Logo of jester cap with thought bubble.

Image source: The Motley Fool.

CNO Financial Group, inc (NYSE:CNO)
Q2 2021 Earnings Call
Jul 29, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the CNO Financial Group Second Quarter 2021 Earnings Call. [Operator Instructions]. I will now hand the conference over to Jennifer Childe, Vice President of Investor Relations and Sustainability. Please go ahead.

Jennifer Childe -- Vice President of Investor Relations

Thank you, Operator. Good morning and thank you all for joining us on CNO Financial Group's Second quarter 2021 Earnings Conference Call. Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer and Paul McDonough, Chief Financial Officer. Following the presentation, we will also have 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 CNOinc.com.

This morning's presentation is also available in the Investors section of our website and was filed in a Form 8-K yesterday. We expect to file our Form 10-Q and post it on our website on or before August 6. 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 presentations contain a number of non-GAAP measures, which should not be considered as substitutes 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 the presentations, we will be making performance comparisons and unless otherwise specified any comparisons made will be referring to changes between second quarter 2020 and second quarter 2021. And with that, I'll turn it over to Gary.

Gary C. Bhojwani -- Chief Executive Officer

Good morning everyone and thank you for joining us. Turning to slide 4, we reported operating earnings per share of $0.66, which represents 20% growth over the prior period, or 60% growth excluding significant items in both periods. Sales activity remains strong and we have exceeded pre-pandemic levels in a number of areas. Total Life and Health NAP was up 35% over the second quarter of 2020 and up 10% relative to 2019 levels.

Our results also benefited from ongoing deferral of medical care which boost our health margins, solid alternative investment performance, and continued share repurchase activity. Premium collections remain strong in our underlying margins excluding COVID impacts performed well as expected. Our capital and liquidity remain conservatively positioned. We ended the quarter with an RBC ratio of 409% and $336 million in cash at the holding company while also returning $105 million to shareholders through a combination of share repurchases and dividends. We continue to execute well against our strategic priorities, specifically, successfully implementing our strategic transformation that we initiated in January 2020, growing the business profitably, launching new products, and services, expanding to the right to slightly younger wealthier consumers within the middle-income market, and deploying excess capital to its highest and best use.

Turning to slide 5 and our growth scorecard: As was the case for 6 consecutive quarters prior to the pandemic, all 5 of our scorecard metrics were up year-over-year. Life sales remained strong, fueled by continued momentum in both our direct to consumer and exclusive field agent channels. Overall health sales were up almost 90% over the prior period which reflected the first full quarter of the pandemic when state home restrictions were first Instituted. Total collected life and health premiums were up 1%. This reflects continued solid growth in Life NAP and persistency of our customer base offset as expected by lower Medicare Supplement premiums.

Annuity collected premiums were up 42% year-over-year, relative to the second quarter of 2019 annuity collected premiums were up 1%. Client assets in brokerage and advisory grew 33% year-over-year to $2.6 billion fueled by new accounts, which were up 13%, net client asset inflows and market value appreciation. Sequentially client assets grew 8%. Fee revenue was up 50% year-over-year to $31 million, reflecting growth in 3rd party sales, growth within our broker dealer, and registered investment advisor, and the inclusion of DirectPath results.

Turning to our Consumer division on Slide 6: We continue to leverage our cross-channel sales program. Our hybrid sales and service model which blend virtual engagement with our local field, exclusive field agents has led to significant improvements in lead conversion rates, customer acquisition costs, and sales product. Life and health, sales were up 32% over the prior period, and 19% over the same period in 2019. Life sales climbed 8% for the quarter to over $50 million reflecting the 6th consecutive quarter of year-over-year growth.

Direct to consumer life sales were level with the record production in the prior period. Life sales generated by our exclusive field agents were up 23% and comprised over 40% of our total life sales. Leads from our direct to consumer business supported this growth. Within our health product lines supplemental health and long-term care sales saw healthy growth over both the second quarter of 2020 and the second quarter of 2019. These results benefited from initiatives that enable our products to be sold through multiple channels.

