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Date

Friday, May 1, 2026 at 11 a.m. ET

Call participants

  • Chief Executive Officer — Gary Bhojwani
  • Chief Financial Officer — Paul McDonough
  • Chief Investment Officer — Eric Johnson
  • Vice President, Investor Relations — Adam Auvil

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Takeaways

  • Operating earnings per share -- $1.05, up 33% and up 42% excluding significant items, driven by profitable sales growth, underwriting strength, and higher investment yields.
  • Total new annualized premiums (NAP) -- Up 11%, supported by fifteen consecutive quarters of sales growth across both major divisions.
  • Book value per diluted share (ex-AOCI) -- $38.98, representing a 5% increase, reflecting capital strength.
  • Returned capital -- $77 million to shareholders, including $60 million in share repurchases, reducing diluted share count by 7%.
  • Life and health NAP (Consumer Division) -- Increased 9%, with total health NAP up 20%, and supplemental health up 10%.
  • Medicare supplement policies -- Medicare supplement NAP grew 53%, with total Medicare policies sold up 24%. Management cited industry disruption and a shift away from Medicare Advantage.
  • D2C life sales -- Nearly 65% of direct-to-consumer life sales originated from non-television digital, web, or third-party channels.
  • Annuity collected premiums -- Decreased 2% versus a strong comparable period; annuity account values increased 7%.
  • Brokerage and client assets -- Client assets rose 27% to a record, and total client accounts increased 13%; combined assets under management now exceed $18 billion, up 12%.
  • Producing agent count -- Up 3%, marking the thirteenth consecutive quarter of growth, with registered agent count up 7%, and agent recruiting also rising.
  • Worksite division NAP -- Life and health NAP up 22%, hospital indemnity insurance up 121%, accident insurance up 18%, and life insurance up 56%, with NAP from new clients up 65%, primarily due to geographic expansion.
  • Expense ratio -- 18.9%, lower due to reduced spending; management indicated normalization is expected through the rest of the year.
  • Net investment income -- Increased 6% year over year, supported by 4.8% growth in net insurance liabilities and assets, and thirteen consecutive quarters of new money rates above 6%.
  • Trailing 12-month operating ROE -- 13.1%, or 12.2% excluding significant items.
  • Consolidated risk-based capital ratio -- Within 360%-390% target range; holding company liquidity at $280 million, above the $150 million minimum target.
  • Medicare supplement rate increases -- CFO McDonough said, "The closed block with a Jan. 1, 2026 effective date, asking for an increase of 10.5%, and we received approvals for 10.2%. And then the open block with July 1, 2026 effective dates, we filed for 16.8% and we are expecting approvals for around 14.5%." Closed block represents roughly two-thirds of the exposure.
  • FABN funding market -- Eric Johnson explained, "spreads in the market did during the first quarter of the year, financials actually widened out relative to, let," resulting in reduced arbitrage for funding agreements and a pause on new transactions.
  • Use of technology and AI -- Technology investments, including AI deployment in the Colonial Penn call center, led to shorter customer wait times and higher sales conversion rates.
  • Guidance and ROE targets -- Management affirmed 2026 guidance and reiterated that 12% ROE is a waypoint, noting the likelihood of increasing 2027 ROE ambitions but deferred formal updates.

Summary

CNO Financial Group (CNO 1.16%) reported operating earnings per share growth, emphasizing consistent performance in both sales and agent recruiting, with tangible increases across health, life, and worksite business lines. Management highlighted capital strength, balance sheet liquidity, and higher book yields as contributing factors to improved investment income and disciplined capital deployment. The company discussed industry trends impacting Medicare product demand, the shifting distribution of direct-to-consumer life sales, and the strategic use of technology to drive agent productivity and customer outcomes. Regulatory approvals for substantial Medicare supplement rate increases will begin to impact results by year-end. The call conveyed management's intent to evaluate and potentially raise return-on-equity objectives following sustained operational improvement, but deferred formal guidance revisions pending additional business visibility.

