Globe Life Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Insurance Market: Serves the lower middle to middle income market, which is vastly underserved with significant growth potential. Competitive advantage comes from efficient distribution channels and extensive data/experience.
• Agency Channels:
  • American Income: Life premiums were $451 million, up 5% year-over-year; life underwriting margin was $261 million, up 18% year-over-year. Hires for American Income are up 17% this quarter.
  • Liberty National: Life premiums were $98 million, up 5% year-over-year; life underwriting margin was $70 million, up 57% year-over-year. Implemented a new worksite enrollment platform and recruiting CRM.
  • Family Heritage: Health premiums were $119 million, up 10% year-over-year; health underwriting margin was $51 million, up 49% year-over-year. Average producing agent count was up 9% year-over-year.
• Direct-to-Consumer: Life premiums were $245 million, down 1% year-over-year; life underwriting margin was $114 million, up 29% year-over-year. New technology improved the underwriting process, expected to generate approximately 1 million leads in 2025 for exclusive agencies.
• Investment Portfolio: Fixed maturity portfolio yield was 5.26% in the third quarter. BBB bonds make up 43% of fixed maturities, and below investment-grade bonds are at historical lows. Anticipates investing $800 million to $850 million in fixed maturities and $300 million to $400 million in commercial mortgage loans and limited partnership investments in 2025.

Segment Performance

• Life Insurance: Third quarter life premium revenue was $844 million, a 3% increase from the year-ago quarter. Life underwriting margin was $482 million, up 24% year-over-year. For full year 2025, life premium revenue is expected to grow between 3% and 3.5%, and life underwriting margin as a percentage of premium is anticipated to be between 44% and 46%.
• Health Insurance: Third quarter health premium revenue was $387 million, a 9% increase from the year-ago quarter. Health underwriting margin was $108 million, up 25% year-over-year. For full year 2025, health premium revenue is expected to grow in the range of 8% to 9%, and health underwriting margin as a percentage of premium is anticipated to be between 25% and 27%.
• Investment Operations: Excess investment income was $37 million, down approximately $3 million from the year-ago quarter. Net investment income was $286 million in the quarter, slightly above the previous year's third quarter. For full year 2025, net investment income is expected to be flat, required interest is expected to grow around 2%, resulting in a decline in excess investment income of around 10% to 15% for the year.

Guidance

• 2025: Net operating earnings per diluted share are estimated to be in the range of $14.40 to $14.60, representing 17% growth at the midpoint. Total premium revenue is expected to grow approximately 5%. Life premium revenue is expected to grow between 3% and 3.5%, and health premium revenue is expected to grow in the range of 8% to 9%. Administrative expenses are expected to be approximately 7.3% of premium.
• 2026: Net operating earnings per diluted share are estimated to be in the range of $14.60 to $15.30, representing 3% growth at the midpoint. Total premium revenue is expected to grow 6% to 7%, life premium revenue is expected to grow 4% to 5%, and health premium revenue is expected to grow 9% to 11%. Underwriting margins are anticipated to be 40% to 43% for life and 24% to 27% for health. Net investment income is expected to grow approximately 3%.

Risks

• Economic Uncertainty: Uncertainty regarding the U.S. economy, but well-positioned with historically low percentages of invested assets in BBB and below-investment-grade bonds.
• Regulatory Changes: Impact of regulatory approvals for the Bermuda reinsurance affiliate and potential changes in regulations affecting operations.

Question and Answer

• **Q: Concerns about life sales growth of exclusive agencies and confidence in reacceleration.

A: Not from consumer demand perspective. Agent count growth is key; hires for American Income are up 17% this quarter, a leading indicator for future sales growth.

• **Q: Excess cash flow guidance and Bermuda benefits.

A: $600 million to $700 million for 2026 does not include benefit from Bermuda affiliate; takes at least 2 accounting periods for reciprocal jurisdiction.

• **Q: Sales growth outlook and new technology impact.

A: New worksite enrollment platform and recruiting CRM improve agent productivity and recruiting, leading to future sales growth.

• **Q: 2025 guidance and 4Q EPS.

A: Favorable third quarter results, but seasonal factors and claim trends affect fourth quarter EPS; guidance raised by $0.05 midpoint.

• **Q: Health margins and claims trends.

A: Health margins improving, claim cost trends flattened; rate increases in 2026 expected to boost margins.

• **Q: Bermuda reinsurance progress.

A: In licensing and regulatory approval process, expected to execute first reinsurance transaction by end 2025, benefit not in 2026 guidance.

• **Q: M&A thoughts.

A: M&A considered, but focused on organic growth; excess cash flow used for share repurchases unless better opportunity arises.

• **Q: DTC conversion rate.

A: Technology improvements increased conversion rate, leading to higher sales and more advertising spend across channels.