Joseph Coletti
Welcome to Innovators and Ideas, an audio series from RBC Capital Markets where we explore the bold thinking and impactful leadership shaping the future of the financial sector. We're on location today at RBCs’ Global Financial institutions conference here in New York, and joining us is Gary Bhojwani, CEO of CNO Financial Group, who’s strategic leadership and vision have strengthened the company's position in the financial services industry while championing innovation and growth. Gary, thanks for taking time out to join us.
Gary Bhojwani
Thanks for having us. We really appreciate being here.
Joseph Coletti
So I want to begin by maybe having you kind of walk through and give us a little bit of your company's story for our listeners. Can you talk about kind of your mission, what's driving sort of your purpose, and how all that influences the work that you do for your clients?
Gary Bhojwani
Sure, our mission is to secure the future of middle income America. We do that by providing health insurance, retirement products, life insurance, basically financial services for middle income America. And at first blush, that may sound like something that's really common, but it's actually not. We're one of very few companies that focus specifically on American households that have a net worth generally between $100,000 and $200,000 or less. So these are folks that really need help preparing for retirement, and that focus on middle income America is really the first thing that makes us very different from most other players in the financial services. The second thing that makes us somewhat unique in this space is we provide these products or distribute these products through different distribution channels. Most companies in our space will pick one or two. We actually have more than that. We will reach our customers either through our own captive, dedicated agents, or through what's known as direct to consumer, meaning directly online, or through independent agents. So that mix focusing on middle income America, the mix of products and the mix of distribution is really what sets us apart, and we're really pleased to be in the space.
Joseph Coletti
I want to stay on that focus on middle income America. I want to kind of talk about what you think some of the drivers of your success with this customer base has been.
Gary Bhojwani
Whenever I think about what it is we do and how important it is, I start out by thinking of my own parents. My father, as he prepared for retirement, he really represents, to a large extent, our target consumer. And we needed to make sure that we had a way to take care of his basic needs in retirement. And remember, we're living in a time where pensions have gone away. The government can't provide richer benefits than it has. If anything, I think we're on a trajectory where we're going to reel some of those benefits in, we have to. So it's really up to individuals to secure some of these products, and what we do is focus on helping these people. And many of our products, like the retirement oriented products, of course, are more long term in nature and really a lot of planning. But some of our other products, life insurance as an example, we're talking to these consumers sometimes when they've just had the worst days of their lives, and we're there to help. So therein lies our view that this is really a noble business. We're here to help people. We make a difference, and we focus in on a market that is traditionally underserved, and we consider it a great privilege to do that. Now, in terms of continuing to do that, it's very difficult to focus on this market space. There's a reason most people don't. The economics are, frankly, a lot tougher. Only because we've been doing it for so long and we have so much scale that we're able to do this in a cost effective way.
Joseph Coletti
You guys have a lot of sales momentum right now and we want to kind of get a sense from you and a vision for what the next three to five years and what the opportunities really look like.
Gary Bhojwani
Yeah, we've been very, very fortunate. We've had a long stretch, in fact, over 10 quarters in most of our products, of continual, successive sales growth. Starting in 2020 we really fired up the growth engine, and like everybody else in the world, we were impacted by COVID, so that slowed things down a little bit, but we've been able to really get that growth engine going again and deliver some wonderful results. Now the next step is to optimize the results. And we've talked a lot to our shareholders about the things we want to improve in terms of our expenses and RoE and, deliver what's called operating leverage, meaning the bottom line grows at least as quick, if not quicker, than the top line. And that's really one of the things we're focusing on here for this next phase of our growth.
Joseph Coletti
I wonder if you could talk a little bit about the sort of trends that are impacting and driving some of your customer needs, but also, like when you think about your value proposition to them, how you're kind of adapting that to serve their new needs.
Gary Bhojwani
Right now, most of the customers we talk to, if you really boil it down, there are two sets of needs they're worried about. The risk of dying too young, so think life insurance. Or, the risk of living too long. And I know that sounds crazy, living too long, and what we're really talking about there is outliving their money. So we're emphasizing the types of products that help guard against that. Think long term care, think annuities and so on. So we've seen that shift happen. We think it's going to continue to happen. There are 11,000 folks turning 65 every day, and that trend is expected to continue until roughly 2027 and at which time, it'll start to taper off a little bit. We're kind of in the peak of the boomers turning 65 but even then, there's going to be a ton of Americans that are going into retirement, and they need help preparing for it, just like my dad.
Joseph Coletti
The transformation in the benefit space continues to accelerate. Can you talk a little bit about how your company is approaching technology to continue to sort of support your agent workforce?
Gary Bhojwani
I think if you step back and think about any product or service you interact with in your life, I guarantee you, you will find that over the last decade or so, there's a much greater technology component to it than there used to be. You as a consumer expect to be able to go into a retail store like Nordstrom and have it be seamless, whether you're dealing with the store or online. There's a similar expectation in financial services. But if I have my way about it and we do this well, I want our consumers to feel like they can always interact with a real person. Our agents, we have wonderful agents that really good at their job, they make complex subjects very simple, they do a fantastic job at this. And I want our consumers to continue to rely on that human interaction, because we think that's where the value is, that last mile of service. But then I want our agents, the people that are providing this service, to have great technology behind them. So will we have to provide consumers with some basic ability to shop and compare and look at products online, of course, just like every other service you're interacting with these days. But we really want that human component, and so I think that may make us a little bit different in it, we don't want our consumers to deal with us only online. We want them to interact with us. We want them to get the benefit of that advice and expertise. We think that's the best way to prepare them for the future.
Joseph Coletti
We ask a lot of our guests about what they think the qualities or some of the key decisions that leaders in their space need to make to really lead into the future. I wanted to take a step back. And as you think about CNO and you think about this entire space, you know, what are some of those that you think are really important to success moving forward?
Gary Bhojwani
I think the successful formula for us, we've got to stay focused on the middle market. But we've got to do it in a way that that perfectly blends technology and human interaction. And we want to find the way to perfectly blend that. And I think in this time that we're going into where things like innovation and service and so on are so important, finding that right mix and perfecting it, that's our mission.
Joseph Coletti
And let's maybe close with one more kind of big picture. Maybe you can give us a little bit more on how you see the outlook for sort of the broader insurance industry, sort of moving forward. But I think even more importantly, you know why do you think that CNO is can really be a strong long term investment from investor standpoint.
Gary Bhojwani
Setting the company aside for a moment, if you just take a look at the macro-economic environment, 11,000 folks turn 65 every day. So huge number of people coming through this pipeline, they're living longer. It costs more for that longer lifestyle. Many healthcare costs and so on are going up, and there are fewer alternatives that provide these products through retirement and so on. So when you look at the external environment, you look at the formula that we're bringing in terms of technology and human interaction, and then you look at this, just focus on the middle market. I think it's a really good combination that makes us a great company to invest in as well as to do business with.
Joseph Coletti
I think that's a great way to close and Gary, really appreciate you taking time out of your busy schedule at the conference to talk to us today. It's been a really fascinating discussion. I think our listeners are going to enjoy it, and we hope we'll have you back again.
Gary Bhojwani
Thank you so much. Thanks for hosting this event. We really appreciate being here. Thank you.