  • CFO McDonough confirmed, "the first quarter is typically the lowest insurance product margin quarter of the year," due to seasonality, but cited solid margins in 2026 to date.
  • The company attributed annuity premium declines of 2% to "You are right in citing the fact that we had tough comparables—or strong comparables, I should say. Frankly, I would be happy to have that problem every quarter. And even the 2% that we cited, I regard that as nothing more than just quarter-to-quarter fluctuation. Remember, if the selling season in one quarter is one or two days shorter than another quarter, you are going to see variance. There are all kinds of things that go on every quarter. To be really blunt, I do not pay that much attention to volume from quarter to quarter. I am much more focused on the one- and three-year trends, and everything I see points me to strong demand and, more importantly—or at least as importantly—a really strong ability in our product portfolio and distribution network to be able to execute and meet those demands. So I am extremely bullish, and I would not pay any attention to minor fluctuations of 1% or 2% here or there. It is, in my mind, irrelevant," asserting underlying demand trends remain intact.
  • Medicare supplement faced "modestly adverse claims experience," with management planning to address profitability through the timing of approved rate adjustments.
  • CFO McDonough explained, "We did have an impact from the S&P being down about 5% in the quarter. As you know from your question, that drives the reserves for FIAs and interest-sensitive life down," impacting statutory surplus and risk-based capital, but expects neutral impact over the full year as equity markets recover.
  • Management signaled that performance drivers span both revenue growth and capital efficiency, reflecting incremental improvement across the company's value chain.
  • Eric Johnson noted limited incremental return opportunities in credit markets due to "pretty flat" spreads, stating that the company maintained a conservative investment approach.
  • Favorable long-term care experience continued, with CFO McDonough indicating stable and positive claims results subject to review in the third quarter of 2026.

Industry glossary

  • NAP (New annualized premiums): The annualized value of new insurance premium written in a given period, a key growth metric in insurance sales.
  • FABN (Funding agreement-backed notes): Debt instruments issued by insurance companies, backed by funding agreements, often used to generate investment spread income.
  • FHLB (Federal Home Loan Bank program): A source of low-cost funding for insurers, using membership in the Federal Home Loan Bank system to finance assets or liabilities.
  • AOCI (Accumulated other comprehensive income): A component of equity reflecting unrealized gains and losses on certain investments, excluded in "ex-AOCI" book value calculations.
  • FIAs (Fixed indexed annuities): Insurance products that credit interest based on the performance of an equity index, with principal protection features.
  • ISLs (Interest-sensitive life insurance): Life insurance contracts where credited interest, cash value, and benefits vary based on a fixed or variable declared rate.

Full Conference Call Transcript

Gary Bhojwani: Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO Financial Group, Inc. is off to a strong start to the year, building on our excellent 2025 performance. First quarter operating earnings per diluted share were up 33% to $1.05 and up 42% excluding significant items. We also delivered our fifteenth consecutive quarter of sales growth and our thirteenth consecutive quarter of producing agent count growth. We remain pleased with the consistent results we are generating, and we remain focused on growing earnings, improving profitability, and reinvesting in the business. Our performance in the quarter once again illustrates the strength and resilience of our business model.

We continue to perform well through economic uncertainty as we help middle income households achieve greater financial security and protection. Sales results in the quarter were strong across both divisions, with total new annualized premiums up 11%. Our exclusive middle market focus and our last-mile captive agent distribution model create our durable competitive moat. This difficult to replicate model is a clear advantage and a catalyst for profitable growth. Earnings continue to benefit from strong insurance product margin and investment results reflecting growth in the business and expansion of the portfolio book yield. We maintained a robust capital position while returning $77 million to shareholders. Book value per diluted share, excluding AOCI, was $38.98, up 5%.

Turning to slide five and our growth scorecard. Nearly all of our growth scorecard metrics were up for the quarter with strong performance across production, distribution, and investments and capital. Turning to slide six on our Consumer division. The Consumer business delivered a strong start to the year. This marks our fourteenth consecutive quarter of sustained sales growth and includes a 9% three-year compound annual growth rate for Life and Health NAP. Consistent execution and our focus on the middle income market continue to drive our results. Life and Health NAP was up 9% for the quarter. Total Health NAP was up 20%, marking fifteen consecutive quarters of growth. Supplemental health was up 10%.

