Earnings Call Transcript - CNO Q2 2025

Operator, Operator

Hello, everyone, and thank you for joining the CNO Financial Group Second Quarter 2025 Earnings Call. My name is Sami and I'll be coordinating your call today. I would now like to hand over to your host, Adam Auvil from CNO to begin. Please go ahead, Adam.

Adam Auvil, Host

Good morning, and thank you for joining us on CNO Financial Group's Second Quarter 2025 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. Let me remind you that any forward-looking statements we make today are subject to a number of factors, which may cause actual results to be materially different than those contemplated by the forward-looking statements. Today's presentation contains a number of non-GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures. You'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we will be making performance comparisons and unless otherwise specified, any comparisons made will refer to changes between second quarter 2025 and second quarter 2024. And with that, I'll turn the call over to Gary.

Gary Bhojwani, CEO

Thank you, Adam. Good morning, everyone, and thank you for joining us. CNO has reported another strong quarter and we are on track to meet our 2025 objectives and improve our three-year return on equity. We consistently deliver results that reflect our effective execution of our strategic plan and position us for ongoing profitable growth. Our business fundamentals continue to be robust. This quarter's sales performance was impressive, with record new annualized premiums of $120 million, an increase of 17%, double-digit growth in insurance sales across both divisions, and several product line sales records. We achieved our 12th consecutive quarter of strong sales momentum and our 10th straight quarter of growth in producing agent compensation. I will provide more detailed insights on these results for each division shortly. Operating earnings per diluted share were $0.87. Earnings benefited from favorable insurance product margins and solid investment results, which reflect business growth and an expanded portfolio book yield. New money rates have surpassed 6% for the past ten quarters while maintaining portfolio quality. Our capital and liquidity levels are above target. We returned $117 million to shareholders in this quarter and $234 million year-to-date. The book value per diluted share, excluding AOCI, increased 6% to $38.05. Paul will elaborate on our financial performance. Moving to our growth scorecard metrics, all were up this quarter. Remember, our growth scorecard centers on three key performance drivers: production, distribution, and capital investments. I will address each division in the next two slides, while Paul will delve deeper into investments and capital during his remarks. Starting with the Consumer division. The Consumer business achieved excellent sales results, marking our 11th consecutive quarter of sustained growth, with nearly all product lines seeing double-digit increases. Our consistent execution and focus on the underserved middle-income market continue to drive growth. We build enduring relationships with our customers by blending virtual connections with local agents who provide effective sales and service. As I've communicated throughout my time at CNO, this personal interaction is particularly valuable to customers during economic uncertainty and market volatility. Annuity collected premiums reached a new high of over $500 million in a single quarter, supported by 19% growth. This represents our eighth consecutive quarter of growth in annuities. Average account size rose by 11%, and in-force account values were up by 8%. Our captive distribution and the lasting relationships agents have with their clients add stability to our annuity sector. We also experienced our ninth consecutive quarter of growth in brokerage and advisory. Client assets in this area increased by 27% to $4.6 million, setting a new record. New accounts rose by 13%, and average account size grew by 12%. Collectively with annuity account values, our clients now entrust us with over $17 billion, up 13%. The steady growth in brokerage, advisory, and annuities highlights a significant but largely unmet need among our markets to help protect against outliving retirement income. We believe middle-income consumers deserve professional