Release Date: February 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you explain the reduction in the ROE guidance from 14%-16% to 12%-13% for 2025, and do you expect to return to the higher range in 2026? A: Mike Katz, Executive Vice President - Finance, explained that the reduction is due to several factors, including investments in leave management, weaker Stop Loss results, and lower prepayment income. He anticipates that the ROE will be at the high end of the 12%-13% range in 2025 and expects to return to the 14%-16% range in 2026 as Stop Loss results improve.
Q: Will the $50 million strategic spend on leave management and disability administration recur in 2026? A: Mike Katz stated that the spend is primarily impacting 2025, with expectations for revenue from leave administration and short-term disability in 2026. The investment is expected to break even in 2026 and generate positive earnings in 2027.
Q: How confident are you in the improvements in Stop Loss underwriting and risk selection? A: Mike Katz emphasized that they have taken significant steps to improve risk selection, including holding firm on data requests and focusing on known claims. They achieved a 21% average net effective rate increase for January 2025, with higher increases on underperforming blocks. They are confident in their reserves and have external validation of their underwriting improvements.
Q: Can you provide more details on the expected wealth flows for 2025, especially considering the OneAmerica acquisition? A: Heather Lavallee, CEO, noted that while the OneAmerica acquisition may create some volatility in flows due to a 90% retention assumption, the fundamentals of their wealth business remain strong. They have $20 billion in plans for implementation in 2025, and full-service sales are up 30% compared to the previous year.
Q: What are the ongoing investment needs in Health Solutions, and how should we think about expenses in 2025 and beyond? A: Heather Lavallee highlighted the strategic importance of investing in leave management to enhance customer experience and drive growth in supplemental health products. Mike Katz added that while some expenses will continue, they expect revenue offsets from leave administration and short-term disability in 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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