Globe Life Inc. Reports Fourth Quarter 2019 Results

|Feb 4|magazine43 min read

MCKINNEY, Texas, Feb. 4, 2020 /PRNewswire/ -- Globe Life Inc. (NYSE: GL) reported today that for the quarter ended December 31, 2019, net income was $1.69 per diluted common share, compared with $1.45 per diluted common share for the year-ago quarter. Net operating income for the quarter was $1.70 per diluted common share, compared with $1.56 per diluted common share for the year-ago quarter.

Net income for the year ended December 31, 2019 was $6.83 per diluted common share, compared with $6.09 per diluted common share for the year-ago period. Net operating income for the year ended December 31, 2019 was $6.75 per diluted common share compared with $6.13 per diluted common share for the prior period.

HIGHLIGHTS:

  • Net income as an ROE was 11.6% for the year ended December 31, 2019. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.5% for the same period.
  • Life underwriting margin at the American Income Life Division increased over the year-ago quarter by 9%.
  • Life premiums increased over the year-ago quarter by 8% at the American Income Life Division. Health premiums increased over the year-ago quarter by 8% at the Family Heritage Division.
  • Life net sales at the Liberty National Division and American Income Life Division increased over the year-ago quarter by 13% and 9%, respectively.
  • Total health net sales increased over the year-ago quarter by 13%.
  • 930,044 shares of Globe Life Inc. common stock were repurchased during the quarter.

Note: As used in the earnings release, "Globe Life," the "Company," "we," "our," and "us" refer to Globe Life Inc., a Delaware corporation incorporated in 1979, its subsidiaries and affiliates.

GLOBE LIFE INC.
Earnings Release—Q4 2019
(Dollar amounts in thousands, except share and per share data)
(Unaudited)

RESULTS OF OPERATIONS

Net operating income, a non-GAAP(1) financial measure, has been used consistently by Globe Life's management for many years to evaluate the operating performance of the Company, and is a measure commonly used in the life insurance industry. It differs from net income primarily because it excludes certain non-operating items such as realized investment gains and losses and certain significant and unusual items included in net income. Management believes an analysis of net operating income is important in understanding the profitability and operating trends of the Company's business. Net income is the most directly comparable GAAP measure.

The following table represents Globe Life's operating summary for the three months ended December 31, 2019 and 2018:

Operating Summary


Per Share








Three Months Ended

December 31,




Three Months Ended

December 31,




2019


2018


%

Chg.


2019


2018


%

Chg.

Insurance underwriting income(2)

$

1.62



$

1.51



7


$

179,563



$

171,256



5

Excess investment income(2)

0.57



0.54



6


62,599



61,680



1

Parent company expense

(0.02)



(0.03)





(2,273)



(2,878)




Income tax

(0.43)



(0.39)



10


(47,146)



(44,870)



5

Stock compensation benefit (expense), net of tax

(0.04)



(0.07)





(4,650)



(8,166)




Net operating income

1.70



1.56



9


188,093



177,022



6













Reconciling items, net of tax:












Realized gain (loss)—investments

0.02



(0.04)





1,734



(4,362)




Realized loss—redemption of debt



(0.08)







(8,752)




Part D adjustments—discontinued operations









11




Non-operating fees







(508)






Legal proceedings

(0.02)







(2,258)






Tax reform adjustment



0.01







798




Net income(3)

$

1.69



$

1.45





$

187,061



$

164,717
















Weighted average diluted shares outstanding

110,665



113,667











(1)  GAAP is defined as accounting principles generally accepted in the United States of America.

(2)  Definitions included within this document.

(3)  A GAAP-basis consolidated statement of operations is included in the appendix of this report.


Note: Tables in this earnings release may not sum due to rounding.

The following table represents Globe Life's operating summary for the twelve months ended December 31, 2019 and 2018:

Operating Summary


Per Share








Twelve Months Ended

December 31,




Twelve Months Ended

December 31,




2019


2018


%
Chg.


2019


2018


%
Chg.