guidance and retirement products, and we consider it a privilege to serve this market. Life and health NAP saw double-digit growth, increasing by 17%. We are pleased with our life business outcomes, which included total life insurance up by 20%, record direct-to-consumer life insurance sales up 29%, and field agents selling life insurance up by 4%. As anticipated, our life production returned to growth this quarter as D2C lead volumes rebounded strongly. Our results also benefited from initiatives we have implemented over the past few years to diversify our marketing strategies beyond television to include more digital, web, and third-party channels. Web and digital now account for more than 30% of D2C lead-generated sales, an increase of 39% year-over-year. We continue to explore partnerships with select third parties to distribute our simplified issue life products. The total Health NAP increased by 13%. As I mentioned last quarter, the sustained growth in our health results reflects strong customer demand for practical solutions to cover medical coverage gaps and manage rising healthcare costs. Supplemental health grew by 21%, and Medicare Supplement was up 18%. While Medicare Advantage policies sold decreased this quarter, they are up by 4% for the year. Medicare Advantage sales are not included in NAP, as we manufacture Medicare Supplement products and distribute Medicare Advantage policies through over 20 third-party carriers. By offering both types of products, we can provide customers with more coverage options and respond swiftly to competitive shifts and changing healthcare preferences among middle-market consumers. With over 11,000 people in the U.S. turning 65 every day, the demand for Medicare products remains steady. Medicare is a year-round focus for CNO and continues to be a key product allowing us to reach and serve more customers. Agent productivity and retention were strong this quarter, bolstering our sales momentum. The number of producing agents increased by 3%, marking our 10th consecutive quarter of growth. The registered agent count also grew by 6%. Our investments in technology continue to enhance customer experiences and promote operational efficiency. For example, accelerated underwriting on some simplified life products achieved an 89% instant decision rate on submitted policies in this quarter, an increase of 12% from Q1 2025. Moving to our Worksite division performance, we achieved a record second quarter in insurance sales for Worksite life and health, with NAP up 16%. This marks our sixth consecutive quarter of NAP growth and our 13th consecutive quarter of overall NAP growth. Key highlights included record life insurance sales rising by 54%, hospital indemnity insurance up by 22%, and accident insurance increasing by 16%. Life sales now account for 35% of our total worksite insurance sales. Strategic growth initiatives have been instrumental in driving our Worksite NAP performance, with geographic expansion contributing 25% of this growth this quarter, continuing our six-quarter growth streak from this program. NAP from new group clients rose by 84%. Worksite recruiting increased by 34% in the quarter, while agent productivity grew by 16%. The number of producing agents was up by 4%, marking our 12th consecutive quarter of growth. Recent investments in training and sales technology tools have improved agent productivity and boosted momentum. For instance, we launched a new customer relationship management platform to support sales and new group development, and agent feedback has been positive. Fee sales remained flat in this quarter, but we expect to see improvements in the second half of the year, driven by increasing interest in our new Optavise Clear product. Optavise Clear combines our existing services into a single package for employees, adds new Medicare advocacy services, and enhances user technology. Early feedback from brokers and clients has been encouraging. As we gear up for the enrollment season in our Worksite division, we also kicked off a new marketing campaign, "Health is Human." In both the Worksite and Consumer divisions, our customers seek technology as a supplement, not a replacement, for human interaction. This campaign emphasizes the value our experienced agents and advocates provide to clients when paired with our technology. Now, I'll hand it over to Paul.