Our Medicare business continues to perform well, building on the strong results our field leaders delivered during the 2025 annual enrollment period. Total Medicare policies sold were up 24% with Medicare supplement NAP up 53%. Our results continue to reflect the shift in consumer preferences away from Medicare Advantage and towards Medicare Supplement. During the 2025 AEP, industrywide MA enrollment growth slowed to about 3%, the weakest pace in twenty years. The broader MA market also continued to experience significant disruption as many leading carriers pared back plans and benefits over the last eighteen months. Approximately 3 million MA members had their plans terminated for the 2026 plan year, requiring them to find new coverage.

About one in five people with Medicare switched plans or carriers, the highest rate ever recorded for an annual enrollment period. This environment underscores the value of offering both Med Sup and Medicare Advantage through our national agent distribution model. Medicare remains a flagship door-opening product for CNO Financial Group, Inc., supporting our ability to expand the total number of households we serve. Life NAP was up 1% for the quarter with more than half of our life production being generated from direct sales. Our approach to the D2C life channel continued to benefit from technology-driven productivity enhancement and diversifying our marketing away from television to include more web, digital, and third-party channels.

These nontelevision lead sources generated nearly 65% of all D2C life sales for the quarter. Annuity collected premiums of $434 million were down 2% on a strong comparable. Account values were up 7% over the prior year. We delivered our twelfth consecutive quarter of brokerage growth. Client assets were up 27% to a new record, and total accounts were up 13%. When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 12%. Strong agent productivity and retention fuel our sustained sales momentum. Agent recruiting is also up as our career path continues to resonate with applicants seeking financial stability and a career of purpose.

Producing agent count was up 3%, our thirteenth consecutive quarter of growth. Registered agent count grew 7%. Investments in technology, data, and artificial intelligence are woven into our strategy to drive greater efficiency and agent productivity and to enhance our customer experience. One example is our Colonial Penn call center, where we are using AI to help answer and intelligently route customer calls to live agents. The early results are very encouraging. We are seeing shorter customer wait times and higher quality sales conversions. We have multiple initiatives underway across the company to advance our technology and AI roadmap. As these programs move from pilot to execution, we will continue to share examples of the value they deliver.

Next, slide seven and our Worksite division performance. The Worksite business also started the year strong, with Life and Health NAP up 22%. This represents our sixteenth consecutive quarter of sales growth with a 20% four-year compound annual growth. Highlights from the quarter included life insurance up 56%, hospital indemnity insurance up 121%, and accident insurance up 18%. Our focus on small to mid-sized businesses and associations combined with our career agent model continues to drive meaningful sales growth. NAP from new clients increased 65%, largely driven by geographic expansion and further penetration into existing markets. Live sales, in particular, experienced a significant uptick from these new client relationships.

Our sales performance in the quarter was driven by strong agent productivity. Producing agent count was up for the fifteenth quarter, and agent recruiting was up 8%. Across both divisions, we are pleased with the solid start to 2026. We are executing well, and expect that momentum to carry through the remainder of the year. And with that, I will turn it over to Paul.

Paul McDonough: Thank you, Gary, and good morning, everyone. Turning to the financial highlights on slide eight. Operating earnings per share were $1.05 for the quarter, up 33% and up 42% excluding significant items in the prior period. The increase reflects continued profitable sales growth, strength in underwriting results, growth in net investment income driven by growth in assets, together with higher yields, and ongoing discipline in expense and capital management. Fee income was in line with expectations in the quarter. The expense ratio was 18.9%, reflecting lower than planned spending in the quarter, which we expect to normalize over the balance of the year.

During the quarter, we deployed $60 million of excess capital on share repurchases, contributing to a 7% reduction in weighted average diluted shares outstanding. We continue to take a measured, disciplined approach to expense and capital management, reinvesting in the business to support growth, while also generating a healthy level of free cash flow which we return to shareholders through dividends and share repurchases. On a trailing twelve-month basis, operating return on equity was 13.1%, and 12.2% excluding significant items. Turning to slide nine. Outstanding sales performance over the last several years continues to drive growth in insurance product margins across each major product category.