Insurance underwriting income

$

6.44



$

5.87



10


$

717,557



$

676,025



6

Excess investment income

2.31



2.13



8


257,605



245,094



5

Parent company expense

(0.09)



(0.09)





(10,260)



(10,684)




Income tax

(1.70)



(1.55)



10


(189,155)



(178,475)



6

Stock compensation benefit (expense), net of tax

(0.21)



(0.22)





(23,645)



(24,986)




Net operating income

6.75



6.13



10


752,102



706,974



6













Reconciling items, net of tax:












Realized gain (loss)—investments

0.15



0.06





16,291



7,327




Realized loss—redemption of debt



(0.08)







(8,752)




Part D adjustments—discontinued operations







(92)



(44)




Administrative settlements



(0.03)





(400)



(3,590)




Non-operating fees



(0.01)





(508)



(1,247)




Legal proceedings

(0.06)







(6,603)






Tax reform adjustment



0.01







798




Net income

$

6.83



$

6.09





$

760,790



$

701,466
















Weighted average diluted shares outstanding

111,381



115,249










MANAGEMENT VS. GAAP MEASURES

Shareholders' equity, excluding net unrealized gains on fixed maturities, and book value per share, excluding net unrealized gains on fixed maturities, are non-GAAP measures that are utilized by management to view the business without the effect of unrealized gains or losses which are primarily attributable to fluctuation in interest rates associated with the available-for-sale portfolio. Management views the business in this manner because the Company has the ability and generally, the intent, to hold investments to maturity and meaningful trends can more easily be identified without the fluctuations. Shareholders' equity and book value per share are the most directly comparable GAAP measures. 


Twelve Months Ended

December 31,


2019


2018

Net income as an ROE(1)

11.6

%


12.3

%

Net operating income as an ROE (excluding net unrealized gains on fixed maturities)

14.5

%


14.6

%






December 31,


2019


2018

Shareholders' equity

$

7,294,307



$

5,415,177


Impact of adjustment to exclude net unrealized gains on fixed maturities

(1,962,268)



(425,961)


Shareholders' equity, excluding net unrealized gains on fixed maturities

$

5,332,039



$

4,989,216






Book value per share

$

66.02



$

48.11


Impact of adjustment to exclude net unrealized gains on fixed maturities

(17.76)



(3.79)


Book value per share, excluding net unrealized gains on fixed maturities

$

48.26



$

44.32



(1) Calculated using average shareholders' equity for the measurement period.

INSURANCE OPERATIONS—comparing Q4 2019 with Q4 2018: 

Life insurance accounted for 74% of the Company's insurance underwriting margin for the quarter and 70% of total premium revenue. 

Health insurance accounted for 25% of the Company's insurance underwriting margin for the quarter and 30% of total premium revenue.

Net sales of life insurance increased 7%, while net health sales increased 13%. 

The following table summarizes Globe Life's premium revenue by product type for the three months ended December 31, 2019 and 2018:

Insurance Premium Revenue


Quarter Ended


December 31,

2019


December 31,

2018


%

Chg.

Life insurance

$

631,470



$

600,171



5

Health insurance

275,214



256,900



7

Total

$

906,684



$

857,071



6

INSURANCE UNDERWRITING INCOME

Insurance underwriting margin is management's measure of profitability of the Company's life, health, and annuity segments' underwriting performance, and consists of premiums less policy obligations, commissions and other acquisition expenses. Insurance underwriting income is the sum of the insurance underwriting margins of the life, health, and annuity segments, plus other income, less insurance administrative expenses. It excludes the investment segment, Parent Company expense and income taxes. Management believes this information helps provide a better understanding of the business and a more meaningful analysis of underwriting results by distribution channel. Insurance underwriting income, a non-GAAP measure, is a component of net operating income, which is reconciled to net income in the Results of Operations section above.

The following table summarizes Globe Life's insurance underwriting income by segment for the three months ended December 31, 2019 and 2018:

Insurance Underwriting Income


Quarter Ended


December 31,

2019


% of

Premium


December 31,

2018


% of

Premium


%

Chg.