Paul McDonough, CFO

Thanks, Gary, and good morning, everyone. Turning to the financial highlights on Slide 8. Operating earnings in the quarter and year-to-date were in line with our expectations with some puts and takes. Insurance product margins continue to benefit from consistent growth in the business, rising book yields, and net favorable claims experience across the product set. On the other hand, the yield on our alternative investments remains below our long-term run rate expectation, creating a partial offset. In the quarter, we deployed $100 million of excess capital on share repurchases and intentionally brought risk-based capital and Holdco liquidity closer to our run rate targets. The share repurchases in the quarter contributed to an 8% reduction in weighted average diluted shares outstanding. On a trailing 12-month basis, operating return on equity was 11.8% and 11.2%, excluding significant items. This does include some elevated earnings in the second half of 2024. On a run rate basis, we remain on track to generate an operating return on equity of around 10.5% for the full year 2025 and to achieve our three-year target of 11.5% in 2027, reflecting an improvement of 150 basis points relative to a run rate return on equity of about 10% in 2024. Turning to Slide 9. Total insurance product margin was solid for the quarter, modestly exceeding our expectations with spreads and surrender activity in line with expectations in our annuity products and with net positive claims experience across our health and life products. Within our health products, supplemental health and long-term care continue to benefit from favorable claims experience, while we have seen higher claims in our Medicare Supplement products. As you know, Medicare Supplement allows for annual rate adjustments, enabling us to respond promptly to claims experience as needed. Life margins reflect lower non-deferrable advertising expenses in traditional life with mortality experience and trends generally in line with expectations. Our total margin, again, demonstrates the value of our diversified product portfolio where we ordinarily see some puts and takes, netting to stable and growing margin in total over time. As a reminder, the prior period benefited from a favorable MRB reserve movement in our FIAs and a significantly favorable reserve change in our other annuities driven by favorable mortality. Turning to Slide 10. Total net investment income grew for the seventh consecutive quarter. The average yield on allocated investments was 4.92%, up 11 basis points year-over-year. The increase in yield along with growth in the business drove a 7% increase in net investment income allocated to products for the quarter. This was partially offset by a decline in net investment income not allocated to products, which was primarily driven by lower option forfeitures as a result of lower annuity surrenders and lower in-the-money options, tighter spreads in the FHLB program, and higher interest expense on higher average debt outstanding. Income from our alternative investments was flat year-over-year, generating a return of 6% as compared to our long-term run rate expectation of between 9% and 10%. In total, net investment income was up 2%. Notably, the second quarter marked the 12th consecutive quarter of growth in book yield and invested assets, and the 10th consecutive quarter of new money rates that exceed 6%. Turning to Slide 11. The market value of invested assets grew 5% in the quarter, primarily driven by growth in the business and market appreciation on the investment portfolio. Approximately 96% of our fixed maturity portfolio at quarter end was investment-grade rated with an average rating of single A, reflecting our up in quality bias over the last several years. Our portfolio is high quality, liquid, and built for resilience in volatile market environments. Turning to Slide 12. Over the past several quarters, we had pursued a measured approach to draw down excess capital by returning capital to shareholders through share repurchases. As of June 30, we are closer to our target risk-based capital and minimum Holdco liquidity levels with a consolidated RBC ratio of 378% and Holdco liquidity of $187 million. Leverage at quarter end was 26.1% at the low end of our target range. Turning to Slide 13 and our 2025 guidance. We are reaffirming all guidance as summarized on this slide with one small adjustment. We are lowering the upper bound in the expense ratio range to 19.2% from 19.4%, reflecting better operating leverage as we continue to grow the business. As a reminder, the guidance does not reflect any new treaties with our Bermuda company. We continue to work with our domestic regulators and the Bermuda Monetary Authority to explore additional transactions. And with that, I'll turn it back to Gary.

Gary Bhojwani, CEO

Thanks, Paul. CNO remains uniquely positioned to serve the growing needs of the middle-income market with our diverse products and distribution. Our business fundamentals remain strong. We move into the second half of the year with considerable sales momentum and a clear line of sight to improved profitability. We continue to be pleased with our consistent, repeatable results and the steady execution against our strategic growth plan. CNO remains well equipped to navigate the evolving economic environment, drive improved return on equity, and to deliver on our promises to our customers and shareholders. Before we open up the line for questions, I am pleased to share that in September, we will host the next session in our CNO Investor Briefing series. This 1-hour session will focus on the Consumer division led by Division President, Scott Goldberg. As a reminder, our investor briefings focus on one area of CNO's business, provide a deeper look at that area of strategy and approach, and offer an opportunity for Q&A with members of management. Program registration will open in August. Event details will be announced soon. So please ensure that you are signed up to receive our e-mail alerts. We thank you for your support and interest in CNO Financial Group. We will now open it up to questions.

Operator, Operator

Our first question comes from Ryan Krueger from Keefe, Bruyette, & Woods.