Our 3rd-party Medicare Advantage party sales were up 20% in the second quarter. Medicare supplement sales remain challenged. Med sales were up modestly over the first quarter. However, as discussed in previous quarters, our market is experiencing a secular shift away from Medicare supplement and toward Medicare Advantage. We continue to invest in both our Medicare supplement and Medicare Advantage offerings to ensure we are well positioned to meet our customers' needs and preferences.

Consistent with the first quarter, roughly 50% of our Consumer Division life and health sales were completed virtually. Consumer selecting to engage virtually held steady, even as communities reopened and vaccination rates increase. This is a profound change in how we connect with consumers and further validate the transformation we initiated in January of 2020. It will continue to have significant implications for our business going forward. Among other things, this change, expand our agents' ability to interact with customers across a broader geographic area. As I mentioned annuity collected premiums were up 42% as compared to the prior year and up 1% versus 2019. The number of new annuity accounts grew 16% and the average annuity policy size rose 14%. Our portfolio of index annuity products continues to be well received by our middle market consumers. Our recently launched guaranteed lifetime income annuity plus was a key contributor to our second quarter annuity sales growth. Of course, we continue to maintain strict pricing discipline on our annuities to balance sales growth and profitability. Participation rates and other terms are reviewed regularly to reflect current macro environment conditions.

Client assets and brokerage and advisory grew 33% year-over-year and 8% sequential to $2.6 billion in the second quarter. Combined with our annuity account values, we now manage $12.7 billion of assets for our clients. This has fundamentally shifted the relationship we have with our customer base. Unlike some insurance products, which can be transactional in nature, investment products tend to create deeper and longer-lasting customer relationships.

We continue to reap the benefits of the shift in the agent recruiting strategy that we initiated several years ago. We now rely more heavily on targeted recruiting approaches, including personal referrals. This has periodically resulted in fewer new agent recruits. However, the new agents we appoint are more likely to succeed and stay with us over time. Relative to the year-ago period, our producing agent count increased 7%. Sequentially, our producing agent count was down slightly but overall, our agent force remained stable.

Our securities licensed registered agent force was up 6%. Improvements in agent productivity had became more important driver of our sales growth then agent count in recent quarters and we have significant runway for future growth.

Turning to slide 7 in our worksite Division: It looks like sales were up sharply in the second quarter as compared to the year-ago period. We expect to approach 2019 sales levels when access to workplaces improves. Ongoing pilots and programs to target new employer groups, offer new services, and capture new business continue to progress retention of our existing customers also remained strong with continued stable levels of employee persistency our producing agent count was up 15% year-over-year and 7% sequentially. Recall that we slowed our agent recruiting during the pandemic due to workplace restrictions. As a result agent count remains down nearly 40% from pre-COVID levels. To help boost recruitment and support a return on to pre-COVID production levels, we are rolling out a field agent referral program. This program is designed similarly to our successful Consumer Division program.

Relative to 2019 levels, our veteran agent count is up 7%. Retention in productivity levels among our veteran agents who have been with us for more than 3 years remains very strong. These agents have been the driving force behind our recent sales momentum and are expected to be instrumental in helping to rebuild our overall agent force.

Few revenue generated from our business is more than doubled in the quarter due to the DirectPath acquisition feedback has been strong surrounding the unique combination of products and services we can now bring to the worksite market. We are realizing early cross sale successes between Web Benefits Design and DirectPath and the pipeline continues to grow.

Along with strong client retention, these business has also generated double-digit increases over both 2020 and 2019 in various metrics.

Turning to slide 8: Our robust free cash flow enabled us to return $105 million to shareholders in the second quarter, including $87 million in share buybacks. We also raised our dividend 8% in May and 9 consecutive annual increase. Our capital allocation strategy remains unchanged. We intend to deploy 100% of our excess capital to its highest and best use over time. While share repurchases form a critical component of our strategy, organic, and inorganic investments also play an important role.