Insurance underwriting margins:










Life

$

177,116



28


$

167,707



28


6

Health

61,024



22


58,214



23


5

Annuity

2,326





2,660







240,466





228,581





5

Other income

241





56






Administrative expenses

(61,144)





(57,381)





7

Insurance underwriting income

$

179,563





$

171,256





5

Per share

$

1.62





$

1.51





7

Administrative expenses were $61 million, up 6.6% from the year-ago quarter. The ratio of administrative expenses to premium was 6.7%, same as the year-ago quarter.

LIFE INSURANCE RESULTS BY DISTRIBUTION CHANNEL 

Our distribution channels consist of the following exclusive agencies, American Income Life Division (American Income), Liberty National Division (Liberty National) and Family Heritage Division (Family Heritage); an independent agency, United American Division (United American); and our Direct to Consumer Division.

Total premium, underwriting margins, first-year collected premium and net sales by all distribution channels are shown at https://investors.globelifeinsurance.com at "Financial Reports and Other Financial Information."

Life Underwriting Margin


Quarter Ended




December 31,




2019


2018




Amount


% of

Premium


Amount


% of

Premium


%

Chg.

American Income

$

98,209



33



$

90,313



33



9

Direct to Consumer

39,152



19



38,989



19



Liberty National

18,479



26



17,753



25



4

Other

21,276



40



20,652



38



3

Total

$

177,116



28



$

167,707



28



6

 

Life Premium


Quarter Ended




December 31,




2019


2018


%
Chg.

American Income

$

297,245



$

275,961



8

Direct to Consumer

209,013



200,410



4

Liberty National

71,544



69,654



3

Other

53,668



54,146



(1)

Total

$

631,470



$

600,171



5

 

Life Net Sales(1)


Quarter Ended




December 31,




2019


2018


%
Chg.

American Income

$

59,296



$

54,482



9

Direct to Consumer

29,788



29,155



2

Liberty National

14,618



12,984



13

Other

3,036



3,392



(10)

Total

$

106,738



$

100,013



7



(1)

Net sales is annualized premium issued (gross premium that would be received during the policies' first year in force and assuming that none of the policies lapsed or terminated), net of cancellations in the first thirty days after issue, except in the case of Direct to Consumer where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. We believe that net sales is a better indicator of the rate of premium growth than annualized premium issued.

HEALTH INSURANCE RESULTS BY DISTRIBUTION CHANNEL

Health Underwriting Margin


Quarter Ended




December 31,




2019


2018




Amount


% of

Premium


Amount


% of

Premium


%
Chg.

United American

$

15,353



14



$

13,705



14



12

Family Heritage

18,836



25



17,526



25



7

Liberty National

10,377



22



11,195



24



(7)

American Income

13,665



53



12,726



54



7

Direct to Consumer

2,793



15



3,062



16



(9)

Total

$

61,024



22



$

58,214



23



5

 

Health Premium


Quarter Ended




December 31,




2019


2018


%
Chg.

United American

$

108,311



$

97,341



11

Family Heritage

75,713



70,360



8

Liberty National

46,691



46,780



American Income

25,586



23,562



9

Direct to Consumer

18,913



18,857



Total

$

275,214



$

256,900



7

 

Health Net Sales(1)


Quarter Ended




December 31,




2019


2018


%
Chg.

United American

$

31,942



$

29,752



7

Family Heritage

18,173



15,221



19

Liberty National

7,172



6,392



12

American Income

4,951



3,735



33

Direct to Consumer

1,554



1,330



17

Total

$

63,792



$

56,430



13



(1)

Net sales is annualized premium issued (gross premium that would be received during the policies' first year in force and assuming that none of the policies lapsed or terminated), net of cancellations in the first thirty days after issue, except in the case of Direct to Consumer where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. We believe that net sales is a better indicator of the rate of premium growth than annualized premium issued.