Ryan Krueger, Analyst

My first question was on direct-to-consumer sales. Can you give a little bit more color on the momentum from the web digital piece of this? And to what extent do you think that can continue? It seems like, in particular, this was an extremely strong quarter there, so I was just hoping to get a little bit more color on what's going on underneath the surface.

Gary Bhojwani, CEO

Thank you for the question, Ryan. We're very pleased with the ongoing evolution and growth of our direct-to-consumer business, and we expect this momentum to continue. However, I want to emphasize that this business operates over the long term, not just from quarter to quarter, and there will be fluctuations along the way. Nevertheless, we don’t foresee anything in the near future that will hinder our progress. For this cycle, our improvement has largely stemmed from a few key areas. First, we've seen a strong recovery in our lead generation efforts. We are successfully transitioning from traditional lead generation methods like TV to more web and digital approaches. Consumer behavior around television is changing, resulting in a decrease in that volume while digital engagement is increasing. It's challenging to determine how these trends will balance each other out, but we are very encouraged by what we observed this quarter. For example, web and digital sales increased by 39% compared to the previous year, accounting for nearly a third of our total direct-to-consumer sales this quarter. We are confident in our continued growth in this area. While we cannot guarantee that every quarter will see a 39% increase, we anticipate positive growth over the next two to three years. Did I address your question, Ryan?

Ryan Krueger, Analyst

You did. I have a follow-up on Medicare Supplement. Your margins have remained relatively stable, down a little compared to last year, but still overall quite good. I understand there are significant differences among various Medicare sectors. I thought it would be a good opportunity for you to discuss what you are observing in that business, especially considering the recent reports about challenges faced by primary health care companies.

Gary Bhojwani, CEO

Yes. Brian, I'm really glad you asked the question because there are lots of differences. And one of the things I would ask our investors and analysts to do is really remember the ways in which our book is different because there are some very substantial differences between our business and some of the companies that are currently getting a lot of headlines. And I want to give you maybe a quick framework within which to think about this. I would argue that there are three different areas or three different categories where our business is materially different than some of what you're reading in the headlines. So first and foremost is our distribution profile. We have a long history with captive agents. And remember, the way our captive agents are managed and incented gives us better persistency. There's less of an incentive to churn, there's less of an ability to churn, and it gives us more control. We've continued to have very good production. And remember that with our captive distribution, we really view Medicare Supplement as a way to start the relationship. Now there are very strict guidelines around how you can cross-sell and what you need to do to develop a relationship and so on. And we, of course, follow all of those. But we really encourage our captive distribution to think about this as a much broader relationship. They're not just trying to sell one product; they're trying to build a broader relationship. So our distribution is very different. That's the first category. The second category is what I would just generically describe as underwriting risk. So first of all, it's really important to remember that Medicare Supplement is funded by the premiums received by the policyholders. Medicare Advantage and Medicaid and some of these other things are funded through reimbursement rates set by the government. Medicare Supplement has a fixed benefit profile. Medicare Advantage has a benefit profile that is up to the carrier that can be negotiated differently, and that's where some of the carriers have gotten into trouble. Remember, we sell Medicare Advantage, but we don't manufacture it. So we don't have some of those risks. The biggest area of risk we have is in Medicare Supplement, which is what we manufacture. We've been doing that for a long time. And as a reminder, we get a chance to reprice that every year. So the underwriting risk around Medicare Supplement is very different than Medicare Advantage and Medicaid. And again, when you're reading these headlines, it's really important to remember that when you're seeing this. Finally, if you think about the regulatory risk, it really seems to be concentrated at the moment on Medicare Advantage. And I just want to remind you again, we don't manufacture that; we strictly distribute it. Agents are paid the same commission in our system regardless of the carrier, and there's no incentives for selling specific carrier products. In addition, those Medicare Advantage carriers pay CNO; they don't pay the agents directly. We then distribute that. So we have certain elements of control that really mitigate some of that regulatory risk and some of the things you've been reading on. So just to summarize, distribution risk is different, underwriting risk is different, and regulatory risk is different. We come at this in a very different way than some of the companies that are currently in the headlines.

