Globe Life Inc. Reports Second Quarter 2020 Results
COVID-19— The Company has transitioned the organization, employees and agents, from an in-person experience to one that is primarily virtual. While the current environment continues to present challenges,
HIGHLIGHTS:
- Net income as an ROE was 9.4% for the six months ended
June 30, 2020 . Net operating income as an ROE excluding net unrealized gains on fixed maturities was 13.6%. - Life premiums increased over the year-ago quarter by 8% at the Direct to Consumer Division and 7% at the American Income Life Division.
- Health premiums increased over the year-ago quarter by 7% at the Family Heritage Division.
- Life net sales at the Direct to Consumer Division increased over the year-ago quarter by 43%.
- Health underwriting margin increased over the year-ago quarter by 7%.
Note: As used in the earnings release, "
Earnings Release—Q2 2020
(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
The following table represents
Operating Summary |
|||||||||||||||||||
Per Share |
|||||||||||||||||||
Three Months Ended |
Three Months Ended |
||||||||||||||||||
2020 |
2019 |
% Chg. |
2020 |
2019 |
% Chg. |
||||||||||||||
Insurance underwriting income(2) |
$ |
1.56 |
$ |
1.60 |
(3) |
$ |
167,042 |
$ |
178,556 |
(6) |
|||||||||
Excess investment income(2) |
0.57 |
0.58 |
(2) |
61,137 |
64,678 |
(5) |
|||||||||||||
Parent company expense |
(0.02) |
(0.03) |
(2,516) |
(2,872) |
|||||||||||||||
Income tax |
(0.40) |
(0.42) |
(5) |
(43,070) |
(47,114) |
(9) |
|||||||||||||
Stock compensation benefit (expense), net |
(0.05) |
(0.06) |
(5,761) |
(6,366) |
|||||||||||||||
Net operating income |
1.65 |
1.67 |
(1) |
176,832 |
186,882 |
(5) |
|||||||||||||
Reconciling items, net of tax: |
|||||||||||||||||||
Realized gain (loss)—investments |
(0.04) |
0.04 |
(3,784) |
4,072 |
|||||||||||||||
Part D adjustments—discontinued operations |
— |
— |
— |
(43) |
|||||||||||||||
Legal proceedings |
— |
(0.04) |
— |
(4,345) |
|||||||||||||||
Net income(3) |
$ |
1.62 |
$ |
1.67 |
$ |
173,048 |
$ |
186,566 |
|||||||||||
Weighted average diluted shares |
107,134 |
111,586 |
(1) |
GAAP is defined as accounting principles generally accepted in |
(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. |
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
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.
Six Months Ended |
|||||||
2020 |
2019 |
||||||
Net income as an ROE(1) |
9.4 |
% |
12.3 |
% |
|||
Net operating income as an ROE (excluding net unrealized gains on fixed maturities) |
13.6 |
% |
14.6 |
% |
|||
|
|||||||
2020 |
2019 |
||||||
Shareholders' equity |
$ |
7,848,369 |
$ |
6,700,398 |
|||
Impact of adjustment to exclude net unrealized gains on fixed maturities |
(2,361,530) |
(1,533,945) |
|||||
Shareholders' equity, excluding net unrealized gains on fixed maturities |
$ |
5,486,839 |
$ |
5,166,453 |
|||
Book value per share |
$ |
73.26 |
$ |
60.22 |
|||
Impact of adjustment to exclude net unrealized gains on fixed maturities |
(22.05) |
(13.79) |
|||||
Book value per share, excluding net unrealized gains on fixed maturities |
$ |
51.21 |
$ |
46.43 |
(1) |
Calculated using average shareholders' equity for the measurement period. |
INSURANCE OPERATIONS—comparing Q2 2020 with Q2 2019:
Life insurance accounted for 71% of the Company's insurance underwriting margin for the quarter and 70% of total premium revenue.
Health insurance accounted for 28% of the Company's insurance underwriting margin for the quarter and 30% of total premium revenue.
Net sales of life insurance increased 2%, while net health sales declined 23%.
