PR Newswire | Oct 21, 2020 04:15PM EDT

10/21 15:15 CDT

Globe Life Inc. Reports Third Quarter 2020 Results MCKINNEY, Texas, Oct. 21, 2020

MCKINNEY, Texas, Oct. 21, 2020 /PRNewswire/ -- Globe Life Inc. (NYSE: GL) reported today that for the quarter ended September 30, 2020, net income was $1.76 per diluted common share, compared with $1.82 per diluted common share for the year-ago quarter. Net operating income for the quarter was $1.75 per diluted common share, compared with $1.73 per diluted common share for the year-ago quarter.

HIGHLIGHTS:

* Net income as an ROE was 9.4% for the nine months ended September 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 9% at the American Income Life Division and 8% at the Direct to Consumer Division. * Health premiums increased over the year-ago quarter by 8% at the Family Heritage Division. * Life net sales at the Direct to Consumer Division and American Income Life Division increased over the year-ago quarter by 50% and 14%, respectively. * Health underwriting margin increased over the year-ago quarter by 20%. * 1.4 million shares of Globe Life Inc. common stock were repurchased during the quarter.

COVID-19 Update:Over the past two quarters, the Company has seen a rise in life claims as result of the pandemic and a corresponding decrease in life underwriting margins. While the Company cannot precisely estimate the length or severity of COVID-19, we anticipate approximately $56 million in COVID-related life claims for the full year 2020. Despite the challenges created by the pandemic, the Company continues to effectively conduct business operations through its various distribution channels.

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-Q3 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 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, 2020 and 2019:

Operating Summary

Per Share

Three Months Ended Three Months Ended September 30, September 30,

2020 2019 % 2020 2019 % Chg. Chg.

Insurance underwriting$1.71 $1.66 3 $183,100$184,619(1) income^(2)

Excess investment 0.55 0.58 (5) 59,326 64,773 (8) income^(2)

Parent company expense(0.03) (0.02) (2,689) (2,472)

Income tax (0.43) (0.44) (2) (45,945) (48,305) (5)

Stock compensation benefit (expense), net(0.06) (0.06) (5,995) (6,232) of tax

Net operating income 1.75 1.73 1 187,797 192,383 (2)



Reconciling items, net of tax:

Realized gain (loss) 0.02 0.09 2,465 9,435 -investments

Realized loss-redemption of - - (501) - debt

Non-operating expenses(0.01) - (816) -

Net income^(3) $1.76 $1.82 $188,945$201,818



Weighted average diluted shares 107,053110,914 outstanding

(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.

GLOBE LIFE INC. Earnings Release-Q3 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 does not intend to sell, nor is it likely that management will be required to sell, the fixed maturities prior to their anticipated recovery. It creates more meaningful trends than can be more easily identified without the fluctuations. Shareholders' equity and book value per share are the most directly comparable GAAP measures.

Nine Months Ended September 30,

2020 2019

Net income as an ROE^(1) 9.4 %12.0 %

Net operating income as an ROE (excluding net 13.6 %14.7 %unrealized gains on fixed maturities)



September 30,

2020 2019

Shareholders' equity $8,224,908 $7,312,531

Impact of adjustment to exclude net unrealized (2,672,610) (2,038,243) gains on fixed maturities

Shareholders' equity, excluding net unrealized $5,552,298 $5,274,288 gains on fixed maturities



Book value per share $77.60 $65.96

Impact of adjustment to exclude net unrealized (25.21) (18.38) gains on fixed maturities

Book value per share, excluding net unrealized $52.39 $47.58 gains on fixed maturities

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

INSURANCE OPERATIONS-comparing Q32020 with Q3 2019:

Life insurance accounted for 69% of the Company's insurance underwriting margin for the quarter and 70% of total premium revenue.

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

Net sales of life insurance increased 21% for the quarter, while net health sales were flat.

The following table summarizes Globe Life's premium revenue by product type for the three months ended September 30, 2020 and 2019:

Insurance Premium Revenue

Quarter Ended

September 30,September 30,% 2020 2019 Chg.

