Globe Life Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Investment operations: Excess investment income was $35 million, down approximately $8 million from the year - ago quarter. Net investment income was $282 million, down 1%. For the full year 2025, net investment income is expected to be up about 1% and required interest to grow around 2.5%. In the second quarter, $263 million was invested in investment - grade fixed maturities at an average yield of 6.44%, and $68 million in commercial mortgage loans and limited partnerships with debt - like characteristics at an average expected cash return of approximately 9.7%.
• Capital and liquidity: Parent began the quarter with liquid assets of approximately $90 million and ended with approximately $105 million. Repurchased approximately 1.9 million shares of Globe Life common stock for a total cost of approximately $226 million in the second quarter. Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. Submitted a preliminary business plan to the Bermuda Monetary Authority to establish an affiliate reinsurer in Bermuda.
• Distribution channels performance: Discussed the performance of each distribution channel including American Income Life, Liberty National, Family Heritage, Direct to Consumer Division, and United American General Agency, such as sales growth, agent count growth, and margin changes.

Segment Performance

• Life Insurance operations: Second - quarter premium revenue increased 3% from the year - ago quarter to $840 million. Life underwriting margin was $340 million, up 6% from a year ago. For the year, life premium revenue is expected to grow around 3.5%, and life underwriting margin as a percent of premium is anticipated to be between 43% and 45%.
• Health insurance: Premium revenue grew 8% to $378 million, while health underwriting margin was down 2% to $98 million. For the year, health premium revenue is expected to grow in the range of 8% to 9% and health underwriting margin as a percent of premium is anticipated to be between 25% and 27%.
• Distribution channels:
  • American Income Life: Life premiums were up 5% over the year - ago quarter to $446 million, life underwriting margin was up 6% to $205 million. Average producing agent count for the second quarter was 12,241, up 3% from a year ago.
  • Liberty National: Life premiums were up 5% over the year - ago quarter to $97 million, life underwriting margin was up 8% to $33 million. Net life sales decreased 5%, net health sales were $8 million, down 2% from the year - ago quarter. Average producing agent count for the second quarter was 3,882, up 5% from a year ago.
  • Family Heritage: Health premiums increased 9% over the year - ago quarter to $116 million, health underwriting margin increased 12% to $41 million. Net health sales were up 20% to $30 million. Average producing agent count for the second quarter was 1,498, up 10% from a year ago.
  • Direct to Consumer Division: Life premiums were down 1% over the year - ago quarter to $246 million, while life underwriting margin increased 8% to $69 million. Net life sales were $31 million, up 2% from the year - ago quarter and up 24% from the first quarter.
  • United American General Agency: Health premiums increased 10% over a year - ago quarter to $164 million, health underwriting margin was $12 million, down $4 million from the year - ago quarter due to higher claim costs. Net health sales were $25 million, up approximately $7 million over the year - ago quarter.

Guidance

• Earnings: For 2025, net operating earnings per diluted share is estimated to be in the range of $14.25 to $14.65.
• Investments: At the midpoint of full - year guidance, assume investment of approximately $900 million to $1 billion in fixed maturities at an average yield of around 6.2%, and approximately $200 million to $300 million in commercial mortgage loans and limited partnership investments with debt - like characteristics, at an average expected cash return of 7% to 9%.
• Share repurchase and dividends: Anticipate share repurchases will total $600 million to $650 million for the full year and distribute $80 million to $90 million to shareholders in the form of dividends.

Risks

• Economic uncertainty: Uncertainties in the U.S. economy could impact the investment portfolio, such as the unrealized loss position in the fixed maturity portfolio due to interest rate changes.
• Bermuda affiliate: Uncertainty regarding the timing and impact of establishing the Bermuda reinsurance affiliate, including regulatory approval and rating agency discussions.
• Regulatory investigations: Uncertainty related to the ongoing DOJ and SEC investigations, as the company has no control over the agencies' timing and actions.

Question and Answer

• Q: Jack Matten on higher earnings guidance and Bermuda affiliate A: Frank Svoboda said mortality experience translating to statutory income, and James Matthew Darden said they are in conversations with regulators and rating agencies on Bermuda affiliate and will provide updates later.
• Q: Andrew Kligerman on sales guidance and Med Sup A: James Matthew Darden said sales guidance revision is due to timing of new agents getting productive, and Frank Svoboda said there will always be a market for Med Sup but it will ebb and flow.
• Q: Jimmy Bhullar on guidance and Direct to Consumer A: James Matthew Darden and Frank Svoboda discussed mortality results continuing to run favorably, admin expenses moderation, and Direct to Consumer channel recovery.
• Q: Elyse Greenspan on medical trends and health business A: Thomas Kalmbach said Medicare Supplement is different from Medicaid, and James Matthew Darden and Frank Svoboda said supplemental health business is stable.
• Q: Ryan Krueger on Bermuda free cash flow A: Thomas Kalmbach and Frank Svoboda said it's early to give timing, but it's a strategic consideration for capital management.
• Q: John Barnidge on Bermuda transactions A: James Matthew Darden said they will do a series of transactions as the Bermuda entity is up and running.
• Q: Wilma Jackson Burdis on M&A and mortality A: James Matthew Darden said M&A is opportunistic, and James Matthew Darden and Frank Svoboda discussed mortality remeasurement and its flow through future years.
• Q: Mark Hughes on lapse experience and health business P&L A: James Matthew Darden and Frank Svoboda discussed lapse experience and that health business results in 2Q are fully reflected.
• Q: Wesley Carmichael on Direct to Consumer technology A: James Matthew Darden said technology investments improve underwriting throughput and conversion rate in Direct to Consumer channel.
• Q: Suneet Kamath on DOJ and SEC investigations A: James Matthew Darden said no new inquiries or requests from DOJ and SEC since the beginning of the year and they are proactive in resolution.
• Q: Thomas Gallagher on Bermuda free cash flow timing A: Thomas Kalmbach and Frank Svoboda said it's early to give timing, but will provide more clarity in future calls.