Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the CNO Financial Group, Inc. third quarter 2018 earnings conference call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Jennifer Childe, Vice President of Investor Relations. You may begin your conference.
Thank you, Stephanie. Good morning, everyone, and thank you for joining us on CNO Financial Group's third quarter 2018 earnings conference call. Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer, and Erik Helding, Chief Financial Officer. Following the presentation, we will also have several other business leaders available for the Q&A 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 earlier today. We expect to file our Form 10-Q and post it on our website on or before November 5th.
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 statement. Today's presentations contain 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 presentations, we will be making performance comparisons, and unless otherwise specified, any comparisons made will be referring to the changes between third quarter 2017 and third quarter 2018. With that, I'll turn the call over to Gary.
Thanks, Jennifer. Beginning with slide five, I am very pleased with our performance in the third quarter, which reflects the continued progress our team has made executing on our strategic priorities. All three of our segments posted sales growth in the quarter and drove all growth scorecard metrics up over the prior period. While we would like to see a few more quarters of this growth before calling it a trend, our results reconfirm our faith in our strategy. Operating earnings per share were $0.53, up 18%, reflecting benefits from tax reform. Book value per diluted share was $19.28, down 10% from year-end 2017 due to the impact from the previously announced reinsurance transaction. This quarter, we closed on the transformative long-term care reinsurance transaction.
Following the close, Moody's upgraded CNO to investment grade, which reflects our significantly de-risked balance sheet, as well as our ability to fund the transaction within the capacity of our existing balance sheet while maintaining capital metrics that are at or better than what we disclosed as part of our 2Q earnings call. Moody's also highlighted our expectations for annual free cash flow generation of approximately $350 million. With the long-term care transaction now complete, our full attention is focused on growing the franchise. Turning to slide six, I want to take a moment to discuss the updated growth scorecard. You'll see that we've divided our measures into categories of drive growth and expand to the right to more clearly allow our stakeholders to track our progress against our growth strategy.
At CNO, expand to the right refers to our goal of reaching customers still within the middle market that are slightly younger and have higher income and wealth. During the third quarter, we delivered growth in life and health NAP and total collected premium. Tied to our initiatives to drive growth and expand to the right, Bankers Life annuity collected premiums, client assets at our broker-dealer registered investment advisor, and fee revenue all generated double-digit growth this quarter. Now let's move to slide seven in our segment results. Starting with Bankers Life, where we are pleased to report meaningful progress across our major initiatives and strong results for the quarter. Life and health NAP increased 2%, which was driven by a 6% increase in health sales. Total collected premiums increased 7%, driven by a 14% increase in annuity collected premiums.
These strong annuity sales, coupled with higher persistency, drove a 5% year-over-year increase in annuity count values. We also made progress in our effort to expand to the right. You'll recall that in 2016, we launched our own broker-dealer and registered investment advisor. I'm pleased to announce that these businesses are now entrusted with over $1 billion in client assets. Net client inflows totaled $70.5 million this quarter and $185 million year to date. Our fee revenue was up 15% over the comparable quarter due to growth in securities, sales, and fee-based investment management services, combined with an increase in Medicare Advantage sales. The number of Bankers Life financial advisors has grown 25% over the prior year. Currently, 13% of our agent force is dually registered, which leaves us with significant runway for growth.
Because they are able to offer more asset accumulation and income protection products, they help drive sales of our retirement products such as annuities. In fact, these dually registered agents were responsible for 48% of the Bankers Life annuity sales during the quarter. Our producing agent count increased 1% this quarter. This growth was generated from gains made in first-year agent retention, which reduces our reliance on new agent recruiting and is consistent with our strategy to build a more tenured and productive agent force. Moving to slide eight, Washington National has generated growth in six of the past seven quarters due to the success of our strategic initiatives.
Total NAP in the third quarter was up 2%, driven by a 28% increase in worksite life sales. Total collected premiums were up 2%, driven by increases in supplemental health sales. Our geographic expansion efforts have delivered over $3 million of incremental NAP in 2018, while our diversification initiatives are showing promising results. Life sales were up 25% in the third quarter while our short-term care pilot delivered its best results to date. The short-term care initiative is particularly encouraging since it leverages the breadth of the diverse CNO product portfolio and distribution capabilities. Total worksite sales were up 12%, driven by a record-breaking quarter in the PMA worksite channel, which posted its sixth consecutive quarter of double-digit growth. Successful new agent recruiting, combined with strong experienced agent retention, contributed to an overall increase of 3% in the average producing agent count in the quarter.