As a reminder, the first quarter is typically the lowest insurance product margin quarter of the year, reflecting seasonality across several of our products. Against that backdrop, our first quarter 2026 results were solid, reflecting the strength of the underlying business. Fixed indexed annuities benefited from growth in the block. Supplemental health and long-term care both also benefited from growth in the block, with long-term care margin also reflecting favorable morbidity. Medicare supplement faced modestly adverse claims experience, partially offset by the favorable impact of continued growth. We expect rate increases over the course of 2026 to help address the recent claims experience. Our traditional life margins benefited from growth in the block, favorable mortality, and lower nondeferrable advertising expense.

Overall, these results again demonstrate the value of our diversified product portfolio where individual puts and takes across product lines typically net to stable and growing total margin over time. Turning to slide 10. Net investment income increased 6% year-over-year, marking the tenth consecutive quarter of growth in total net investment income. The growth was driven by two key factors: growth in net insurance liabilities and related assets, which increased 4.8% in the quarter, and continued improvement in book yields, supported by thirteen consecutive quarters of new money rates above 6%.

Net investment income not allocated to products increased year-over-year, reflecting growth in the FHLB and FABN programs, while alternative investment income improved over the prior year but was slightly below expectations. Importantly, our portfolio continues to remain high quality and liquid. The average book value of invested assets increased 4.2% year-over-year, reflecting growth in the business. Our investment posture remains disciplined, supporting durable income generation while maintaining flexibility in a volatile market. Our new investments in the quarter comprised approximately $1.3 billion of assets with an average duration of five years. Our new investments are summarized in more detail on slide 20 of the presentation. Turning to slide 11. Our total capital position remains robust.

The consolidated risk-based capital ratio remains well within our target range, which we manage between 360–390%, recognizing that some variability is expected quarter to quarter. Holding company liquidity ended the quarter at $280 million, well above our $150 million minimum target. Debt to capital was 26.4%, remaining comfortably within our 25–28% target range. Overall, our capital and liquidity position provides flexibility to support growth, manage risk, and deploy capital thoughtfully over time. Turning to our 2026 guidance on slide 12. We are pleased with our first quarter results and the momentum we are carrying into the balance of the year. We feel good about the variables within our control, and the underlying performance of the business.

However, given the volatile macroeconomic environment, and the simple fact that we have three quarters yet to go in 2026, we are affirming our original guidance at this time, and consistent with our historical practice, we will refine our projections later in the year. Regarding our three-year operating return on equity target, we have been clear that 12% ROE was not a destination but rather a waypoint in the journey of our continued improvement. Our recent ROE results make it likely that we will increase our 2027 ROE ambitions. However, just as with our annual guidance, we do not believe it would be appropriate to update our 2027 ROE target less than halfway through the three-year cycle.

We believe credibility is built through delivery, not through frequent recasting of long-term targets. And we intend to update our ROE objectives for 2027 and beyond no later than early next year. And with that, I will turn it back to Gary.

Gary Bhojwani: Thanks, Paul. Turning to slide 13. Consistent, repeatable results continue to drive our momentum as we grow earnings, improve profitability, and reinvest in the business. Our results reflect the resilience of our business model and the strength of our diversified products and distribution. Disciplined execution will continue to drive our growth and create meaningful value for customers, associates, and shareholders in 2026 and beyond. Thank you for your support of and interest in CNO Financial Group, Inc. We will now open the call for questions. Operator?

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from Suneet Kamath with Jefferies. Please go ahead.

Suneet Kamath: Thanks. Good morning. I wanted to start with the MedSup business. Paul, I think you talked about in your prepared remarks some pricing plans. Can you flesh that out a little bit and give a sense of the timing of when you would expect those premiums to sort of kick in?

