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GLOBE LIFE INC. REPORTS Third Quarter 2019 Results

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October 23, 2019 4:29 PM EDT

MCKINNEY, Texas, Oct. 23, 2019 /PRNewswire/ -- Globe Life Inc. (NYSE: GL) reported today that for the quarter ended September 30, 2019, net income was $1.82 per diluted common share, compared with $1.55 per diluted common share for the year-ago quarter. Net operating income for the quarter was $1.73 per diluted common share, compared with $1.59 per diluted common share for the year-ago quarter.

HIGHLIGHTS:

  • Net income as an ROE was 12.0%. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.7%.
  • Life underwriting margin at Liberty National Exclusive Agency and American Income Exclusive Agency increased over the year-ago quarter by 12% and 9%, respectively.
  • Health underwriting margin at Family Heritage Exclusive Agency increased over the year-ago quarter by 12%.
  • Life premiums increased over the year-ago quarter by 7% at American Income Exclusive Agency and health premiums increased over the year-ago quarter by 7% at both Family Heritage Exclusive Agency and American Income Exclusive Agency.
  • Life net sales at Liberty National Exclusive Agency and American Income Exclusive Agency increased over the year-ago quarter by 12% and 9%, respectively.
  • 932,946 shares of common stock were repurchased during the quarter.

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 September 30, 2019 and 2018:

Operating Summary

Per Share

Three Months Ended

September 30,

Three Months Ended

September 30,

2019

2018

%

Chg.

2019

2018

%

Chg.

Insurance underwriting income(2)

$

1.66

$

1.53

8

$

184,619

$

176,017

5

Excess investment income(2)

0.58

0.54

7

64,773

61,528

5

Parent company expense

(0.02)

(0.02)

(2,472)

(2,667)

Income tax

(0.44)

(0.40)

10

(48,305)

(46,531)

4

Stock compensation benefit (expense), net of tax

(0.06)

(0.05)

(6,232)

(5,625)

Net operating income

1.73

1.59

9

192,383

182,722

5

Reconciling items, net of tax:

Realized Gain (Loss)—Investments

0.09

0.01

9,435

815

Part D adjustments—Discontinued operations

—

—

—

24

Administrative settlements

—

(0.03)

—

(3,590)

Non-operating fees

—

(0.01)

—

(1,247)

Net income(3)

$

1.82

$

1.55

$

201,818

$

178,724

Weighted average diluted shares outstanding

110,914

114,974

(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.

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.

September 30,

2019

2018

Net income as an ROE(1)

12.0

%

12.4

%

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

14.7

%

14.7

%

Shareholders' equity

$

7,312,531

$

5,538,905

Impact of adjustment to exclude net unrealized gains on fixed maturities

(2,038,243)

(601,946)

Shareholders' equity, excluding net unrealized gains on fixed maturities

$

5,274,288

$

4,936,959

Book value per share

$

65.96

$

48.35

Impact of adjustment to exclude net unrealized gains on fixed maturities

(18.38)

(5.25)

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

$

47.58

$

43.10

(1)

Calculated using average shareholders' equity for the measurement period.

INSURANCE OPERATIONS—comparing Q3 2019 with Q3 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 6%, while net health sales increased 16%.

The following table summarizes Globe Life's premium revenue by product type for the three months ended September 30, 2019 and 2018:

Insurance Premium Revenue

Quarter Ended

September 30, 2019

September 30, 2018

%

Chg.

Life insurance

$

630,824

$

605,547

4

Health insurance

269,166

255,201

5

Annuity

3

2

Total

$

899,993

$

860,750

5

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 September 30, 2019 and 2018:

Insurance Underwriting Income

Quarter Ended

September 30, 2019

% of

Premium

September 30, 2018

% of

Premium

%

Chg.

