Amid swirl of lawsuits, stock drop, Globe Life execs say allegations unfounded

Globe Life executives addressed swirling allegations during a first-quarter earnings call Tuesday, aggressively refuting a litany of lawsuits, accusations and investigations it faces.

Many of the allegations are from a recent report that accused brokers at subsidiary American Income Life Insurance Co. of widespread insurance fraud, including writing policies for dead and fictitious people, and an alleged kickback scheme that netted millions for senior executives.

Shares of Globe Life dropped more than 50%, following the report from Fuzzy Panda Research, which took a short position on the company. Shares recovered somewhat in the two weeks since, but are down nearly 40% in one month.

Frank M. Svoboda, co-CEO of Globe Life, said the company's audit committee is hiring international law firm WilmerHale to conduct an investigation of the allegations. He declined to specify a timeframe for that investigation, other than the "near term."

"When complaints are raised, including complaints alleging fraud, deceit, unethical business practices, or other misconduct, American Income has a dedicated group responsible for investigating these allegations," said co-CEO J. Matt Darden. "American Income has not hesitated to take disciplinary actions against agents and agency owners where warranted, including termination and notice to the appropriate regulatory bodies."

Despite several questions from analysts on the call, Globe Life executives mostly declined further comment on all allegations.

Globe Life issues listed

In addition to the Fuzzy Panda report, Globe Life dealt with these issues in the quarter:

1. The insurer is being sued by a former executive who claims he was fired for blowing the whistle on "potentially illegal" sales practices.

Scott Dehning claims that Globe Life and subsidiary American Income fired him in May 2023 after he reported "a clear practice of unethical and potentially illegal business practices" to Michigan regulators.

The lawsuit was initially filed in Michigan state court, but Globe Life petitioned to have the case transferred to federal court in Grand Rapids, Mich. Dehning was vice president of field operations from September 2015 until he was fired. In that role, he supervised about 17 state general agents, the lawsuit said.

According to court documents, that case is ongoing.

2. The Equal Employment Opportunity Commission reopened an investigation into sexual harassment claims against a top-selling Pittsburgh, Pa. insurance agency connected to Globe Life.

The EEOC action came amid a lawsuit filed by a former agent over the same allegations of workplace abuse. In a federal lawsuit against Arias Agencies and others, Renee Zinsky alleges shocking acts – such as office wrestling matches, use of date rape drugs and sexual acts carried out in front of employees.

Zinsky initially filed a lawsuit in the Western District of Pennsylvania in April 2022 against Simon Arias, Arias Agencies, Michael Russin, and American Income. A judge later granted a motion to compel arbitration filed by Arias and American Income.

Zinsky withdrew her claims the night before her arbitration hearing was to begin last month, Svoboda said, "without obtaining any relief or payment."

3. In March 2022, Globe Life and several subsidiaries were sued by BKL Holdings, Inc., doing business as License Coach. BKL claimed that it provided test prep services to Globe Life and its allegations formed the basis for the Fuzzy Panda claims of kickbacks and bribery, Darden said.

"American Income does not contract with or recommend any test prep companies to prospective agents and we're not aware of any bribes or kickbacks to the company," Darden said.

The U.S. District Court for the Eastern District of Texas dismissed the BKL lawsuit in November 2023 after the plaintiffs did not respond to court requests to produce an attorney.

Agent recruitment up

When executives got to the Q1 highlights, there were several. At the American Income Life Division, life net sales and premiums increased over the year-ago quarter by 17% and 7%, respectively. Additionally, the average producing agent count increased 15% over the year-ago quarter, Globe Life said in a news release.

At the Liberty National Division, the average producing agent count increased 14% over the year-ago quarter and life premiums increased 7%. At the Family Heritage Division, health net sales increased 11% and premiums increased 8% over the year-ago quarter.

Globe Life reported first-quarter net income of $254.2 million. The McKinney, Texas-based company said it had net income of $2.67 per share. Earnings, adjusted for non-recurring costs, came to $2.78 per share.

The results did not quite meet Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $2.80 per share.

The life and health insurance company posted revenue of $1.42 billion in the period. Its adjusted revenue was $1.4 billion, which also did not meet Street forecasts. Four analysts surveyed by Zacks expected $1.43 billion.

The Associated Press contributed to this report

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.