Paul McDonough: Sure. Hi, Suneet. So we started seeing some increase in our MedSup claims last year, translating to higher benefit ratios. As you mentioned, we have the opportunity to file rate increases annually, allowing us to address emerging experience and maintain profitability of the book over time with a bit of a lag. So in 2025, we filed for rate increases in two buckets. The closed block with a 01/01/2026 effective date, asking for an increase of 10.5%, and we received approvals for 10.2%. And then the open block with 07/01/2026 effective dates, we filed for 16.8% and we are expecting approvals for around 14.5%.

These rate increases earn in over time, with the full quarterly impact over these two blocks evident by fourth quarter of this year, which should translate to improved benefit ratios depending a little bit on claims experience in 2026, which we would then address with 2027 rate filings. In the long run, over time, MedSup is a good product for us, meeting our target returns.

The good news is that MedSup is not our only product, and I think this illustrates the strength and the resiliency of our business model, including its product diversity, which typically translates to puts and takes in product margin across our product portfolio, but relatively stable and growing margin in total, and you certainly see that in our first quarter results.

Suneet Kamath: And are those two buckets that you mentioned similarly sized, or is one bigger than the other?

Paul McDonough: The closed block, I would say, is maybe two-thirds, and the open block about a third. Roughly.

Suneet Kamath: Okay. And then maybe for Gary, just focusing on the Consumer segment. At the product level, it looked like Health NAP was quite strong. But life D2C and annuities, less so. And I think you had mentioned in annuities some tough comps. So maybe just give us some color in terms of what you expect there. Are we getting to the point where the comps are getting just too difficult to grow, or was there something anomalous in the first quarter? Thanks.

Gary Bhojwani: Suneet, thanks for the question, and thanks for the continued interest in CNO Financial Group, Inc. I did not see any particular anomalies in the first quarter. And if anything, I would argue that all of the forces that have continued to allow us to grow are still there. You still have the population—about 11 thousand folks turning 65 every day. You still have the absence of alternatives. You have longer lifespans. You still have the fact that the government cannot solve this problem. We expect demand for these products to continue to be very robust. You are right in citing the fact that we had tough comparables—or strong comparables, I should say.

Frankly, I would be happy to have that problem every quarter. And even the 2% that we cited, I regard that as nothing more than just quarter-to-quarter fluctuation. Remember, if the selling season in one quarter is one or two days shorter than another quarter, you are going to see variance. There are all kinds of things that go on every quarter. To be really blunt, I do not pay that much attention to volume from quarter to quarter.

I am much more focused on the one- and three-year trends, and everything I see points me to strong demand and, more importantly—or at least as importantly—a really strong ability in our product portfolio and distribution network to be able to execute and meet those demands. So I am extremely bullish, and I would not pay any attention to minor fluctuations of 1% or 2% here or there. It is, in my mind, irrelevant.

Suneet Kamath: Okay. Thanks.

Operator: Your next question is from Ryan Krueger with KBW. Please go ahead.

Ryan Krueger: Hey. Thanks. Good morning. First question is just on expenses. I know you mentioned normalization during the rest of the year. But would you consider this all timing related in terms of the abnormally favorable expenses this quarter, or do you think we are actually seeing some favorability maybe to what you had originally expected?

Paul McDonough: Hey, Ryan. I am not sure I am totally following the question. But just to offer some thoughts, and please give me a follow-up if I am not answering the question. There is always some variability across quarters. It is somewhat difficult to plan each quarter exactly. Typically, in the first quarter of the year, we have higher expenses, which translates to a higher expense ratio, and that grades down over time. That has been pretty consistent over the last several years. Honestly, that was our expectation this year. It has not played out that way.

But we expect that the expenses for the full year will still come in around where we had originally planned, and that should translate to the expense ratio when you do the math. Having said that, the growth we are seeing in the business will likely drive some favorability in the denominator of the ratio. And I think that points to the continued leverage that we are getting in the business from the growth that we are seeing. So, Ryan, let me know if that did not answer your question.

Ryan Krueger: No, that was exactly what I was getting at. Thank you. And then I just have one for Eric Johnson. There has certainly been a lot of volatility and, I guess, concern or fluctuation in the credit markets these days. Just curious about your perspective on what you are seeing in the credit markets and also where you are seeing good opportunities to deploy new money right now.