And with that, I'll turn it over to Paul.

Paul H. McDonough -- Chief Financial Officer

Thanks, Gary, and good morning everyone.

Turning to the financial highlights on Slide 9: Operating earnings per share were up 20% year-over-year and up 60% excluding significant items. The results for the quarter reflect solid underlying insurance margins, ongoing net favorable COVID related impacts, strong alternative investment performance, and continued disciplined capital management.

Over the last 4 quarters, we have deployed $337 million of excess capital on share repurchases reducing weighted average shares outstanding by 7%. Return on equity improved 90 basis points in the 12 months ending June 30, 2021 compared to the prior year period. The sum of expenses allocated to products and not allocated to products. Excluding significant items increased by about $6 million sequentially driven by incentive compensation accrual adjustments related to earnings outperformance in the first half of the year. The increase in expenses over the prior year period also reflects lower a management expenses in 2020 due to COVID related restrictions and the June 30, 2020 conclusion of a transition services agreement related to the long-term care reinsurance transaction completed in 2018.

In general, our expenses continue to reflect both expense discipline and operational efficiency on the one hand and continued targeted growth investments on the other hand.

Turning to slide 10: Insurance product margin in the second quarter was up $17 million or 8% excluding significant items. Net COVID impacts were $21 million favorable in the quarter as compared to $6 million unfavorable in the prior year period. Excluding COVID impacts, margins in the quarter remained solid and stable across the product portfolio. The net favorable COVID impacts in the quarter reflect continued favorable claims experience in our healthcare products, particularly impacting Medicare supplement and long-term care due primarily to continued deferral of care. This was partially offset by the unfavorable impact of COVID related mortality in our life products.

The favorable COVID impact in the quarter exceeded our expectations as the outlook that we provided on our April earnings call assume that healthcare claims would begin to normalize in the second quarter, including an initial spike in claims due to pent-up demand that did not materialize in the quarter.

Regarding our annuity margin, recall that in the second quarter of 2020, we saw a favorable mortality in our other annuities block unrelated to COVID, which translated to $10 million of positive impacts. As we noted at the time, this resulted from a handful of terminations and large structured settlement policy, which we expect from time to time in this block, but not on a regular basis.

Turning to slide 11: Investment income allocated to products was essentially flat in the period as growth in the net liabilities and related assets was mostly offset by a decline in yield. Investment income, not allocated to products, which is where the variable components of investment income flow through increased $40 million, reflecting a solid gain in the current period and our alternative investment portfolio and a loss on that portfolio in the prior year period. Recall that we report our alternative investments on a 1/4 lag. Our new money rate of 3.38% for the quarter was lower sequentially reflecting a continuation of our up in quality bias from the first quarter and continued spread tightening in general, partially offset by higher average underlying Treasury rate in the second quarter versus the first quarter.

Our new investments comprised $1.1 billion of assets, with an average rating of single A and an average duration of 16 years. This higher level of new investment reflected reinvestment of maturing assets and a higher level of prepayment activity in the period. Our new investments are summarized in more detail. On slide 22 and 23 of the earnings presentation.

Turning to slide 12: At quarter end, our invested assets totaled $28 billion, up 8% year-over-year approximately 96% of our fixed maturity portfolio is investment grade rated with an average rating of single A. This allocation to single A rated holdings is up 200 basis points sequentially. The BBB allocation comprised 39.4% of our fixed income maturities, down 140 basis points. Both year-over-year and sequentially. We are actively managing our BBB portfolio to optimize our risk-adjusted returns to the extent suitable and attractive opportunities develop, we may over time balance recent up an quality bias with a modest increase in allocation to alternatives asset-backed securities closed or investment grade emerging market security.

