you’d still have that level of visibility on cash flow?

Yes, that’s correct, Tom. So just remember that we utilize our life NOLs at the end of 2016, and really reguided to the $300 million in a post life NOL world. So we still do have meaningful non-life NOLs. Those don’t expire – the majority of them don’t expire until 2023. So we’ve got a good five and a half years, six years worth of tax shelter.

Got you. That’s helpful. Thanks.

Hence the Q&A session. I’ll now hand it back over to the presenters for the closing comments.

Yes. Thank you, operator; thank you all on the call, and appreciate your support and interest in CNO Financial Group. This ends the call.

This ends today’s conference call. You may now all disconnect.