CNO Financial Group, Inc. Status update

Good morning, and welcome to CNO Financial Group's investor briefing on our worksite division and Medicare business. I'm Adam Auvil, Vice President of Investor Relations & Sustainability. Thank you for joining us today. These briefings are designed to provide a deeper understanding of CNO and the drivers that support our growth. If you have not watched our prior investor briefings on investments and the consumer division, both are available in the investor relations section of our website. Today's discussion is grounded in our purpose to secure the future of middle-income America. Both our worksite and Medicare businesses bring that purpose to life by helping customers navigate important coverage needs with the support of our trusted in-person agents. Before we begin, I need to cover a few housekeeping items. This morning's presentation is available in the investors section of our website and was filed today in a Form 8-K.

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. Finally, today's presentation contains a number of operating metrics. Certain operating metrics do not have a corresponding GAAP measure but are presented because management believes they provide useful insight into our business and performance. These metrics should not be considered a substitute for results reported in accordance with GAAP. I'd now like to introduce Karen DeToro, President of the Worksite Division. Karen, over to you. All right.

Thank you, Adam. Thank you to all of you for making time today to learn more about our worksite division. I'm Karen DeToro, President of CNO's Worksite Division. I've been with CNO for seven years. I spent four years as CNO's Chief Actuary, and I was named President of the Worksite Division in January 2024. CNO has been selling insurance in the worksite for decades, and I'm here today to shed a little more light on how we go to market and what's been driving our success in this market. Joining me today is Richard Shaffer, Senior Vice President of Worksite Sales. Richard has been with CNO in this role for four years, and he has done a tremendous job of working with our field agents to deliver strong growth every quarter since he joined.

Richard will share some insights about our agents and the investments we're making to support them a little later in the presentation. As you listen today, I'd like you to keep three main points in mind. First, our focus in the worksite division is well-aligned with CNO's mission of securing the future of middle-income America. Our agents focus on helping employers with middle-income employees, such as teachers, first responders, and union members. These individuals need the coverage that we offer, and it's easy for them to buy this coverage at their workplace. Many employees in this demographic don't know where to start when purchasing insurance on their own, and they appreciate the trust and convenience that comes with evaluating coverage offered through their employer.

Second, our products are specifically designed to fill the gaps in employer-paid coverage, gaps that have widened greatly over the last two decades as employers have sought to manage benefit costs through reduced benefit offerings and the increasing use of high-deductible health plans. We offer life and health products that we can manufacture and service with confidence. We specifically don't offer products like major medical, dental, or vision that require provider networks. This is similar to our strategy in the consumer division on Medicare, where we choose to manufacture Medicare Supplement but not Medicare Advantage. Third, as with CNO's consumer division, we pride ourselves on the strength and quality of our own distribution. Many worksite carriers go to market through employee benefits brokers and consultants, which puts a distance between the carrier and the employers that they're serving. This can also result in broker-initiated churn.

We go to market primarily through our captive agents. As you'll hear from Richard, these agents provide the last mile of delivery. They show up anytime, anywhere employers need them to help employees understand their benefits, purchase coverage, and use that coverage when they need it. They maintain long-term relationships with the employers and employees we serve. We're very proud of the success we've had over the last several years. 2020 was a difficult year for the U.S. voluntary benefits market in general, and we were no exception. But since 2020, we've delivered consistent sales growth with an 18% compound annual growth rate from 2020 to 2025. Over that same period, the U.S. market for the products that we offer had a compound annual growth rate of only 5%. So far in 2026, our year-over-year growth rates were 22% in Q1 and 29% in Q2.

With respect to producing agent count, after a slight dip in 2021, which was driven by the ongoing effects of the pandemic, we've also delivered consistent growth in this metric. I'll note that our sales have grown faster than our producing agent count, meaning that we're growing that both by adding agents and through improved productivity. Driving greater productivity has been a strategic priority since Gary Bhojwani became CEO in 2018, and the benefits are showing up in stronger production, higher agent effectiveness, and sustained sales growth. We've delivered this growth by focusing on industries that need in-person education and enrollment for their employees. These are industries where people aren't sitting in front of a computer all day, so virtual enrollments are not an effective option. These employees may have limited break periods or shift changes late at night or early in the morning.