Eric Johnson: Good morning, and thank you. We have always taken the point of view that we wanted to have a stable and consistent investment performance at CNO Financial Group, Inc. And so our asset allocation model over the last couple of years has really been predicated on being capital efficient and storing up dry powder for a more favorable environment where you could really make some money at lower levels of risk versus making very little bits of money at maybe higher levels of risk. As we got into this year and you had some volatility in the first quarter, you saw a lot of rates volatility.

The Treasury curve moved up 30–40 basis points, but credit spreads were actually pretty flat—traveled in, in IG, maybe a 5–7 basis point channel; high yield maybe a 30–40 basis point channel. So you did not really get dislocation. The market was pretty well behaved largely because there was a lot of demand for product at higher rate levels. Investors were willing to buy, and you saw that in oversubscriptions and continued good executions on new issues. Through the quarter, we pretty much stuck to our knitting, and you can see it in the earnings deck. We worked shorter on the curve, largely because that was our ALM need, and we want to keep that in check.

And then, secondly, there was not any opportunity to make big money. So that is reflected in the new money rate, which is a little higher than 6%, consistent with prior quarters. We did not lunge at the market. We are going to let it come to us. I do not think this story is in the ninth inning. As the economy evolves and the impact of higher energy costs and other things happen, there will be better entry points for a real change in strategy. We are not there yet.

Ryan Krueger: Great. Thanks a lot. Appreciate it.

Gary Bhojwani: You are welcome.

Operator: Your next question is from Joel Hurwitz with Dowling and Partners. Please go ahead.

Joel Hurwitz: Hey. Good morning. Wanted to start on the ROE targeting. Good to hear that it will likely increase. What do you think are the biggest drivers of the recent outperformance that you think is moving forward? Is it growth, expenses, experience?

Paul McDonough: Good morning, Joel. I think it is all of the above. As we have been saying for a couple of years, there are not really any silver bullets here. It is really a combination of actions taken across the value chain of the business that is driving earnings growth. Some of it is earnings, of course, but we are also taking actions in the denominator of the calculation—being as efficient as possible in capital. We continue to focus on that.

Again, I feel like a bit of a broken record on this, but the answer has not changed, and that is that we are focusing on the entire business, and there are things that we are doing to improve effectiveness and efficiency, to drive growth, to drive risk-adjusted returns in the investment portfolio, and to optimize capital. You add all that up, and on a compounding basis, it has been driving ROE improvement, and we expect it will continue to do so.

Joel Hurwitz: Got it. That is helpful. And then shifting to long-term care. Can you just sort of unpack the experience and maybe expectations moving forward? Results have been favorable, and they look to improve further this quarter. Is the margin around 50% sort of the new normal for that business?

Paul McDonough: Long-term care continues to perform exceptionally well. It continues to surprise us a bit to the upside, including in this quarter. We revised assumptions a bit last third quarter. We will do that again this year in the third quarter, and we will see how things evolve. But the claims experience has been reasonably stable and favorable. It continues to be a great business for us. It is a product that our customers need, and it is designed and priced in a way that generates good returns and stable results.

Joel Hurwitz: Okay. Thank you.

Operator: Your next question is from Jack Matten with BMO Capital Markets. Please go ahead.

Jack Matten: Hey, good morning. Just one follow-up on the ROE target. Given that CNO Financial Group, Inc. is currently at 12.2%, there are still, I think, some meaningful benefits to emerge from actions you have taken in recent quarters. Are there any partial offsets or places where there could be some normalization as we think about that overall trajectory? It just seems that there could be some meaningful upside versus the original 12% target based on where things are currently running.

Paul McDonough: Yeah, Jack. I can provide some initial thoughts, and Gary may want to jump in. Two points. Number one, operating earnings continue to drive, and within a reasonable range, we expect to be able to continue to drive growth in operating earnings. We will continue to focus on capital to drive improvement on that side of the equation. The other comment I would make is that the denominator is shareholders' equity, and so it is impacted by nonoperating income, which, as you know, is volatile. So that can create some noise, plus or minus, in the ratio over time. But over long periods of time, that tends to even out. I will leave it there.