PRODUCING EXCLUSIVE AGENT COUNT RESULTS BY DISTRIBUTION CHANNEL


Quarterly Average

Producing Agent Count(1)


End of Quarter

 Agent Count


Quarter Ended




Quarter Ended








December 31,




September 30,


December 31,




September 30,


2019


2018


%
Chg.


2019


2019


2018


%
Chg.


2019

American Income

7,631



6,936



10



7,578



7,551



6,894



10



7,700


Liberty National

2,534



2,172



17



2,398



2,660



2,159



23



2,421


Family Heritage

1,228



1,129



9



1,135



1,286



1,097



17



1,236



(1) The quarterly average producing agent count is based on the actual count at the end of each week during the period.

INVESTMENTS

Management uses excess investment income as the measure to evaluate the performance of the investment segment. It is defined as net investment income less both the required interest attributable to net policy liabilities and the interest on debt. We also view excess investment income per diluted common share as an important and useful measure to evaluate performance of the investment segment, since it takes into consideration our stock repurchase program.

The following table summarizes Globe Life's investment income, excess investment income, and excess investment income per diluted common share.

Excess Investment Income


Quarter Ended


December 31,


2019


2018


%

Chg.

Net investment income

$

227,456



$

224,233



1

Required interest:






Interest on net policy liabilities(1)

(144,355)



(138,943)



4

Interest on debt

(20,502)



(23,610)



(13)

Total required interest

(164,857)



(162,553)



1

Excess investment income

$

62,599



$

61,680



1

Per share

$

0.57



$

0.54



6


(1)  Interest on net policy liabilities is a component of total policyholder benefits, a GAAP measure.

Net investment income increased 1%, while average invested assets increased 4%. Required interest on net policy liabilities increased 4%, while average net policy liabilities increased 3%. The weighted average discount rate for the net policy liabilities was 5.7% and was in line with the year-ago quarter.

The composition of the investment portfolio at book value at December 31, 2019 is as follows:

Investment Portfolio


As of


December 31, 2019


Amount


% of Total

Fixed maturities at fair value(1)

$

18,907,147



95

%

Policy loans

575,492



3


Other long-term investments(2)

326,347



2


Short-term investments

38,285




Total

$

19,847,271



100

%


(1) Fixed maturities at amortized cost as of December 31, 2019 were $16.4 billion.

(2) Includes $186 million of investments accounted for under the fair value option which have an amortized cost of $176 million as of December 31, 2019.

Fixed maturities at amortized cost by asset class as of December 31, 2019 are as follows:

Fixed Maturity Portfolio by Sector


As of


December 31, 2019


Investment

Grade


Below

Investment

Grade


Total

Corporate bonds

$

13,630,386



$

602,915



$

14,233,301


Municipals

1,559,736





1,559,736


Government-sponsored enterprises

332,340





332,340


Government & agencies

89,167





89,167


Collateralized debt obligations



56,990



56,990


Other asset-backed securities

129,992



14,250



144,242


Total

$

15,741,621



$

674,155



$

16,415,776


The market value of Globe Life's fixed maturity portfolio was $18.9 billion compared with amortized cost of $16.4 billion. Net unrealized gains were comprised of gross unrealized gains of $2.6 billion and gross unrealized losses of $83 million.

Globe Life is not a party to any credit default swaps and does not participate in securities lending.

At amortized cost, 96% of fixed maturities (97% at market value) were rated "investment grade." The fixed maturity portfolio earned an annual taxable equivalent effective yield of 5.41% during the fourth quarter of 2019, compared with 5.56% in the year-ago quarter.

Comparable information for acquisitions of fixed maturity investments is as follows:

Fixed Maturity Acquisitions


Quarter Ended


December 31,


2019


2018

Amount

$

449,101



$

409,050


Average annual effective yield

4.1

%


5.3

%

Average rating

A+



A-


Average life (in years) to:




Next call

15.2



17.6


Maturity

31.4



22.5


SHARE REPURCHASE:

During the quarter, the Company repurchased 930,044 shares of Globe Life Inc. common stock at a total cost of $93 million for an average share price of $99.82.