Turning to slide nine, Colonial Penn delivered its strongest rate of sales growth in more than three years. NAP was up 19% due to increased cost-effective advertising spend and strong sales productivity. We always remain price-disciplined in our approach and acted on attractive lead investment opportunities during the third quarter. Total collected premiums were up 2%, driven by growth in the block and stable persistency. We continue to see success with our initiatives to diversify our lead sources. Web and digital sales were up 40% in the third quarter, driven by investments in enhancing our website and expanding our online lead generation activities. We've also implemented various technologies to enhance lead processing, improve the customer experience, and speed the sales closing process. This has led to higher quality lead generation, improved telesales agent productivity, and stronger sales conversion rates.
We are committed to expanding our product offerings within Colonial Penn and plan to pilot new products in 2019. I'll now turn the call over to Erik to discuss our financial results. Erik?
Thanks, Gary. CNO had a strong quarter of earnings. We reported a net loss per share of $3.22, the loss was driven by a one-time charge of $4.01 per share related to the LTC reinsurance transaction that was completed in the third quarter. Excluding this loss, net income per share was $0.79, up from $0.59 in the prior year. We reported operating earnings per share of $0.53, up 18% from the prior year. Operating return on equity was 10.2%, an increase from 2017 levels, primarily reflecting lower corporate tax rates. Holding company cash and investments were $166 million, down from the second quarter as a result of the $265 million contribution made to the insurance companies to fund the LTC reinsurance transaction.
As this utilized most of our excess capital at the holding company, we have a desire to run the holding company balance comfortably above our stated minimum of $150 million. We currently expect no incremental excess capital deployment in the fourth quarter. CNO's estimated consolidated risk-based capital ratio was 450%, up from the second quarter and slightly higher than expectations as a result of higher statutory income and a slightly lower impact from the LTC reinsurance transaction. As we head into the fourth quarter, it is worth noting that as a result of recent changes made by the NAIC, primarily reflecting the impact of tax reform into the RBC calculation, we expect our consolidated RBC ratio to be reduced by approximately 25 points when we report fourth quarter results.
With the LTC reinsurance transaction behind us, strengthened capital metrics, and expectations for annual free cash flow generation of approximately $350 million, we are optimistic about the opportunities to serve more of the middle-income market and accelerate profitable growth. Turning to slide 11 in segment earnings. It is worth noting that our segment earnings have been adjusted in all periods to reflect the movement of the reinsured LTC business out of the Bankers Life segment and into the LTC and Run-off segment, consistent with what was described when we announced the transaction. However, beginning in the fourth quarter, earnings in the LTC and Run-off segment will represent only the non-reinsured closed block LTC business that has been reported in this segment since 2016. Bankers Life earnings reflect favorable mortality and investment results. Medicare Supplement margins were lower due to higher incurred claims.
Washington National's earnings reflect higher supplemental health margins as we continue to experience lower levels of incurred claims. Colonial Penn's EBIT was flat to prior year, with favorable mortality and growth in in-force EBIT being offset by higher cost-effective advertising spend, which resulted in increased sales. Based on results for the first three quarters of the year, we expect Colonial Penn's EBIT to be in the $12 million-$18 million range for 2018. Earnings in the LTC and Run-off segment were in line with expectations but lower than prior year due to favorable claims experience in the Bankers Life ceded block in the third quarter of 2017. Beginning in the fourth quarter, we expect this segment to generate break-even earnings, as this segment will only include the non-reinsured closed block of business.
Lastly, corporate segment results were slightly better than the prior year due to favorable investment results and lower expenses. Turning to slide 12 on our key health benefit ratios. Bankers Life Medicare Supplement benefit ratio was 75.6%, higher than expectations, due in part to elevated costs related to physician-administered drug treatments. Despite the higher level of claims in the quarter, we continue to expect that the Medicare Supplement benefit ratio will be in the 71%-74% range for the fourth quarter. Bankers Life long-term care interest adjusted benefit ratio for the retained block of business was 79%, slightly elevated, but still in line with our expectations. We expect the interest-adjusted benefit ratio for this block to be in the 74%-79% range for the fourth quarter. Washington National supplemental health interest adjusted benefit ratio was 56.9%, in line with recent experience and expectations.