They may be spread out across multiple geographic locations. These are the conditions for which our agency model is perfectly suited. These industries also tend to be ones that employ middle-income Americans. Our agents do extremely well in industries like transit and utilities, education, and public sector. We've historically done well with unions, and we're growing our union presence even more with focused attention and investment in that space. These middle-income Americans need the coverage we offer. There's a large addressable market in the industries we serve, which means continued opportunity for growth. Our top four industries represent roughly one-third of the total employment market in the United States. Health services and construction are expected to grow faster than the national average over the next eight years based on projections from the Bureau of Labor Statistics.

Transit is expected to grow at about the same rate as the national average. While education and public sector are expected to stay flat in terms of the total number of jobs, both industries are expected to experience high turnover driven by rising retirements, which will bring more new employees into these industries. Finally, due to the nature of the work in these industries, they are less likely to be disintermediated by AI. Our product portfolio positions us well to capitalize on the evolution that is happening in the U.S. employee benefits space. The supplemental products we offer in the workplace are designed to address the growing gap in employer-paid coverage. Here are some sobering statistics about employee benefits.

In just the last four years, the percentage of employers offering major medical coverage to their employees has dropped from 78% to 61%, and this drop is occurring primarily among employers with fewer than 100 employees. Less than half of employers provide dental or vision coverage to their employees. In 2025, 88% of employees with major medical were enrolled in a plan with a deductible, and that average annual deductible was over $1,800. Consider this against the backdrop of recent surveys that indicate that almost half of Americans do not have the liquidity to cover a $1,000 emergency expense. We all know that the premiums for major medical insurance for both the employer and the employee continue to rise each year. To sum up, employers are providing less coverage and shifting more of the financial burden to employees, with middle-income workers often feeling the strain the most.

Our supplemental health products, critical illness, accident insurance, and hospital indemnity, help protect employees and their families from unexpected out-of-pocket healthcare-related costs that may not be covered by their major medical, dental, or vision coverage. These are primarily indemnity products, which means policyholders can use their benefits as they see fit, whether to cover a medical bill or to pay for other non-medical expenses that can arise from an adverse health event. We also offer life insurance in the workplace. The workplace is where many Americans first obtain life insurance coverage. Group coverage is the typical starting point, but the amount of coverage offered on these group products is typically limited and often insufficient to meet people's coverage needs. Our supplemental life products offer both term and permanent coverage in amounts up to $250,000 to help employees address this gap and obtain coverage in a convenient way.

We are particularly proud of the return of premium feature offered on our supplemental health and life products, subject to state regulations. When this rider is added to the product, it pays the policyholder the cumulative premiums paid into the policy, less any benefits received, generally after 20 to 25 years. Through this product design, we have paid out almost $5 billion to policyholders since inception. Our products are typically written as individual, not group coverage. Even though the policies are individual, we can still take payment through payroll deduction or through direct bill, whatever the employer prefers. The individual chassis means that coverage is portable and employees can keep their coverage even if they leave the employer. This feature, combined with the return of premium feature, tends to make our policies stickier than some other workplace coverage.

As I noted, we are less exposed to broker-driven churn because of the fact that our long-tenured captive agents maintain stable relationships with the employers that they work with for years or even decades. We feel we have a strong story to tell about our go-to-market approach and our product portfolio, but I think the most distinctive quality of our Worksite Division is the strong synergy between our captive distribution, the Optavise Career Agency, and our manufacturing arm, Washington National Insurance Company. I am going to turn it over to Richard now to talk about how this relationship, and in particular, our Optavise agency force, is a source of competitive advantage for us. Richard. Thank you, Karen. Good morning, everyone.

My name is Richard Shaffer, Head of Sales in CNO's Worksite Division. I have worked in the employee benefits industry for 28 years. One thing that makes our business different is that we own both manufacturing of insurance through Washington National and distribution of our products through our wholly owned career agency, Optavise. That is increasingly rare. Most supplemental benefits carriers rely heavily on brokers and external enrollment firms. We do not. We have a dedicated career sales force working for Optavise selling Washington National Insurance. That gives us direct relationships with employers and employees before, during, and after enrollment. Our distribution force is comprised of independent contractors. Agents are paid through product commissions, allowing for a variable cost structure. As sales grow, the economics scale. An independent contractor workforce creates tremendous energy and alignment.