Turning to slide 13: We continue to generate strong free cash flow to the holding company in the sector with excess cash flow, $114 million or 128% of operating income for the quarter and $432 million or 119% of operating income on a trailing 12 month basis.

Turning to slide 14: At quarter end, our consolidated RBC ratio is 409%, which represents approximately $45 million of excess capital relative to the high end of our target range of 375% to 400%. Our Holdco liquidity at quarter end was $336 million, which represents $186 million of excess capital relative to our target, minimum Holdco liquidity of $150 million. Even after returning $105 million of capital to shareholders in the quarter, our excess capital grew by approximately $22 million from March 31 to June 30 of this year.

This primarily reflects the strength of our operating results in the quarter and the recent up in quality bias in our investment portfolio.

Turning to slide 15: While uncertainty related to COVID continues, we believe it is very unlikely that any future COVID scenario would cause our capital and liquidity to fall below our target levels. For that reason, we are no longer running a formal adverse case scenario as we had been doing through the first quarter of this year. Instead, we are updating a single base case scenario or forecast with upside and downside risks to that forecast.

In our most recent forecast, we expect a continuation of the sales momentum we've seen in the past 5 quarters, we expect a modest net favorable COVID related mortality and morbidity impact on our insurance product margin for the balance of 2021 and the modest net unfavorable impact in 2022.

This assumes that COVID deaths do not worsen in the second half of this year and that healthcare claims begin to normalize after a brief spike beginning in the 3rd quarter due to pent-up demand from deferral of care.

When and if a spike actually occurs and when our health product claims actually normalize is highly uncertain. So far, we have seen some intra-quarter volatility in our health claims during the pandemic, but nothing that has persisted long enough to establish a trend. On the mortality side impacting our life products, the number of COVID deaths we will see for the next several quarters is also uncertain, given the recent rise in infections largely from the Delta variant and the potential for material impacts from additional variants.

Certainly, one of the biggest risks to our forecast is how exactly COVID will evolve from here. But again, we believe, however it evolves, it represents an earnings event for us, favorable or unfavorable, not the capital or liquidity of that.

Assuming no shift in interest rates, we expect net investment income allocated to product to remain relatively flat in this base forecast as growth in assets is offset by lower yields reflective of both the lower interest rate environment and are up in quality shift in asset allocation.

In general, we expect alternative investments to revert to a mean annualized return of between 7% and 8% at some point and over the long term, but the actual results will certainly be more variable with likely more upside potential than downside in the near term given the current economic outlook.

We expect fee income to be modestly favorable to the prior year as we grow our 3rd party Med Advantage distribution and improve the unit economics of that business. Growth in web Benefits Design, earnings, and the inclusion of DirectPath will also contribute to fee income. We expect the sum of our quarterly allocated and not allocated expenses tax significant items for balance of the year to be generally consistent with levels reported in the first quarter of this year, allowing for some quarterly volatility.

And finally as COVID related uncertainty diminishes which is certainly will at some point, we expect to manage our capital and liquidity closer to target levels, reducing our excess capital over time.

And with that, I'll turn it back over to Gary.

Gary C. Bhojwani -- Chief Executive Officer

Thank you, Paul. We are pleased with the healthy results we've generated this quarter and in the first half of the year. The strength of our diversified business model and the steady execution of our strategic priorities and organizational transformation underpin that success. The consumer division has met or exceeded pre-pandemic performance and our worksite Division is making meaningful progress.

As we enter the second half of the year, we remain squarely focused on maintaining our growth momentum, building upon our competitive advantages, and managing the business to optimize profitability, cash flows, and long-term value for our shareholders.

We thank you for your support and interest in CNO. Please continue to take care of your health, including vaccinations for those that are eligible. Stay safe!

We will now open it up for questions, Operator?

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from the line of Colin Johnson with B Riley Securities.