We expect the interest-adjusted benefit ratio to be in the 56%-59% range for the fourth quarter. With that, I'll turn it back over to Gary.
Thanks, Erik. CNO is squarely focused on accelerating long-term profitable growth. The diversity of the franchise, the depth and breadth of our product offerings, and our commitment to the middle-income market forms a solid foundation for sustainable growth and sets us apart from our competitors. At the same time, our robust free cash flow generation and strong balance sheet gives us the flexibility to pursue investments that advance our strategic initiatives and generate incremental long-term shareholder value. For example, the significant investments we've made in pilot programs at Bankers Life to improve agent retention and build our broker dealer have been key drivers of our recent sales growth. These investments align with our efforts to expand to the right. Investments in technology, such as our automated underwriting and platform consolidation, are simplifying and improving customer experience while boosting the productivity of our agents.
Similarly, the investment we made in Tennenbaum Capital Partners in 2016 was, at the time, an alternative use of excess capital and an opportunity to boost our investment returns. We sold our minority interest during the third quarter at a substantial gain, which demonstrates our willingness and ability to be thoughtful, methodical, and disciplined in our approach to corporate development and M&A. In closing, I'm very encouraged by our recent financial and operational performance and remain bullish about our prospects. Through continued execution of our strategic priorities, we expect to boost sales and earnings, generate strong free cash flow, and improve our ROE, all while continuing to drive value for all of our stakeholders. Thank you for your continued interest in CNO Financial Group. We will now open it up for questions. Operator?
At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from Randy Binner with B. Riley FBR. Please go ahead.
Thanks. Good morning. I wanted to ask a question about the Medicare Supplement loss activity. I apologize if I missed it, but I think you said it was physician-registered medical claims. I didn't quite catch that terminology. Could you please clarify that and just talk a little bit through kind of what that dynamic was? In general, I think of this as being a more predictable line.
Sure, Randy. Thanks for the question. This is Erik. Yeah, what I mentioned was physician-administered drug treatments. What this pertains to is, in the quarter, we just saw, in general, just an elevated level of claims. The one acute thing that sort of stuck out to us was an elevated level of activity related to chemotherapy-
Okay
arthritis drug treatments.
Those would be activities, though, that would be contemplated within Medicare sup. I guess the question is it something where the product set written for this cohort of risk or this year didn't anticipate this? This is an unusual kind of spike in that activity. I guess the follow-up there would be, what would give you the confidence that it would settle back down in the fourth quarter?
Yeah, it was more the latter, Randy. It was more just an unusual spike. Certainly, the product design and pricing provides for things like this, but we just saw an elevated level of activity in the quarter. Having not seen that to this extent in the past, that's sort of what gives us some comfort that it's not going to repeat. Certainly only time will tell, and we'll see how things play out in the fourth quarter.
Is it something that others have seen in that product area?
I'm not aware of anyone else having this particular issue in the quarter. That's something we'll be looking at as well.
When do you sell most of your Medicare Supplement?
It's sold throughout the year. There's a heavy level of activity actually right now.
Yeah.
They're in open enrollment, and those have policy effective dates of January 1. There's a heavy level of activity now. The bulk of the sales on an annual basis do occur in the fourth quarter.
Okay. Yeah, I guess the last piece on that is then, whatever you underwrote for this next year is already kind of in progress. It covers what it covers. The thought there again is that this is just an unusual spike and there's nothing that needs to be changed about the product.
Not at this particular point in time. I think where you're headed is, you're correct. Pricing has been set for the 2019 policy year. That will be what it is. The benefit that we have with Medicare Supplement is that it is annually renewable, and we can re-rate every year. To the extent we see kind of a continuation of these trends, it's something that we can build into the repricing of the product for the 2019 year.
Right. Okay. Got it. I'll leave it there. Thank you.
Your next question comes from Erik Bass with Autonomous Research. Please go ahead.
Hi. Thank you. Gary, as you expand to the right, does this change who you are competing with or the market and pricing kind of competitive dynamics? Is it the same agents for you who are targeting the more affluent market as your traditional core market, or is it really more the province of the dually registered agents?