The following table summarizes
Insurance Premium Revenue |
|||||||||
Quarter Ended |
|||||||||
|
|
% Chg. |
|||||||
Life insurance |
$ |
670,822 |
$ |
631,201 |
6 |
||||
Health insurance |
282,877 |
266,282 |
6 |
||||||
Annuity |
3 |
1 |
|||||||
Total |
$ |
953,702 |
$ |
897,484 |
6 |
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
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, stock compensation 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
Insurance Underwriting Income |
|||||||||||||
Quarter Ended |
|||||||||||||
|
% of Premium |
|
% of Premium |
% Chg. |
|||||||||
Insurance underwriting margins: |
|||||||||||||
Life |
$ |
161,699 |
24 |
$ |
175,050 |
28 |
(8) |
||||||
Health |
64,240 |
23 |
60,159 |
23 |
7 |
||||||||
Annuity |
2,265 |
2,365 |
|||||||||||
228,204 |
237,574 |
(4) |
|||||||||||
Other income |
404 |
398 |
|||||||||||
Administrative expenses |
(61,566) |
(59,416) |
4 |
||||||||||
Insurance underwriting income |
$ |
167,042 |
$ |
178,556 |
(6) |
||||||||
Per share |
$ |
1.56 |
$ |
1.60 |
(3) |
Administrative expenses were
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
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 |
|||||||||||||||
|
|||||||||||||||
2020 |
2019 |
||||||||||||||
Amount |
% of |
Amount |
% of Premium |
% Chg. |
|||||||||||
American Income |
$ |
93,454 |
30 |
$ |
97,006 |
34 |
(4) |
||||||||
Direct to Consumer |
28,148 |
12 |
39,042 |
18 |
(28) |
||||||||||
Liberty National |
18,873 |
26 |
18,136 |
25 |
4 |
||||||||||
Other |
21,224 |
40 |
20,866 |
39 |
2 |
||||||||||
Total |
$ |
161,699 |
24 |
$ |
175,050 |
28 |
(8) |
Life Premium |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2020 |
2019 |
% Chg. |
|||||||
American Income |
$ |
308,675 |
$ |
288,334 |
7 |
||||
Direct to Consumer |
235,201 |
217,278 |
8 |
||||||
Liberty National |
73,326 |
71,478 |
3 |
||||||
Other |
53,620 |
54,111 |
(1) |
||||||
Total |
$ |
670,822 |
$ |
631,201 |
6 |
Life |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2020 |
2019 |
% Chg. |
|||||||
American Income |
$ |
51,414 |
$ |
61,048 |
(16) |
||||
Direct to Consumer |
49,396 |
34,456 |
43 |
||||||
Liberty National |
10,709 |
13,428 |
(20) |
||||||
Other |
2,610 |
3,207 |
(19) |
||||||
Total |
$ |
114,129 |
$ |
112,139 |
2 |
(1) |
Net sales is annualized premium issued (gross premium that would be received during the |
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
HEALTH INSURANCE RESULTS BY DISTRIBUTION CHANNEL
Health Underwriting Margin |
|||||||||||||||
Quarter Ended |
|||||||||||||||
|
|||||||||||||||
2020 |
2019 |
||||||||||||||
Amount |
% of Premium |
Amount |
% of Premium |
% Chg. |
|||||||||||
United American |
$ |
15,282 |
14 |
$ |
14,390 |
14 |
6 |
||||||||
Family Heritage |
18,857 |
24 |
17,901 |
25 |
5 |
||||||||||
Liberty National |
12,524 |
26 |
11,837 |
25 |
6 |
||||||||||
American Income |
14,775 |
58 |
13,040 |
53 |
13 |
||||||||||
Direct to Consumer |
2,802 |
15 |
2,991 |
16 |
(6) |
||||||||||
Total |
$ |
64,240 |
23 |
$ |
60,159 |
23 |
7 |
Health Premium |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2020 |
2019 |
% Chg. |
|||||||
United American |
$ |
112,885 |
$ |
102,254 |
10 |
||||
Family Heritage |
77,987 |
73,037 |
7 |
||||||
Liberty National |
47,391 |
47,292 |
— |
||||||
American Income |
25,554 |
24,450 |
5 |
||||||
Direct to Consumer |
19,060 |
19,249 |
(1) |
||||||
Total |
$ |
282,877 |
$ |
266,282 |
6 |
Health |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2020 |
2019 |
% Chg. |
|||||||
United American |
$ |
12,001 |
$ |
16,587 |
(28) |
||||
Family Heritage |
13,564 |