For the twelve months ended December 31, 2019, the Company repurchased 3.9 million shares at a total cost of $350 million for an average share price of $89.04.

LIQUIDITY/CAPITAL:

Globe Life's operations consist primarily of writing basic protection life and supplemental health insurance policies which generate strong and stable cash flows. Capital at the insurance companies is sufficient to support operations.

EARNINGS GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2020:

Globe Life projects that net operating income per share will be in the range of $7.03 to $7.23 for the year ending December 31, 2020.

NON-GAAP MEASURES:

In this news release, Globe Life includes non-GAAP measures to enhance investors' understanding of management's view of the business. The non-GAAP measures are not a substitute for GAAP, but rather a supplement to increase transparency by providing broader perspective. Globe Life's definitions of non-GAAP measures may differ from other companies' definitions. More detailed financial information, including various GAAP and non-GAAP measurements, is located at https://investors.globelifeinsurance.com on the Investors page under "Financial Reports and Other Financial Information."

CAUTION REGARDING FORWARD-LOOKING STATEMENTS:

This press release may contain forward-looking statements within the meaning of the federal securities laws. These prospective statements reflect management's current expectations, but are not guarantees of future performance.  Accordingly, please refer to Globe Life's cautionary statement regarding forward-looking statements, and the business environment in which the Company operates, contained in the Company's Form 10-K for the year ended December 31, 2018, and any subsequent Forms 10-Q on file with the Securities and Exchange Commission and on the Company's website at https://investors.globelifeinsurance.com. Globe Life specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.

EARNINGS RELEASE CONFERENCE CALL WEBCAST:

Globe Life will provide a live audio webcast of its fourth quarter 2019 earnings release conference call with financial analysts at 12:00 pm (Eastern) tomorrow, February 5, 2020. Access to the live webcast and replay will be available at https://investors.globelifeinsurance.com on the Calls and Meetings page, at the Conference Calls on the Web icon. Immediately following this press release, supplemental financial reports will be available before the conference call on the Investors page menu of the Globe Life website at "Financial Reports."  

APPENDIX

GLOBE LIFE INC.

GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended

December 31,


Twelve Months Ended

December 31,


2019


2018


2019


2018

Revenue:








Life premium

$

631,470



$

600,171



$

2,517,784



$

2,406,555


Health premium

275,214



256,900



1,077,346



1,015,339


Other premium





4



12


Total premium

906,684



857,071



3,595,134



3,421,906


Net investment income

227,456



224,233



910,459



882,512


Realized gains (losses)

2,195



(16,600)



20,621



(1,804)


Other income

241



33



1,318



1,137


Total revenue

1,136,576



1,064,737



4,527,532



4,303,751










Benefits and expenses:








Life policyholder benefits

410,437



395,174



1,638,053



1,591,790


Health policyholder benefits

176,361



165,534



687,764



649,188


Other policyholder benefits

7,740



8,412



31,532



34,264


Total policyholder benefits

594,538



569,120



2,357,349



2,275,242


Amortization of deferred acquisition costs

139,290



128,501



551,726



516,690


Commissions, premium taxes, and non-deferred acquisition costs

76,745



69,789



298,047



278,487


Other operating expense

78,413



70,082



304,825



279,585


Interest expense

20,502



23,610



84,306



90,076


Total benefits and expenses

909,488



861,102



3,596,253



3,440,080










Income before income taxes

227,088



203,635



931,279



863,671


Income tax benefit (expense)

(40,027)



(38,929)



(170,397)



(162,161)


Income from continuing operations

187,061



164,706



760,882



701,510










Discontinued operations:








Income (loss) from discontinued operations, net of tax



11



(92)



(44)


Net income

$

187,061



$

164,717



$

760,790



$

701,466










Total basic net income per common share

$

1.73



$

1.48



$

6.97



$

6.22










Total diluted net income per common share

$

1.69



$

1.45



$

6.83



$

6.09


 

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SOURCE Globe Life Inc.