Erik, first of all, thanks for the question, and thanks for the continued support. We do not expect to see a material difference in our competitors as we expand to the right. I would remind all of you that we still are staying focused squarely in the middle market. In many cases, these are customers we already had, say, with a medsup policy or what have you. Now that we're able to offer more complete services, it's just another thing we're offering them. The answer to your first question is, we do not expect a material change in our competitors. Could that change a couple of years from now as we increase our penetration? Sure. Our market share in relative terms is so low that it's going to be a long time before I get really worried about that.
We're staying squarely in the middle market and don't see a material change in our competitor list. In terms of the agents, it is generally the same agents that are producing the growth you saw this quarter. That said, our hope is that as we have a greater percentage of our traditional insurance agents become financial advisors, that more of the sales of these more complicated accumulation and income-oriented products will end up coming from them. Even in this quarter, as you'll recall from my comments, almost 50% of the annuity sales came from the agents with a securities license. I would expect that trend to grow with anything.
We'll continue to see that, but as we build out the agent force and as we continue to train and develop them, we're really focused on those agents that have that ability to be able to provide services at that level and have that aptitude. We think we've got a lot of runway here with the number of agents that we have, and we have a relatively small percentage so far that have that securities license.
Got it. Are the financial advisor recruiting dynamics any different from traditional insurance agents? Would you expect since you have a wider product set and potentially the opportunity to earn higher commissions, that you could kind of expand the pool or have better retention than you've seen historically?
I think one of the things that makes our model unique, if you think about some of the other firms out there that are in this business and that recruit existing financial advisors, there's a lot of those companies that are competing one against another, and you'll see financial advisors move from brand X to brand Y. In our case, the majority of our advisors, I don't have the stats in front of me, but the majority of our advisors started out in our system as insurance agents, and they've grown up with us, and they've learned the insurance business with us, and then we are teaching them the financial advisor business. We're not competing with the traditional firms that you would think of for those financial advisors. Now, over time, could that change a few years from now? Sure.
Right now, our focus is on bringing people into our system as insurance agents, teaching them the insurance business, and then the ones that have the right qualifications and ambition and so on, helping them become financial advisors and really expanding our system that way.
Thank you. Just one for Erik. Heard your comment, I think you said no real plans to deploy excess capital in the fourth quarter. I know you've traditionally wanted to build a buffer and holding company liquidity above the $150 million level. Do you have sort of a target in mind of how much buffer you'd like to hold going forward?
Erik, thanks for the question. We've typically talked about having something comfortably above $200 million. I think it's a little bit more complicated than just setting a number. I think it depends on kind of what's going on with respect to internal company dynamics, what's going on with respect to kind of global/macro conditions. So we have to assess that in broader terms than just in the context of just kind of a hard and fast number. So, the simple answer is above $200 million, but that's caveated with what else is going on that we need to be aware of.
Got it. Thank you.
Your next question comes from Ryan Krueger with KBW. Please go ahead.
Good morning. I had a question about just overall capital deployment priorities now that you've completed the long-term care transactions. Can you talk a little bit about how you're thinking about M&A opportunities relative to buyback and kind of what types of M&A you'd be interested in?
Ryan, this is Gary. Thanks for the question. First of all, I want to make sure we communicate this in the clearest way possible. There's just a handful of things I'd like to say first about our buyback position. Number 1, I want to make sure everyone understands the authorization for buybacks, we still have that from our board. Number 2, we did buy back a significant amount of shares in the first quarter this year, about $62 million, I believe. Sorry, second quarter, not in the first quarter, second quarter. We haven't changed our general view that we want to put capital to work at its highest and best use. Obviously, now that the reinsurance transaction has come to light in Q3, everyone understands some of the measures we took there. Similarly, though, we do see other opportunities right now in the marketplace.
We've been looking. We think we've got an ability to invest in this business and grow. We are equally open to both distribution and manufacturing types of opportunities. We have some thoughts, to be blunt, Ryan, we're still working through our 2019 plan and having discussions with our board as to what types of entities we'd be most interested in. I also want to be clear, if we don't find the right opportunities, that buyback authorization remains in place. I want to make sure everyone understands that's not completely off the table. We just have a bias to want to grow the business and invest in the business. Whether that comes in the form of organic
Investing back into the business with things like the broker-dealer as an example that we did a couple of years ago, or if it comes in the form of inorganic. If those opportunities don't present themselves, buybacks remain an option for us. Okay, great. Appreciate the comments. Thanks.