Colin Johnson -- B Riley Securities

Hey, thanks, good morning. Thanks for taking my question. Just first wondering given that deferral of care had contributed favorably in the quarter, despite the fact that may be coming into the quarter, we expected that to abate as things reopen further if any insight as to maybe why that might have been taking place. Why we would have been seeing a slower resumption of care than otherwise expected on the part of the consumer?

Gary C. Bhojwani -- Chief Executive Officer

Thank you for the question. The short answer is we've got a bunch of theories. I don't know if we have anything that I would point to is being hard and fast, but I'm happy to share with you some of the theories we've heard and seen. First is some consumers are still afraid to go back to see their doctors some consumers have conditions that they would have otherwise thought healthcare on but those conditions passed some of the consumer, that would have gone to see doctors now they themselves have unfortunately passed. There are a variety of other things that the short answer. Lee from I haven't seen anything that says, here's exactly what happened. We know that fewer people are seeking healthcare and our healthcare claims results benefit as a result, but I've seen more theories then I can tell you what to do with, in terms of what exactly is the underlying explanation.

Colin Johnson -- B Riley Securities

Okay, thanks, that's helpful. And then kind of looking at new annualized premium. I think this is the second quarter, now that we're about half of the life and health NAP work digital. Do you think that that number presents maybe longer term equilibrium percentage, so to speak, or there might be more room to the upside with respect to that?

Gary C. Bhojwani -- Chief Executive Officer

I think there is more. This is Gary. I think there is more room to the upside on that. The one thing I want to be transparent about some of this depends on how you define it. So let's say you're sitting in some City in Iowa and you buy a policy from an agent who is also in Iowa. But that interaction takes place over a Zoom call and you complete the paperwork via email. Now the agent is there locally and is happy to meet at your kitchen table but you happen to do all of the digitally and that particular product is completed, as I described visually, but the next product they sell, they come to see you at your kitchen table. Is that a digital relationship or what was that. And I share that with you because we're watching this evolve much more quickly than we expected, but the bottom line for all of our shareholders. We expect an increasing number of interactions to take place virtually, but not to the exclusion of that in person interaction.

At some level. I want our consumers to interact with our agents in person, because that's one of our differentiating characteristics. That's one of the things that we can do that others cannot, we can do both. So I want, consumers that want some of both, but the short answer is, we that the number of digital interactions will continue to grow.

Colin Johnson -- B Riley Securities

Got it. Thank you. And just as a follow on. So as digital, the number of digital sales potentially arises. Do you think that could have any sort of a positive impact on operating expenses? A digital sales versus one in person?

Gary C. Bhojwani -- Chief Executive Officer

I think over time it will, over time a given agent should be able to increase their productivity. They can cover broader geographic area and so that should definitely help us. I want to emphasize the over time part because it's important to remember that in the near term we're investing in certain technologies and training. So it will take time for all these to work its way through.

Paul, do you want to add anything that?

Paul H. McDonough -- Chief Financial Officer

The only thing I'd say is that I think, we're at a position now where as we continue to grow the business and sustain that growth over time, we'll get better operating leverage from our expense base, which has the potential to grow earnings and improve ROE.

Colin Johnson -- B Riley Securities

Okay thank you that's helpful. These were all my questions.

Operator

Your next question comes from the line of Humphrey Lee with Dowling and Partners.

Humphrey Lee -- Dowling & Partners

Good morning. Thank you for taking my questions. A question for Paul. Looking at the annuity earnings and margin specifically for fixing back annuities, they were very strong in the quarter. Just wondering was there some sort of going to market benefits running through the numbers for this quarter and if so, can you provide some color in terms of what the normalized margin would be followed for the FIA.

Paul H. McDonough -- Chief Financial Officer

Sure. Good morning Humphrey. So the sequential improvement in the annuities margin is reflective of market conditions, creating favorable option impacts. So just to drill down a bit higher equities, lower treasuries, and lower volatility created situation where the value of the option assets increases in value more in the embedded derivative reserve. And just to be clear, this is really, it's an accounting and phenomenon if you will, we would expect that the favorable trends to moderate the trends between Q1 and Q2 to moderate depending on market conditions in terms of longer term sort of run rate trends. I would just point to our disclosure over the last couple of years and I think if you look at that there is a noticable sort of underlying run rate.