Life insurance $674,021 $630,824 7

Health insurance287,795 269,166 7

Annuity 1 3

Total $961,817 $899,993 7

GLOBE LIFE INC. Earnings Release-Q3 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 Globe Life's insurance underwriting income by segment for the three months ended September 30, 2020 and 2019:

Insurance Underwriting Income

Quarter Ended

September 30,% of September 30,% of % 2020 Premium2019 PremiumChg.

Insurance underwriting margins:

Life $170,703 25 $181,459 29 (6)

Health 72,860 25 60,941 23 20

Annuity 2,253 2,351

245,816 244,751 -

Other income 292 438

Administrative expenses (63,008) (60,570) 4

Insurance underwriting $183,100 $184,619 (1) income

Per share $1.71 $1.66 3

The lower life insurance underwriting margins in the third quarter of 2020 are primarily attributed to approximately $18 million of higher claims as a result of COVID-19 in the current quarter.

Administrative expenses were $63 million, up 4.0% from the year-ago quarter. The ratio of administrative expenses to premium was 6.6%, compared with 6.7% for the year-ago quarter.

GLOBE LIFE INC. Earnings Release-Q3 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

September 30,

2020 2019

Amount % of Amount % of % Premium PremiumChg.

American Income $100,21331 $100,49634 -

Direct to Consumer34,125 15 41,207 19 (17)

Liberty National 14,699 20 18,572 26 (21)

Other 21,666 40 21,184 39 2

Total $170,70325 $181,45929 (6)

Life Premium

Quarter Ended

September 30,

2020 2019 % Chg.

American Income $318,917$293,1499

Direct to Consumer227,734 211,693 8

Liberty National 73,815 71,812 3

Other 53,555 54,170 (1)

Total $674,021$630,8247







Life Net Sales^(1)

Quarter Ended

September 30,

2020 2019 % Chg.

American Income $67,808 $59,692 14

Direct to Consumer44,253 29,517 50

Liberty National 13,669 13,413 2

Other 2,369 2,975 (20)

Total $128,099$105,59721

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(1) 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. Management considers net sales to be a better indicator of the rate of premium growth than annualized premium issued.

GLOBE LIFE INC. Earnings Release-Q3 2020(Dollar amounts in thousands, except share and per share data) (Unaudited)

HEALTH INSURANCE RESULTS BY DISTRIBUTION CHANNEL

Health Underwriting Margin

Quarter Ended

September 30,

2020 2019

Amount % of Amount % of % Premium PremiumChg.

United American $17,98816 $14,18714 27

Family Heritage 22,466 28 18,801 25 19

Liberty National 14,610 31 11,376 24 28

American Income 14,893 55 13,715 54 9

Direct to Consumer2,903 15 2,862 15 1

Total $72,86025 $60,94123 20

Health Premium

Quarter Ended

September 30,

2020 2019 % Chg.

United American $114,325$103,11211

Family Heritage 80,225 74,168 8

Liberty National 47,199 47,439 (1)

American Income 27,029 25,312 7

Direct to Consumer19,017 19,135 (1)

Total $287,795$269,1667







Health Net Sales^(1)

Quarter Ended

September 30,

2020 2019 % Chg.

United American $12,870 $15,795 (19)

Family Heritage 19,469 17,525 11

Liberty National 5,788 5,903 (2)

American Income 6,140 4,910 25

Direct to Consumer496 546 (9)

Total $44,763 $44,679 -

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(1) 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. Management considers net sales to be a better indicator of the rate of premium growth than annualized premium issued.

GLOBE LIFE INC. Earnings Release-Q3 2020(Dollar amounts in thousands, except share and per share data) (Unaudited)

PRODUCING EXCLUSIVE AGENT COUNT RESULTS BY DISTRIBUTION CHANNEL

Quarterly Average End of Quarter Agent Count Producing Agent Count^(1)

Quarter Ended Quarter Ended

September 30, June 30, September 30, June 30,

2020 2019 % Chg.2020 2020 2019 % Chg.2020

American 9,2887,57823 8,393 9,5837,70024 8,597 Income

Liberty 2,5512,3986 2,395 2,5742,4216 2,379 National

Family 1,3711,13521 1,248 1,4691,23619 1,224 Heritage

(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,

2020 2019 % Chg.