Your next question comes from Alex Scott with Goldman Sachs. Please go ahead.
Hi. I just was interested to get an update on the CLO exposure, just in light of Tennenbaum Capital Partners departing. How much in CLO exposure do you hold now? How much of it is equity tranches versus the investment grade tranches? If there's any plans to do anything with that.
Thanks, Alex. This is Erik. I think I want to clarify. The investment in TCP really wasn't necessarily tied to what we do on CLOs. The investment that we made in Tennenbaum Capital Partners, as Gary said, was an alternative use of excess capital for us that was convenient at the time because we were looking to expand our exposure into alternative investments, that was specifically what Tennenbaum Capital Partners had expertise in. That was sort of a different animal than CLOs that we manufacture and administer in-house. The exposure there is, I believe, still about $1.5 billion, and it's typical that we retain about 10% of that in the form of equity, and so that'd be about $150 million.
Got it. Okay, thanks. The short-term care pilot product that was mentioned, can you provide any color around what do the terms of that product look like? How much in sales do you think you could get that up to, et cetera?
Yeah. Alex, thanks for the question. A couple of comments, again, just to set some context. As you know, we engage in a long-term care reinsurance transaction where we got rid of the most difficult or most problematic portions of the business. We still remain very active in what is technically referred to as long-term care business, but some 90% of the policies we're selling today have benefit periods of two years or less. It's really important to remember that the stuff we're talking about, while it shares the name, is a very different animal. We believe that there's a significant need in the marketplace. The data tells us that.
The short-term care pilot in particular that we've been running has been over at Washington National, where at Washington, we're selling, at the present time, Bankers Life branded product because we've got a great outfit there called PMA that has access to a tremendous number of households and clients and so on, and we think there's an opportunity. We've been very pleased with those sales. We're not providing sales guidance, but the short-term care pilot for the moment is really focused at Washington National. Along with that, we see an opportunity to do more of it at Bankers Life. Bankers Life has traditionally had access to that product, but we've undertaken a much more dedicated and robust training program because we think there's so much opportunity there.
Again, I want to emphasize, it's called long-term care, but it's nothing like the kind of long-term care that's currently in the media. 90% some odd percent have benefit periods less than two years, and a very significant portion, I want to say in the 60s or 70s, has a benefit period less than one year. It's really important to remember that despite the name, it is nothing like what you're reading about. We feel very good about that, and the early market reactions are very strong. Erik. Yeah. Alex, just a couple of more points on that. The short-term care product that Gary's referring to is something that we're very comfortable with, and as Gary mentioned, serves a critical need for the middle-income market.
This is a product that has been redesigned and repriced over multiple iterations over multiple years. It is essentially priced for experience that we have seen. That includes most recent experience related to persistency, morbidity, mortality, interest rates. It is the most current version that we're selling. The tail risk there is pretty minimal. It continues to be reinsured 25% to RGA. On top of that, we have higher capital requirements for that product when we're doing product pricing, and we have a higher internal rate of return hurdle rate for that product as well. All of those things give us comfort about the design and profitability and risk characteristics of that STC product.
Thank you.
Your next question comes from Daniel Bergman with Citi. Please go ahead.
Thanks. Good morning. I guess to start just with the sizable increase in Colonial Penn sales, I was hoping you'd give a little more color around the current environment for sales and lead generation in that business, and whether you think the recent strength is sustainable. Just related to that, with web and digital up a lot, any sense of how big that is now as a proportion of segment sales, and any sense of how big that could get over time?
Yeah. Dan, thanks for the question. First of all, we saw an opportunity in the third quarter, based on where advertising rates were, to go in and get much more aggressive with our investment. In Q4, we don't expect to have the same opportunity because we see that the election cycle will take up some of the ad rates.