Operator, Operator

Our next question comes from John Barnidge from Piper Sandler.

John Barnidge, Analyst

Can you maybe talk about the expense experience in the quarter and the change in the guide? I know there's been a tech and automation aspect that's probably helped expenses while also greater leverage on distribution.

Paul McDonough, CFO

Sure. John, it's Paul. So our expenses in the quarter and year-to-date are generally in line with our expectations on a dollar basis. The expense ratio is a bit better, which is primarily a reflection of better operating leverage as we grow the business. So the denominator in the ratio is helping.

John Barnidge, Analyst

Great. And then can you maybe talk about the long-term care utilization claim patterns and any notable changes that occurred in the quarter?

Paul McDonough, CFO

Sure. It's really just a continuation of the favorable claims experience that we've been seeing. We're certainly pleased to see that. Looking forward, it wouldn't surprise us if we see a bit of a continuation of that. Longer term, we would expect that long-term care claims would begin to trend closer to what the experience had been pre-COVID. But that's kind of a crystal ball question; time will tell.

Operator, Operator

Our next question comes from Wes Carmichael from Autonomous.

Wesley Carmichael, Analyst

I wanted to follow up on the Medicare Supplement discussion. I appreciated your comments, Gary. Can you provide any details on the repricing of that product? What blended rate are you targeting? I understand this involves the states, but when should we expect to see the impact on margins from the increased claim utilization in the near term?

Gary Bhojwani, CEO

Go ahead, Paul.

Paul McDonough, CFO

So on the claims experience and how we would respond with rate filings, so I would describe the claims experience as a modest tick up relative to our expectations. We do expect that will likely persist over the back half of this year. We're baking all that into our rate filings that are happening sort of right around now and would be effective in the first quarter of next year for the lion's share of our book of business. And sort of order of magnitude, average requested rate filings is in the 10% range.

Operator, Operator

Got it. That's very helpful, Paul. And my follow-up, I'm sure you've gotten this question before, but just on competition in the annuity, the fixed annuity space, and I know you guys play more in the middle-income area of the market. But have you seen any change in competition in that market over the past few months or years? And I guess, I ask it in the context of lots of private equity or alternative manager-related capital chasing that space. I wonder if you're seeing that as well.

Gary Bhojwani, CEO

Look, there's a tremendous amount of interest and competition in this space. That's not going to discontinue anytime soon. The asset managers look at the annuity and the insurance business as, frankly, a really cheap source of funds. So they're going to continue to be very aggressive here. So there's tons of competition; it's not going to slow down. But and this is the critical thing, most of those folks are calling on consumers with $500,000 or $1 million or more. Very few of those folks are calling on the client base that we're calling on where you've got the average annuity being sold of $150,000 or less. So tremendous competition, generally speaking, in the annuity space, not nearly as much competition in our particular area, and we really like it that way.

Operator, Operator

Our next question comes from Suneet Kamath from Jefferies.

Suneet Kamath, Analyst

I wanted to go back to the Medicare Advantage. I totally get it that you don't underwrite it; you sell it. But I guess how diversified is the mix of carriers that you're using? And then relatedly, I think one of the carriers out there has been pretty public, has had some issues in terms of payment of claims. Is there any risk to CNO from that?