Insurance underwriting margins:

Life

$

181,459

29

$

168,596

28

8

Health

60,941

23

60,253

24

1

Annuity

2,351

2,564

244,751

231,413

6

Other income

438

416

Administrative expenses

(60,570)

(55,812)

9

Insurance underwriting income

$

184,619

$

176,017

5

Per share

$

1.66

$

1.53

8

Administrative Expenses were $61 million, up 8.5% from the year-ago quarter. The ratio of administrative expenses to premium was 6.7%, compared with 6.5% for the year-ago quarter.

LIFE INSURANCE RESULTS BY DISTRIBUTION CHANNEL

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

September 30,

2019

2018

Amount

% of Premium

Amount

% of Premium

% Chg.

American Income Exclusive Agency

100,496

34

92,524

34

9

Direct Response

41,207

19

39,382

19

5

Liberty National Exclusive Agency

18,572

26

16,579

24

12

Other Agencies

21,184

39

20,111

37

5

Total

$

181,459

29

$

168,596

28

8

 

Life Premium

Quarter Ended

September 30,

2019

2018

%

Chg.

American Income Exclusive Agency

$

293,149

$

273,184

7

Direct Response

211,693

207,693

2

Liberty National Exclusive Agency

71,812

70,207

2

Other Agencies

54,170

54,463

(1)

Total

$

630,824

$

605,547

4

 

Life Net Sales(1)

Quarter Ended

September 30,

2019

2018

%

Chg.

American Income Exclusive Agency

$

59,692

$

54,671

9

Direct Response

29,517

29,755

(1)

Liberty National Exclusive Agency

13,413

11,959

12

Other Agencies

2,975

3,565

(17)

Total

$

105,597

$

99,950

6

(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 Response 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

September 30,

2019

2018

Amount

% of Premium

Amount

% of Premium

% Chg.

United American Independent Agency

$

14,187

14

$

15,818

17

(10)

Family Heritage Exclusive Agency

18,801

25

16,823

24

12

Liberty National Exclusive Agency

11,376

24

11,767

25

(3)

American Income Exclusive Agency

13,715

54

12,750

54

8

Direct Response

2,862

15

3,095

16

(8)

Total

$

60,941

23

$

60,253

24

1

 

Health Premium

Quarter Ended

September 30,

2019

2018

%

Chg.

United American Independent Agency

$

103,112

$

95,849

8

Family Heritage Exclusive Agency

74,168

69,061

7

Liberty National Exclusive Agency

47,439

47,561

—

American Income Exclusive Agency

25,312

23,677

7

Direct Response

19,135

19,053

—

Total

$

269,166

$

255,201

5

 

Health Net Sales(1)

Quarter Ended

September 30,

2019

2018

%

Chg.

United American Independent Agency

$

15,795

$

12,622

25

Family Heritage Exclusive Agency

17,525

16,026

9

Liberty National Exclusive Agency

5,903

5,452

8

American Income Exclusive Agency

4,910

3,611

36

Direct Response

546

878

(38)

Total

$

44,679

$

38,589

16

(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 Response 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

September 30,

June 30,

September 30,

June 30,

2019

2018

% Chg.

2019

2019

2018

% Chg.

2019

American Income Exclusive Agency

7,578

7,105

7

7,364

7,700

7,066

9

7,477

Liberty National Exclusive Agency

2,398

2,180

10

2,290

2,421

2,221

9

2,390

Family Heritage Exclusive Agency

1,135

1,086

5

1,081

1,236

1,143

8

1,089

(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

September 30,

2019

2018

%

Chg.

Net investment income

$

228,905

$

221,627

3

Required interest:

Interest on net policy liabilities(1)

(143,038)

(137,666)

4

Interest on debt

(21,094)

(22,433)

(6)

Total required interest

(164,132)

(160,099)

3

Excess investment income

$

64,773

$

61,528

5

Per share

$

0.58

$

0.54

7

(1)

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

Net investment income increased 3%, while average invested assets increased 6%. 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 September 30, 2019 is as follows:

Investment Portfolio

As of

September 30, 2019

Amount

% of Total

Fixed maturities at fair value(1)

$

18,797,674

95

%

Policy loans

568,892

3

Other long-term investments(2)

315,535

2

Short-term investments

77,556

—

Total

$

19,759,657

100

%

(1)

Fixed maturities at amortized cost as of September 30, 2019 were $16.2 billion.