If we do find the right opportunity, we will absolutely jump on it. That was part of what happened. We saw an opportunity. We took it. We remained disciplined, and we'll do that again. It's a little hard for me to tell you how much more that will happen every quarter, because we just really have to react to what the ad rates allow us to do. Our belief is that in Q4, it won't be as attractive because of the election. That's the first thing to note. It's too hard for me to predict what'll happen in Q1 2019 and so on. In terms of the web leads, I'm going to look at Erik here. Have we disclosed, I know what the numbers are, but have we disclosed how much of that is-
We've talked in pretty general terms. The mix of web digital versus DRTV is, again, we're still heavily weighted towards direct response television, but that mix is slowly moving more towards web digital and direct mail. It's more in the 20-ish% range for direct mail and web digital.
We think that there continues to be an opportunity there to migrate more and more of that. That's where our consumers are going. That's where advertising's going. We believe there's an opportunity. We've been piloting a variety of different techniques. We've been very pleased with the early results of some of those. Some of those haven't worked, but some have worked really well. We'll continue to do that. I feel good about our ability to continue to grow Colonial Penn. If pricing of advertising changes on us, we'll pull back because the discipline of maintaining that profitable growth is very important to us.
Dan, this is Erik. That was part of the reason why the guidance range for EBIT for 2018 was narrower, it's still fairly wide. The way we think about it is if there's an opportunity to be more aggressive and procure cost-effective leads, we'll go after that. That would probably result in us coming in at the low end of the range. If that opportunity does not exist, we're not going to chase it, that would result in us probably coming in towards the high end of the range.
That's very helpful. Maybe just shifting gears a little bit, just with some of the recent volatility in the markets and the rise in interest rates, I just wanted to see if there's any update you could provide really on the investment side, both in terms of where you're seeing good opportunities to invest new money and also if you're seeing any particular areas of potential concern, whether in your specific investment portfolio or just the markets overall.
Dan, this is Erik Helding. I would say we're obviously monitoring the conditions pretty closely. I would say on the margins, nothing specifically changing with respect to our philosophy around investment management. You'll notice that our new money rate here in the quarter was below 5%. That's been below 5% for a couple of quarters. We are being a little bit wary about what's going on in the marketplace and have an eye towards when the current credit cycle is going to end. I would say on the margins, we are taking a bit of a more defensive posture when it comes to deploying new money. Again, I would say there's no wholesale changes in anything that we're doing. It's more at the margins.
Got it. It's very helpful. Thank you.
Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from Humphrey Lee with Dowling & Partners. Please go ahead.
Good morning. Thank you for taking my question. In your prepared remarks, you talk about Bankers Life having some new or enhanced products moving from pilot to scale. Are you just referring to the STC product or is there something else? If so, how should we think about the reaction to these kind of newer products?
Humphrey, this is Gary. Thanks for the questions. We have a number of different products that we've been working on with Bankers Life. We've had some riders that we've put on to our easy issue, universal life policies, and so on. All of them have done quite well. We have a number of different things that we're looking at. The short-term care, I want to be clear on that's not a new product for Bankers Life. Bankers Life has had access to that for some time. We've just redoubled our training and marketing efforts because we believe there's an opportunity. The short-term care is new at Washington National. Again, that product has been in the family for quite some time. We're quite experienced with it, but it's new to the Washington National distribution. It's important to keep those separate.
Got it. Looking at your kind of broker-dealer RIA business, you have $1.2 billion of client assets. What portion of that do you earn a fee on versus kind of those just being annuities? How should we think about the fee income opportunity on those kind of fee-based assets?
Humphrey. Really the fee opportunity is on the RIA business, which is roughly a third of that number. Now obviously in the broker-dealer, there's transaction-based commissions and other things that you can generate earnings on as well. The fee income opportunity really is on the RIA business, which is about a third of it. I think the important thing and probably the more key message that we want to get across is it's less about the income potential and having that grow over time, and we certainly want that to happen, but it's more about the ability to interact with our customers when it comes to helping them plan for the rest of their retirement.
When you think about the trillions of dollars in retirement plans that are going to be needing to get rolled over the course of the next 10+ years, the fact that we now have the ability to move those assets in-house gives us enormous opportunity to help our customers when it comes time to helping them make these financial decisions for themselves. That by itself, I think is a huge opportunity to help us grow and ultimately increase revenue and income.
Got it. Thank you.
There are no further questions at this time.
Thank you, operator, and thank you everyone for joining us on this call.
Thank you. This concludes today's conference call. You may now disconnect.