Gary, if you want to offer some higher-level comments.

Gary Bhojwani: Thanks, Paul. Jack, thanks for the question, and thanks for the interest. I think an important perspective to remember: in 2024 we said we wanted to improve our ROE by 200 basis points in three years. But we have, from the outset, been clear externally and internally that 12% number is not the destination. Not even close. We have to continue to improve. We will continue to improve. You should absolutely count on the fact that we are going to do everything we can to drive that above 12%. Really, the only questions are by when and by how much.

Whether we get to 12% in 2026 or 2027 or whatever it is, our aim is to continue to improve upon that. That is not good enough. We can get better, and that is within our reach. The only thing we are stopping short of doing is communicating by how much and by when. But you should absolutely take certainty in the fact that we are driven to improve that beyond 12%. Twelve percent is nothing more than a waypoint.

Jack Matten: That is helpful. Thank you. And my other question is just on the RBC ratio and, given it is right in the middle of your target range right now, sequentially this quarter was there any kind of movement or impact from lower equity markets on hedges like what you had last year? And if that is the case, would it be fair to think there has been a likely recovery on a mark-to-market basis given what has happened in April? Just curious if any sensitivity you can provide around those movements.

Paul McDonough: Sure. The answer to those questions is yes and yes. We did have an impact from the S&P being down about 5% in the quarter. As you know from your question, that drives the reserves for FIAs and interest-sensitive life down. Economically, it drives the call option assets down by roughly the same amount. But because there is a prescribed flooring in the statutory reserves of the FIAs and the ISLs, you end up with some noise—meaning lower surplus, lower RBC, lower dividend capacity. But as the equity markets recover, as they have done already quarter-to-date, that unwinds. From a planning perspective, we assume that this is a neutral impact in the year and over time.

Jack Matten: Thank you.

Operator: Your next question is from Wilma Burdis with Raymond James. Please go ahead.

Wilma Burdis: Hey. Good morning. Can you talk a little bit about the FABN market this year? Our understanding is that the spread environment is a little bit less favorable. Just interested to hear what you are seeing there. Thanks.

Paul McDonough: Thanks, Wilma. I would invite Eric to take that.

Eric Johnson: If you look at what spreads in the market did during the first quarter of the year, financials actually widened out relative to, let us say, industrials—financials including insurance and banks widened out relative to industrials. So if you want to think about it as kind of on an arbitrage basis, that is negative to the basic arb of a funding agreement transaction, which is to be a financial—an insurance company—that issues, and then you take the money and invest it, hopefully in high-quality industrials and utilities and things like that. Because of that negative arb during the quarter, we run our program on a pretty strict high-quality basis and have a pretty high target return on equity.

I think had we tried to do an offering during the quarter, it would perhaps have produced a marginal contribution and not the one that we try to run the program around. That circumstance is moderating a bit since quarter-end. Financials have come in a little bit more, rates a little bit higher. So we have had some relief in that tension. We will continue to reassess as we get into our next window, which will probably be in June. We had a meeting about it this morning, actually, and we are keeping a close eye on it.

I would also say that we do not have to issue unless the time is right for us and we can achieve our targets without doing violence to our sense of risk and quality. We are under no pressure to do anything. We would like to because it is a good way to make money. We have a nice program, we are good at it, and all that stuff, but we are not going to break the bank.

Wilma Burdis: Makes sense. Sounds like a thoughtful approach. And can you talk a little bit more about your mortality expectations for the year? Seems like there was some favorability in the quarter. But is that just kind of a one-off? What are you seeing there? Any color you can give for the rest of the year would be helpful. Thanks.

Paul McDonough: Hey, Wilma. So, yes, we saw a bit of favorable mortality in our traditional life business. I would say it is within a normal range of expectations. We will continue to monitor that and, again, revisit our assumptions in the third quarter.

Operator: There are no further questions at this time. I will now turn the call back to Adam Auvil, VP of Investor Relations, for closing remarks. Please go ahead.

Adam Auvil: Thank you, operator, and thank you all for participating in today's call. Please reach out to the Investor Relations team if you have any further questions. Have a great rest of your day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.