Humphrey Lee -- Dowling & Partners

Okay, got it. My second question is related to your fee revenue growth, which was very impressive up 50% year-over-year. Can you provide some color in terms of what's the driver for that growth and how much was there was from adding DirectPath versus the growth of your existing a fee-based business?

Paul H. McDonough -- Chief Financial Officer

Yeah, the biggest driver is DirectPath but we are also seeing growth in the fee revenue related to distribution of Med Advantage and from WBD.

Humphrey Lee -- Dowling & Partners

So as we think about like normally first quarter and 4th quarter, tend to be your higher of fee revenue quarters and that used to be kind of 30 million-ish. So now because with the second quarter you kind of had 30 million now. How should we think about that seasonality?

Gary C. Bhojwani -- Chief Executive Officer

I think you should continue to expect the seasonality will follow the annual enrollment period which is Q2, Q3, Q4, because remember the Med Advantage policies we sell during the annual enrollment period is fee income.

Humphrey Lee -- Dowling & Partners

But so is the $30 million count now come that the new run rate going forward for low seasonality quarters?

Paul H. McDonough -- Chief Financial Officer

Yes, certainly. Q2 of this year includes a full quarter of DirectPath, WBD and on the M&A distribution

Humphrey Lee -- Dowling & Partners

Okay, got it. Thank you.

Paul H. McDonough -- Chief Financial Officer

Yeah.

Operator

Your next question comes from the line of Jack Meyer with Autonomous Research.

Erik Bass -- Autonomous Research

Hi, this is actually Erik Bass. First is, do you have an estimate for the RBC ratio impact of adopting the NAICS new C1 factors and will you make any changes to your RBC target range as a result of this?

Paul H. McDonough -- Chief Financial Officer

Good morning, Eric.

So the impact of the new C1 factors as of June 30 pro forma all else equal, is about 16 points on our RBC, which translates to about $80 million of capital. There is some things that we could do in the investment portfolio that's sort of arbitrage is the, the new risk factors and that improves the 16 basis points by a couple of points as to how we think about it, I think it's evolving, I've seen some speculation in the analyst community that some companies will simply reduce their target RBCs. We're in the process of doing some --an analysis with our own internal capital models to drive how we're thinking about it. So I'd like to come back to this question on a future call as to whether we'll reduce sort of formally reduce our target by some amount either the entire sort of adjusted 16 or something less than that. I also think it will be helpful to continue our dialog with the rating agencies to better understand how they think about it. So more to come on this, but that's the pro forma, all else equal impact.

Erik Bass -- Autonomous Research

Got it. That's helpful. Thank you. And then maybe moving kind of sales and earnings. I mean your sales obviously had a nice recovery. And as you noted, are back to pre-pandemic levels at least in the consumer business. Are you now at a level of sales where the enforce block is growing for most products? And if so, should this start to translate into faster organic earnings growth?

Paul H. McDonough -- Chief Financial Officer

Yes. So we're at the in-force block has been relatively flat, looking backwards. But I think, we're now at a point with our expense base and with our growth profile that as we continue to grow that business and that's sustainable and we certainly think that it is, we'll begin to get better operating leverage going forward.

Erik Bass -- Autonomous Research

Got it. Thank you.

Operator

Your next question comes from the line of John Barnidge with Piper Sandler.

John Barnidge -- Piper Sandler

Yeah, thank you for the opportunity. You're at $183 million in buybacks for the year, clearly a good cadence, but down linked quarter, the stock declined obviously a little bit, but can you think about, can you talk about how you're thinking about capital return a little bit more on the balance of the year?