Net investment income $231,432$228,9051

Required interest:

Interest on net policy liabilities^(1)(150,432)(143,038)5

Interest on debt (21,674) (21,094) 3

Total required interest (172,106)(164,132)5

Excess investment income $59,326 $64,773 (8)

Per share $0.55 $0.58 (5)

(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 6%. Required interest on net policy liabilities increased 5%, while average net policy liabilities increased 4%. The weighted average discount rate for the net policy liabilities was 5.7% and was in line with the year-ago quarter.

GLOBE LIFE INC. Earnings Release-Q3 2020(Dollar amounts in thousands, except share and per share data) (Unaudited)

The composition of the investment portfolio at book value at September 30, 2020 is as follows:

Investment Portfolio

As of

September 30, 2020

Amount % of Total

Fixed maturities at fair value^(1)$20,277,05694 %

Policy loans 581,211 3

Other long-term investments^(2) 492,884 2

Short-term investments 263,879 1

Total $21,615,030100 %

(1) On January 1, 2020, the Company prospectively adopted ASU 2016-13 FinancialInstruments-Credit Losses (Topic 326): Measurement of Credit Losses onFinancial Instruments. For available-for-sale fixed maturities, the standardremoved the loss impairment methodology of a direct write-down of the amortizedcost and replaced it with allowances for credit losses. As of September 30,2020, fixed maturities at amortized cost were $16.9 billion less $4 million forallowance for credit losses.

(2) Includes $327 million of investments accounted for under the fair valueoption which have a cost of $324 million as of September 30, 2020.

Fixed maturities at amortized cost, net of allowance for credit losses by asset class as of September 30, 2020 are as follows:

Fixed Maturity Portfolio by Sector

As of

September 30, 2020

Investment Below Total Grade InvestmentAmortized Grade Cost, net

Corporate bonds^(1) $13,807,097$768,713$14,575,810

Municipals 1,703,408 - 1,703,408

Government, agencies and GSEs 419,660 - 419,660

Collateralized debt obligations- 56,763 56,763

Other asset-backed securities 118,001 14,025 132,026

Total $16,048,166$839,501$16,887,667

(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 September 30, 2020 and the corresponding amounts of net unrealized gains recognized in accumulated other comprehensive income (loss).

Amortized Allowance forNet UnrealizedFair Cost Credit LossesGains Value

September 30, 2020$16,892,054$ (4,387) $3,389,389 $20,277,056

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 5.31% during the third quarter of 2020, compared with 5.47% in the year-ago quarter.

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

GLOBE LIFE INC. Earnings Release-Q3 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

September 30,

2020 2019

Amount $342,583 $408,869

Average annual effective yield3.2 %4.1 %

Average rating A+ A

Average life (in years) to:

Next call 17.8 18.6

Maturity 29.2 28.6

SHARE REPURCHASE:

In August, the Company resumed the share repurchase program. During the quarter, the Company repurchased 1.4 million shares of Globe Life Inc. common stock at a total cost of $118 million and an average share price of $81.79. Year-to-date, the Company has repurchased 3.1 million shares of Globe Life Inc. common stock at a total cost of $257 million and an average share price of $83.74.

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. These cash flows are not impacted by volatile equity markets. During the third quarter, the Company issued $400 million of senior unsecured notes due August 15, 2030 and negotiated a new credit facility. (Refer to recent 8-Ks for further information.) Liquidity at the Parent Company is sufficient to meet additional capital needs, if any, of the insurance companies.

EARNINGS GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2020 AND 2021:

Globe Life projects that net operating income per share will be in the range of $6.84 to $7.00 for the year ending December 31, 2020 and from $7.30 to $7.80 for the year ending December 31, 2021.

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."