Gary Bhojwani, CEO

No risk to CNO from that, on that question. On the first question, I believe we have currently about 20 carriers, give or take. So there's no particular concentration risk. We don't see this as a substantial challenge, to be honest with you, given our business model. Virtually every American that turns 65 is going to at least look at Medicare Supplement or Medicare Advantage. The vast majority are going to buy one of those two things. And those consumers that start to shy away from Medicare Advantage will most likely buy Medicare Supplement, and that's just fine by us. If you play the tapes back from the last 3 to 5 years on our earnings calls, I've been saying the same thing. We're happy to sell them either. We probably have a slight preference for Medicare Supplement because we both manufacture and distribute it. But we're happy to sell them either. We're happy to see that demand go to either side of the balloon. It's not a problem for us. We're not concerned by it at all. I think the other thing I would just remind everybody, even if that Medicare Advantage secular trend starts to shift, let's remember that it's been going in one direction for a few years. If it starts to go in the other direction, there's still plenty of room, plenty of volume. And remember that there's still 11,000 folks turning 65 every day. None of that changes whether they start to buy more MA or Med Supp; either way is fine by us.

Suneet Kamath, Analyst

Got it. That makes sense. And then I guess on the annuities, the $520 million of sales, I think, was a record. Anything unusual in there? Or should we think about maybe this being a new baseline? And can you comment about the spreads that you're getting on the new business? I think you've talked about the yields, but just curious if there's been any change in the spreads that you're netting.

Gary Bhojwani, CEO

I’ll let Paul address the last part about the spreads. However, there’s nothing unusual in the annuity sales. We anticipate our sales will continue to be strong. That being said, comparables are becoming more challenging. I’m hesitant to guarantee that every quarter will be as strong, but we appreciate the momentum we have. We value the feedback from our customers and how our producers are approaching this. Additionally, we haven’t highlighted much the fact that the nature of our system ensures we have very low churn compared to others. The way our block is structured is evident in the steady growth and persistency. Along with strong sales, we experience minimal churn. If you examine some of the other results in the industry, I believe this will stand out as a significant difference. There are no major discrepancies. Paul, feel free to share your thoughts on the spreads.

Paul McDonough, CFO

Yes. Regarding the spreads, we have noted some compression over the past couple of years. I would say that sequentially and year-over-year, the spreads have remained fairly stable. There has certainly been no change in the spreads we are pricing to meet our return expectations for the product.

Suneet Kamath, Analyst

And if the Fed starts cutting rates, does that have any impact on this business? Or is it not affected?

Paul McDonough, CFO

The rate environment generally is an input to where we set the par rate on the product. So in that context, it has an impact. But I wouldn't expect it to have a material impact on the demand from our target market and the production.

Operator, Operator

Our next question comes from Joel Hurwitz with Dowling & Partners.

Joel Hurwitz, Analyst

I wanted to go back to the first question on direct-to-consumer sales. So you touched on the strength from web and digital. But I do the math and even back that out, it looked like direct-to-consumer sales outside of web and digital were still very strong despite the lower ad spend. So can you just provide some more color outside of web and digital, what you saw in D2C sales?

Gary Bhojwani, CEO

We continue to see strong production from our direct sales. We have a handful of independent third-party partnerships that we're experimenting with. Those have yielded nice results. And then, of course, as I said, the web and digital. So it's been strength all the way across.

Joel Hurwitz, Analyst

Okay. And then, Paul, could you share any insights on the statutory income or RBC for the quarter? I would have expected some recovery from the negative impact experienced in the first quarter, considering the strong performance of the equity market in the second.

Paul McDonough, CFO

Yes, Joel. There was essentially a reversal in the second quarter that offset the adverse impact we experienced in the first quarter. Statutory income was slightly below our expectations, primarily due to our alternative investments. This factors into the dividend we are distributing, which aims to exceed our target of 375%. The RBC remained flat from the first quarter to the second, which was intentional, bringing us to an RBC of 378% compared to our target of 375%.

Operator, Operator

Our next question comes from Wilma Burdis from Raymond James.

Wilma Burdis, Analyst

Following on the recent session you all hosted on investments, can you talk about how the environment looks today? Has anything changed? And where are you seeing the best opportunities?