(2)

Includes $184 million of investments accounted for under the fair value option which have an amortized cost of $176 million as of September 30, 2019.

Fixed maturities at amortized cost by asset class as of September 30, 2019 are as follows:

Fixed Maturity Portfolio by Sector

As of

September 30, 2019

Investment Grade

Below Investment Grade

Total

Corporate bonds

$

13,578,602

$

552,147

$

14,130,749

Municipal

1,459,986

—

1,459,986

Government-sponsored enterprises

329,610

—

329,610

Government and agencies

87,516

—

87,516

Collateralized debt obligations

—

56,815

56,815

Other asset-backed securities

130,722

14,325

145,047

Total

$

15,586,436

$

623,287

$

16,209,723

The market value of Globe Life's fixed maturity portfolio was $18.8 billion compared with amortized cost of $16.2 billion. Net unrealized gains were comprised of gross unrealized gains of $2.7 billion and gross unrealized losses of $95 million.

Globe Life is not a party to any derivatives contracts, including 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 effective yield of 5.47% during the third 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

September 30,

2019

2018

Amount

$

408,869

$

206,088

Average annual effective yield

4.1

%

5.1

%

Average rating

A

BBB+

Average life (in years) to:

Next call

18.6

20.4

Maturity

28.6

26.0

SHARE REPURCHASE:

During the quarter, the Company repurchased 932,946 shares of Globe Life Inc. common stock at a total cost of $83 million for an average share price of $89.26.

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, 2019 AND 2020:

Globe Life projects that net operating income per share will be in the range of $6.71 to $6.77 for the year ending December 31, 2019 and from $7.00 to $7.30 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 are 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 third quarter 2019 earnings release conference call with financial analysts at 11:00 am (Eastern) tomorrow, October 24, 2019. 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

September 30,

Nine Months Ended

September 30,

2019

2018

2019

2018

Revenue:

Life premium

$

630,824

$

605,547

$

1,886,314

$

1,806,384

Health premium

269,166

255,201

802,132

758,439

Other premium

3

2

4

12

Total premium

899,993

860,750

2,688,450

2,564,835

Net investment income

228,905

221,627

683,003

658,279

Realized gains (losses)

11,943

1,032

18,426

14,796

Other income

438

393

1,077

1,104

Total revenue

1,141,279

1,083,802

3,390,956

3,239,014

Benefits and expenses:

Life policyholder benefits

406,963

396,701

1,227,616

1,196,616

Health policyholder benefits

170,875

162,574

511,403

483,654

Other policyholder benefits

7,854

8,581

23,792

25,852

Total policyholder benefits

585,692

567,856

1,762,811

1,706,122

Amortization of deferred acquisition costs

138,449

129,492

412,436

388,189

Commissions, premium taxes, and non-deferred acquisition costs

74,139

69,632

221,302

208,698

Other operating expense

74,575

74,059

226,412

209,503

Interest expense

21,094

22,433

63,804

66,466

Total benefits and expenses

893,949

863,472

2,686,765

2,578,978

Income before income taxes

247,330

220,330

704,191

660,036

Income tax benefit (expense)

(45,512)

(41,630)

(130,370)

(123,232)

Income from continuing operations

201,818

178,700

573,821

536,804

Discontinued operations:

Income (loss) from discontinued operations, net of tax

—

24

(92)

(55)

Net income

$

201,818

$

178,724

$

573,729

$

536,749

Total basic net income per common share

$

1.85

$

1.59

$

5.24

$

4.73

Total diluted net income per common share

$

1.82

$

1.55

$

5.14

$

4.64

 

 

Cision View original content:http://www.prnewswire.com/news-releases/globe-life-inc-reports-third-quarter-2019-results-300944338.html

SOURCE Globe Life Inc.


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