16,898 |
(20) |
||||||
Liberty National |
4,089 |
5,864 |
(30) |
||||||
American Income |
3,688 |
4,299 |
(14) |
||||||
Direct to Consumer |
522 |
582 |
(10) |
||||||
Total |
$ |
33,864 |
$ |
44,230 |
(23) |
(1) |
Net sales is annualized premium issued (gross premium that would be received during the |
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
PRODUCING EXCLUSIVE AGENT COUNT RESULTS BY DISTRIBUTION CHANNEL
Quarterly Average Producing Agent Count(1) |
End of Quarter Agent Count |
||||||||||||||||||||||
Quarter Ended |
Quarter Ended |
||||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
2020 |
2019 |
% |
2020 |
2020 |
2019 |
% |
2020 |
||||||||||||||||
American Income |
8,393 |
7,364 |
14 |
7,630 |
8,597 |
7,477 |
15 |
8,044 |
|||||||||||||||
Liberty National |
2,395 |
2,290 |
5 |
2,648 |
2,379 |
2,390 |
— |
2,688 |
|||||||||||||||
Family Heritage |
1,248 |
1,081 |
15 |
1,227 |
1,224 |
1,089 |
12 |
1,290 |
(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
Excess Investment Income |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2020 |
2019 |
% Chg. |
|||||||
Net investment income |
$ |
231,568 |
$ |
227,425 |
2 |
||||
Required interest: |
|||||||||
Interest on net policy liabilities(1) |
(147,618) |
(141,315) |
4 |
||||||
Interest on debt |
(22,813) |
(21,432) |
6 |
||||||
Total required interest |
(170,431) |
(162,747) |
5 |
||||||
Excess investment income |
$ |
61,137 |
$ |
64,678 |
(5) |
||||
Per share |
$ |
0.57 |
$ |
0.58 |
(2) |
(1) |
Interest on net policy liabilities is a component of total policyholder benefits, a GAAP measure. |
Net investment income increased 2%, while average invested assets increased 6%. Required interest on net policy liabilities increased 4%, in line with the increase in average net policy liabilities. The weighted average discount rate for the net policy liabilities was 5.7% and was in line with the year-ago quarter.
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
The composition of the investment portfolio at book value at
Investment Portfolio |
||||||
As of |
||||||
|
||||||
Amount |
% of Total |
|||||
Fixed maturities at fair value(1) |
$ |
19,661,182 |
93 |
% |
||
Policy loans |
579,541 |
3 |
||||
Other long-term investments(2) |
432,325 |
2 |
||||
Short-term investments |
531,651 |
2 |
||||
Total |
$ |
21,204,699 |
100 |
% |
(1) |
On |
(2) |
Includes |
Fixed maturities at amortized cost, net of allowance for credit losses by asset class as of
Fixed Maturity Portfolio by Sector |
|||||||||||
As of |
|||||||||||
|
|||||||||||
Investment Grade |
Below |
Total |
|||||||||
Corporate bonds(1) |
$ |
13,748,727 |
$ |
700,713 |
$ |
14,449,440 |
|||||
Municipals |
1,617,951 |
— |
1,617,951 |
||||||||
Government, agencies and GSE's |
411,100 |
— |
411,100 |
||||||||
Collateralized debt obligations |
— |
57,031 |
57,031 |
||||||||
Other asset-backed securities |
115,559 |
14,100 |
129,659 |
||||||||
Total |
$ |
15,893,337 |
$ |
771,844 |
$ |
16,665,181 |
(1) |
Please see our website for information regarding our energy portfolio. |
Below are fixed maturities available for sale by amortized cost, allowance for credit losses, and fair value at
Amortized Cost |
Allowance for |
Net Unrealized |
Fair Value |
||||||||||
|
$ |
16,697,900 |
$ |
(32,719) |
$ |
2,996,001 |
|
||||||
At amortized cost, net of allowance for credit losses, 95% of fixed maturities (96% at fair value) were rated "investment grade." The fixed maturity portfolio earned an annual taxable equivalent effective yield of 5.38% during the second quarter of 2020, compared with 5.50% in the year-ago quarter.