Gary C. Bhojwani -- Chief Executive Officer

Yeah, sure. John, this is Gary. Thanks for the question. I'll give you some high level thoughts and then if Paul wants to share any more details I'll let him give but I'll start us out. So some of this. For those of user been long term participants of this call. Some of this is going to be a repeat of what you've heard from me before in terms of my thought process. But I would just remind you of a few factors.

Number one, we don't have any incentive to hold excess capital, if you look at our incentive comp plans and everything else. We have no incentive to hold excess capital. We have has historically at least since I've been in the chair of CEO, which I can go 15th quarter now particularly quarter. I have declined to provide specific guidance, but instead talked about our capacity and then asked all of our shareholders and analysts to judge us by our actions, not our words and during the time I've been CEO, we bought back stock every single quarter except one, and with the benefit of hindsight everyone realizes the one quarter we didn't was to fund the LTC's transaction. So again, I ask you to judge us by our actions, not our words.

In terms of where we are right now. I think about this quarter in particular and any in the first half of the year and a really simple way, I really like where we're positioned in terms of our capital. I like the fact that given all the uncertainty with COVID we're still conservatively positioned. I like the fact that despite that we were able to invest in growth, we made some investments in terms of certain technologies and abilities as well as the DirectPath acquisition and despite that both quarters 2021, we were able to return a nice amount of money. $100 million and $87 million to our shareholders in the first quarter, the second quarter as to the specific amounts in any given quarter.

One of the things the factors into this analysis is how we think about price not surprisingly, the members of management, we believe that the intrinsic value is well above the GAAP book value, but that doesn't change the reality that when we buy shares at 95% of book value, say versus 80% percent of book value. The benefit is different. I think our long-term shareholders would prefer to see us buy more stock when it's at 80% a books and say at 95% a book, not because of any commentary on the belief in the company but just because of the accounting treatment, how it benefits us so I think what you saw happen from Q1 to Q2 when the stock is trading lower we'll buy more when the stock's trading higher will buy less. And I want to emphasize that A commentary on our view of the intrinsic value of the firm rather it's a simple recognition of the accounting treatment and the greater discount to book, ie, the cheaper the stock is the more, we'll buy, so I wouldn't read into that small delta of $13 million between Q1 and Q2 as anything meaningful, it's nothing more than an acknowledgment of where the stock is trading.

John Barnidge -- Piper Sandler

Okay. That's fantastic.Thank you

Gary C. Bhojwani -- Chief Executive Officer

I think, just in case Paul wants to add anything. Paul you want to...?

Paul H. McDonough -- Chief Financial Officer

No, I think that captures it.

Gary C. Bhojwani -- Chief Executive Officer

Okay, go ahead John.

John Barnidge -- Piper Sandler

Alright. Yeah, thanks, Gary. And then the follow-up safe to say claims tailwind persisted to a greater level than initially expected. Can you talk about maybe how each month of the quarter progressed and how you're thinking about it run rating into the 3rd quarter?

Paul H. McDonough -- Chief Financial Officer

Yeah, John, this is Paul I'd say broadly speaking there has been, there has been some volatility from month to month over the course of the pandemic, going back a year going back more than a year now within an individual product line. Yeah. You might have a month where it's up and in the next month it's down, but it's been relatively stable. There is certainly not in any persistent trend up toward more normal levels, as we said in our outlook through the 3rd quarter in a row. We think it's going to begin to trend up toward more normal levels the next quarter, and we'll see. I think that if our base case assumption holds that we don't see another spike in material spike in infections and deaths. And I think that's a reasonable expectation. If we do see another spike in infection and death, it's probably not, but it also doesn't necessarily mean that we'll have the same behavior by consumers that we've seen so far.

In other words, there is a possible scenario where spike again and you have the mortality impact but consumers say you know what, "I need to get back to my doctor's office" and they begin doing that. So I guess I'd just emphasize that how things actually evolve is very uncertain. And I wouldn't pretend to know exactly what that may look like.

