Globe Life selling a lot of life insurance, paying heavy litigation costs

Globe Life executives might be living in a swirling storm of controversy, but it didn’t impact life insurance sales during the fourth quarter.

American Income Life Insurance, a subsidiary, performed particularly well, delivering a 22% increase in life net sales and 7% growth in life premium. Globe Life executives met with Wall Street analysts Thursday to discuss their results.

American Income is also at the center of most of the allegations Globe Life is facing. As has become his quarterly routine, Co-CEO J. Matt Darden’s script included an update on the various investigations facing Globe Life.

“Neither [the Securities and Exchange Commission or the Department of Justice] has asserted any claims or made any allegations against Globe Life or AIL, and we're not aware of any actions being contemplated,” he said. “For the DOJ and with respect to the [Equal Employment Opportunity Commission] matter, as of now, there have been no material developments to share.”

At least three short-seller and other research firms have issued reports accusing brokers at AIL of widespread insurance fraud, including writing policies for dead and fictitious people, and an alleged kickback scheme that netted millions for senior executives.

Globe Life faces several lawsuits on these and other allegations. One analyst noticed a $12.5 million accrual for legal expenses during Q4.

“Globe Life and its subsidiaries are subject to litigation from time to time. It's common in the insurance industry in general and we've seen an uptick in litigation claims and expenses over the past several quarters,” said Thomas P. Kalmbach, chief financial officer. “The line item for legal proceedings this quarter includes an estimate of costs associated with settlements of certain litigation claims not related to the DOJ, SEC or EEOC matters.”

Globe Life was victimized by a 2024 data breach and, last week, revealed it to be far more extensive than first thought. Analysts asked no questions about the widespread data breach.

In Other News

Productive subsidiaries. Darden gave a rundown of sales and agent recruitment at the Globe Life companies:

AIL premiums increased 7% over the year-ago quarter to $433 million and life underwriting margin rose 9% to $199 million. Net life sales were $93 million, up 22% from a year ago. The average producing agent count for the fourth quarter was 11,926, up 7%.

At Liberty National, life premiums increased 5% over the year-ago quarter to $94 million and the underwriting margin was up 8% to $34 million. Net life sales increased 1% to $26 million. The average producing agent count for Q4 was 3,743 up 11%.

At Family Heritage, health premiums increased 8% over the year-ago quarter to $111 million and underwriting margin increased 12% to $40 million. Net health sales were up 6% to $27 million. The average producing agent count for Q4 was 1,512, up 11%.

At United American, health premiums increased 9% over the year-ago quarter to $151 million. Health underwriting margin was $5 million, down about $9 million from the year-ago quarter. Net health sales were $30 million, up 7%.

In response to a later question, Darden said the typical Globe Life client comes from “middle-income America” and is able to afford to $30 to $60 a month policy premium.

“We continue to see our customer base be very resilient,” Darden said. “I think that just gets back to this marketplace continues to have a significant amount of opportunity with the significant number of people that are under-insured or uninsured … and we have a good opportunity to continue to develop sales in that area.”

Quarterly Snapshot

• Life insurance accounted for 79% of Globe Life's insurance underwriting margin for the quarter and 70% of total premium revenue.
• Health insurance accounted for 21% of the company's insurance underwriting margin for the quarter and 30% of total premium revenue.
• Net sales of life insurance increased 11% for the quarter, and net health sales increased 6%.
• Direct-to-consumer life net sales decreased 11%

Management Perspective

“We started the virtual sales and virtual recruiting during the height of the pandemic, and … we found such a benefit to it is that we've kept that model going forward. I think we're attracting additional individuals that may not have been interested in a sales opportunity that was face to face in a customer's home, across the kitchen table. Now those sales can be done from the comfort of their home or wherever they may be located.”

– Matt Darden on Globe Life’s strong work-from-home agent recruitment

By The Numbers

• Operating Revenue : Adjusted operating income $1.47 billion ($1.42 billion in Q4 2023)
• Net Income: Net income of $255 million ($275 million in Q4 2023)
• Earnings Per Share: Income per diluted share was $3.01 ($2.88 in Q4 2023)
• Share repurchases: 337,821 shares during Q4
• Stock Price Movement: Down 2.5% at the end of Thursday to $119.97

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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 john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.