Earnings Release—Q2 2020
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
Comparable information for acquisitions of fixed maturity investments is as follows:
Fixed Maturity Acquisitions |
|||||||
Quarter Ended |
|||||||
|
|||||||
2020 |
2019 |
||||||
Amount |
$ |
351,034 |
$ |
252,742 |
|||
Average annual effective yield |
4.4 |
% |
5.0 |
% |
|||
Average rating |
A- |
A- |
|||||
Average life (in years) to: |
|||||||
Next call |
16.1 |
23.7 |
|||||
Maturity |
22.8 |
29.2 |
SHARE REPURCHASE:
In the first quarter, the Company announced a temporary postponement of its share repurchase program while it evaluated the expected impact of COVID-19 on the Company's operations and financial results. Accordingly, the Company did not repurchase shares of
LIQUIDITY/CAPITAL:
EARNINGS GUIDANCE FOR THE YEAR ENDING
NON-GAAP MEASURES:
In this news release,
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This press release may contain forward-looking statements within the meaning of the federal securities laws, including statements related to the expected impact of the COVID-19 outbreak on our business operations, financial results and financial condition. These prospective statements reflect management's current expectations, but are not guarantees of future performance. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, which may be national in scope, related to the insurance industry generally, or applicable to the Company specifically. Such events or developments could include, but are not necessarily limited to: 1) Economic and other conditions, including the COVID-19 pandemic and its impact on the
Readers are also directed to consider other risks and uncertainties described in other documents on file with the
EARNINGS RELEASE CONFERENCE CALL WEBCAST:
|
|||||||||||||||
APPENDIX |
|||||||||||||||
|
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Revenue: |
|||||||||||||||
Life premium |
$ |
670,822 |
$ |
631,201 |
$ |
1,320,452 |
$ |
1,255,490 |
|||||||
Health premium |
282,877 |
266,282 |
563,082 |
532,966 |
|||||||||||
Other premium |
3 |
1 |
3 |
1 |
|||||||||||
Total premium |
953,702 |
897,484 |
1,883,537 |
1,788,457 |
|||||||||||
Net investment income |
231,568 |
227,425 |
460,559 |
454,098 |
|||||||||||
Realized gains (losses) |
(4,790) |
5,154 |
(30,887) |
6,483 |
|||||||||||
Other income |
404 |
398 |
729 |
639 |
|||||||||||
Total revenue |
1,180,884 |
1,130,461 |
2,313,938 |
2,249,677 |
|||||||||||
Benefits and expenses: |
|||||||||||||||
Life policyholder benefits |
459,845 |
410,961 |
881,515 |
820,653 |
|||||||||||
Health policyholder benefits |
183,496 |
170,511 |
362,207 |
340,528 |
|||||||||||
Other policyholder benefits |
7,475 |
7,890 |
15,063 |
15,938 |
|||||||||||
Total policyholder benefits |
650,816 |
589,362 |
1,258,785 |
1,177,119 |
|||||||||||
Amortization of deferred acquisition costs |
146,160 |
138,165 |
289,997 |
273,987 |
|||||||||||
Commissions, premium taxes, and non-deferred |
76,140 |
73,698 |
155,077 |
147,163 |
|||||||||||
Other operating expense |
72,714 |
79,044 |
151,296 |
151,837 |
|||||||||||
Interest expense |
22,813 |
21,432 |
43,621 |
42,710 |
|||||||||||
Total benefits and expenses |
968,643 |
901,701 |
1,898,776 |
1,792,816 |
|||||||||||
Income before income taxes |
212,241 |
228,760 |
415,162 |
456,861 |
|||||||||||
Income tax benefit (expense) |
(39,193) |
(42,151) |
(76,574) |
(84,858) |
|||||||||||
Income from continuing operations |
173,048 |
186,609 |
338,588 |
372,003 |
|||||||||||
Discontinued operations: |
|||||||||||||||
Income (loss) from discontinued operations, net of tax |
— |
(43) |
— |
(92) |
|||||||||||
Net income |
$ |
173,048 |
$ |
186,566 |
$ |
338,588 |
$ |
371,911 |
|||||||
Basic net income (loss) per common share: |
|||||||||||||||
Continuing operations |
|||||||||||||||
Discontinued operations |
|||||||||||||||
Total basic net income per common share |
$ |
1.63 |
$ |
1.70 |
$ |
3.17 |
$ |
3.38 |
|||||||
Diluted net income (loss) per common share: |
|||||||||||||||
Continuing operations |
|||||||||||||||
Discontinued operations |
|||||||||||||||
Total diluted net income per common share |
$ |
1.62 |
$ |
1.67 |
$ |
3.13 |
$ |
3.32 |
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