Eric Johnson, Investment Analyst

This is Eric Johnson, and happy to follow up on that question. As you remember on our Investor Day, we talked a fair bit about two or three particular asset classes that we thought would bear fruit for us through the remainder of the year. I'll give you a couple of reminders or examples. First off, we talked about residential mortgage loans where we thought there was good value, particularly in agency-eligible loans that were paying as much as 100, 150 basis points over single A corporates with about the same level ultimately of expected loss and about the same level of capital required. And we've continued to work in that area. Also, we talked a little bit about CRE CDO AA and maybe some AAAs as well, which pay a nice spread, are very, very loss remote and are pretty short on the curve. So we'll do well if the Fed follows through with some rate cuts. And then lastly, we talked a little bit about the muni space, the taxable munis, which I think we think continue to offer some good value and diversified risk factors as well. So it's pretty much, I'd say, steady as she goes in those areas. We continue to pile up quarter after quarter of pretty good book yield and core income. And while we continue to also hold quality high and liquidity pretty high as well. I hope I answered your question.

Wilma Burdis, Analyst

And could you give us a little more color on recruiting activity in the quarter? And just talk a little bit about training of new agents and how we should expect that to convert into sales later in 2025.

Gary Bhojwani, CEO

Yes. We really like where we are in terms of agent productivity, both in the Worksite and Consumer divisions. We've had good recruiting, good productivity. We expect that to continue. And our point of emphasis, I think, is productivity that will continue to be the case. And you've seen that in the numbers. I think the strong sales numbers speak for themselves, and we don't see any reason for that to slow down. Conventional wisdom has held that if the economy does soften, that should help recruiting. But even in a relatively robust economy like we've seen, we've been able to maintain that, and I would expect that to continue. I see no reason to see the slowdown.

Operator, Operator

Our next question comes from Jack Matten from BMO.

Jack Matten, Analyst

Just a follow-up on the capital question earlier. Does the lower kind of statutory earnings you saw change your view at all of excess cash flow generation this year? I think the outlook was $200 million to $250 million, given that you're ultimately solving to be around that 375% RBC ratio.

Paul McDonough, CFO

Sure. So the first thing I'd say is that free cash flow is often lumpy from quarter to quarter and more stable on an annual basis. So we did generate about $50 million of free cash flow in the quarter and year-to-date, but over $200 million on a trailing 12-month basis through June 30. So we do remain confident in our full year guidance. Then with respect to the first half, the free cash flow was certainly a bit below our expectations, primarily driven by taxes. In the ordinary course, taxes on our statutory income are paid from the OpCos to the Holdco, which is where all the NOLs currently reside. In the first half, we actually had no taxable statutory income due to the tax reserve fluctuations in our fixed indexed annuities. This is really just timing. We do expect tax payments up the chain to resume in the second half. So hopefully, that provides some color. But bottom line is we remain confident in the full year guidance.

Jack Matten, Analyst

That's helpful. And then can you just remind us where CNO stands in considering additional opportunities with your Bermuda company, to what extent you think could support ROE accretion as part of the targets you've laid out?

Gary Bhojwani, CEO

Yes. So we are very pleased with how the Bermuda operation continues to develop. As we've shared before, we have a very strong incentive in continuing to maximize that entity. We are engaged in discussions with regulators there, and we're very pleased with how those discussions are going. We also think it's critical that we not front-run any of those discussions, and we really don't want to provide any more details until we have greater definitive responses from our regulatory interactions. But the bottom line is we like the way everything is trending, and we continue to engage in discussions with the Bermuda Monetary Authority.

Operator, Operator

We currently have no further questions. So I'd now like to hand back to Adam for some closing remarks.

Adam Auvil, Host

Thank you, operator, and thank you all for participating in today's call. As a reminder, if you're interested in receiving details on our upcoming investor briefing, please ensure that you are signed up to receive our e-mail alerts. Have a great rest of your day.