GLOBE LIFE INC. Earnings Release-Q3 2020(Dollar amounts in thousands, except share and per share data) (Unaudited)

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 U.S. economy, leading to unexpected changes in lapse rates and/or sales of our policies, as well as levels of mortality, morbidity, and utilization of health care services that differ from Globe Life's assumptions; 2) Regulatory developments, including changes in accounting standards or governmental regulations (particularly those impacting taxes and changes to the Federal Medicare program that would affect Medicare Supplement); 3) Market trends in the senior-aged health care industry that provide alternatives to traditional Medicare (such as Health Maintenance Organizations and other managed care or private plans) and that could affect the sales of traditional Medicare Supplement insurance; 4) Interest rate changes that affect product sales and/or investment portfolio yield; 5) General economic, industry sector or individual debt issuers' financial conditions (including developments and volatility arising from the COVID-19 pandemic, particularly in certain industries that may comprise part of our investment portfolio) that may affect the current market value of securities we own, or that may impair an issuer's ability to make principal and/or interest payments due on those securities; 6) Changes in pricing competition; 7) Litigation results; 8) Levels of administrative and operational efficiencies that differ from our assumptions (including any reduction in efficiencies resulting from increased costs arising from operating during the COVID-19 pandemic); 9) The ability to obtain timely and appropriate premium rate increases for health insurance policies from our regulators; 10) The customer response to new products and marketing initiatives; 11) Reported amounts in the consolidated financial statements which are based on management estimates and judgments which may differ from the actual amounts ultimately realized; 12) Compromise by a malicious actor or other event that causes a loss of secure data from, or inaccessibility to, our computer and other information technology systems; 13) The severity, magnitude and impact of the COVID-19 pandemic, including effects of the pandemic and the effects of the U.S. government's and other businesses' response to the pandemic, on our operations and personnel, and on commercial activity and demand for our products; and 14) Globe Life's ability to access the commercial paper and debt markets, particularly if such markets become unpredictable or unstable for a certain period as a result of the COVID-19 pandemic.

Readers are also directed to consider other risks and uncertainties described in other documents on file with the Securities and Exchange Commission. 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 2020 earnings release conference call with financial analysts at 11:00 am (Eastern) tomorrow, October 22, 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."

GLOBE LIFE INC. Earnings Release-Q3 2020(Dollar amounts in thousands, except share and per share data) (Unaudited)

APPENDIX

GLOBE LIFE INC.

GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Life premium $674,021$630,824$1,994,473$1,886,314

Health premium 287,795 269,166 850,877 802,132

Other premium 1 3 4 4

Total premium 961,817 899,993 2,845,354 2,688,450

Net investment income 231,432 228,905 691,991 683,003

Realized gains (losses) 1,501 11,943 (29,386) 18,426

Other income 292 438 1,021 1,077

Total revenue 1,195,0421,141,2793,508,980 3,390,956



Benefits and expenses:

Life policyholder benefits459,231 406,963 1,340,746 1,227,616

Health policyholder 184,237 170,875 546,444 511,403 benefits

Other policyholder 7,508 7,854 22,571 23,792 benefits

Total policyholder 650,976 585,692 1,909,761 1,762,811 benefits

Amortization of deferred 140,843 138,449 430,840 412,436 acquisition costs

Commissions, premium taxes, and non-deferred 74,614 74,139 229,691 221,302 acquisition costs

Other operating expense 75,397 74,575 226,693 226,412

Interest expense 21,674 21,094 65,295 63,804

Total benefits and 963,504 893,949 2,862,280 2,686,765 expenses



Income before income taxes231,538 247,330 646,700 704,191

Income tax benefit (42,593) (45,512) (119,167) (130,370) (expense)

Income from continuing 188,945 201,818 527,533 573,821 operations



Discontinued operations:

Income (loss) from discontinued operations, - - - (92) net of tax

Net income $188,945$201,818$527,533 $573,729



Total basic net income per$1.78 $1.85 $4.95 $5.24 common share



Total diluted net income $1.76 $1.82 $4.90 $5.14 per common share

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SOURCE Globe Life Inc.