Gary C. Bhojwani -- Chief Executive Officer

John, this is Gary. The only thing I'd add to that. I think what you're hearing from us, we don't know, we've been surprised as Paul indicated for the 3rd quarter in a row, we thought claims to come back and they did so we simply don't know. But we keep trying to send the signal then take a conservative position because we feel like that's our obligation to try and say, "hey, we think it will come back next quarter". The reality is especially that now that we've been wrong for 3 in a row. I wouldn't even know how to give you how the likelihood is that it's actually going to come back. We just don't know, but we're trying to be as conservative as we can.

John Barnidge -- Piper Sandler

No, that's helpful. I guess it's like a ping-pong ball you'll have all these assumptions, and they've done a day, it's going to land further on one side of the other based on an average, so I appreciate that. That's all from my questions. Best of luck!

Gary C. Bhojwani -- Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Ryan Krueger with KBW.

Ryan Krueger -- Keefe, Bruyette & Woods

Hey, good morning, I was hoping you could talk a little bit about recruiting trends. Some of your peers have talked about in some challenges in terms of recruiting due to tight labor conditions. I know you've also been shifting away, or shifting some of the sort of the recruit. So just hoping for some commentary there?

Gary C. Bhojwani -- Chief Executive Officer

Yeah, thanks, thanks for the question. Ryan, I've been involved in a handful of other groups, both within the insurance industry and other industries with other business leaders. I don't know a CEO out there right now that's not worried about ability to get labor. Every single CEO, I've talked to, regardless of industry has expressed concerns over the tightness of the labor market and how difficult it is to get help. So we are absolutely no exception in that regard.

One could argue that some of that trend is even more difficult for us because remember our agents work on a commission basis, they eat what they kill. They don't sell anything they don't make money. Now we have support programs and so on early on, but those difficulties are absolutely hitting our business. Frankly, we got very lucky, a couple of years ago, we started to make a move to de-emphasize just a raw number of recruits and instead try and focus on more targeted recruiting with an idea that would benefit our productivity and our tenure, even if we didn't grow the topline in terms of agent count quite as much. So we're staying consistent with our strategy. I think that strategy is really good in this environment. And again, just out a pure luck, we started a few years ago. So we're well into that we're going to stay on that path. You'll see us continuing to emphasize productivity, we, of course do need to grow agents, but I am less focused on that are more focused on productivity and tenure. And if you could look at our numbers, you can see that on both of those metrics. We've done a pretty reasonable job and we'll continue to do that, but right agent count will continue to be challenging. No question about it.

Ryan Krueger -- Keefe, Bruyette & Woods

Got it. And then can you comment at all on persistency trends you've seen in the life and health business through the pandemic, if you've seen any benefit to persistency. I guess maybe, particularly in the life business as you've gone through the last couple of years now?

Paul H. McDonough -- Chief Financial Officer

Sure, hey Ryan. Good morning. Yeah. The persistency really across our product portfolio through the pandemic has been relatively stable, a little volatility here and there that has driven some pluses and minuses on the margin. But by and large it's remained relatively consistent with pre-COVID experience.

Ryan Krueger -- Keefe, Bruyette & Woods

Great! Thank you.

Operator

So at this time there are no further questions, I will turn the call back over to Jennifer Childe for closing remarks.

Jennifer Childe -- Vice President of Investor Relations

Thanks very much for your participation in the call. We look forward to speaking with you again soon.

Operator

[Operator Closing Remarks].

Duration: 49 minutes

Call participants:

Jennifer Childe -- Vice President of Investor Relations

Gary C. Bhojwani -- Chief Executive Officer

Paul H. McDonough -- Chief Financial Officer

Colin Johnson -- B Riley Securities

Humphrey Lee -- Dowling & Partners

Erik Bass -- Autonomous Research

John Barnidge -- Piper Sandler

Ryan Krueger -- Keefe, Bruyette & Woods

More CNO analysis

All earnings call transcripts

AlphaStreet Logo

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.