GLOBE LIFE INC. - FORM 8-K - EX-99.1 - Q4 2019 EARNINGS RELEASE - February 4, 2020

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8-K - 8-K Q4 2019 EARNINGS RELEASE - GLOBE LIFE INC.gl-20200204.htm

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GLOBE LIFE INC. REPORTS
Fourth Quarter 2019 Results

McKinney, TX, February 4, 2020—Globe Life Inc. (NYSE: GL) reported today that for the quarter ended December 31, 2019, net income was $1.69 per diluted common share, compared with $1.45 per diluted common share for the year-ago quarter. Net operating income for the quarter was $1.70 per diluted common share, compared with $1.56 per diluted common share for the year-ago quarter.

Net income for the year ended December 31, 2019 was $6.83 per diluted common share, compared with $6.09 per diluted common share for the year-ago period. Net operating income for the year ended December 31, 2019 was $6.75 per diluted common share compared with $6.13 per diluted common share for the prior period.


HIGHLIGHTS:
lNet income as an ROE was 11.6% for the year ended December 31, 2019. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.5% for the same period.
lLife underwriting margin at the American Income Life Division increased over the year-ago quarter by 9%.
lLife premiums increased over the year-ago quarter by 8% at the American Income Life Division. Health premiums increased over the year-ago quarter by 8% at the Family Heritage Division.
lLife net sales at the Liberty National Division and American Income Life Division increased over the year-ago quarter by 13% and 9%, respectively.
lTotal health net sales increased over the year-ago quarter by 13%.
l930,044 shares of Globe Life Inc. common stock were repurchased during the quarter.
















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.
1
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(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 December 31, 2019 and 2018:
Operating Summary
Per Share
Three Months Ended
December 31,		Three Months Ended
December 31,
20192018%
Chg.		20192018%
Chg.
Insurance underwriting income(2)
$1.62  $1.51  7  $179,563  $171,256  5  
Excess investment income(2)
0.57  0.54  6  62,599  61,680  1  
Parent company expense(0.02) (0.03) (2,273) (2,878) 
Income tax(0.43) (0.39) 10  (47,146) (44,870) 5  
Stock compensation benefit (expense), net of tax(0.04) (0.07) (4,650) (8,166) 
Net operating income 1.70  1.56  9  188,093  177,022  6  
Reconciling items, net of tax:
Realized gain (loss)—investments0.02  (0.04) 1,734  (4,362) 
Realized loss—redemption of debt—  (0.08) —  (8,752) 
Part D adjustments—discontinued operations—  —  —  11  
Non-operating fees—  —  (508) —  
Legal proceedings(0.02) —  (2,258) —  
Tax reform adjustment—  0.01  —  798  
Net income(3)
$1.69  $1.45  $187,061  $164,717  
Weighted average diluted shares outstanding 110,665  113,667  
(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.





2
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(Dollar amounts in thousands, except share and per share data)
(Unaudited)

The following table represents Globe Life's operating summary for the twelve months ended December 31, 2019 and 2018:
Operating Summary
Per Share
Twelve Months Ended
December 31,		Twelve Months Ended
December 31,
20192018% Chg.20192018% Chg.
Insurance underwriting income$6.44  $5.87  10  $717,557  $676,025  6  
Excess investment income2.31  2.13  8  257,605  245,094  5  
Parent company expense(0.09) (0.09) (10,260) (10,684) 
Income tax(1.70) (1.55) 10  (189,155) (178,475) 6  
Stock compensation benefit (expense), net of tax(0.21) (0.22) (23,645) (24,986) 
Net operating income6.75  6.13  10  752,102  706,974  6  
Reconciling items, net of tax:
Realized gain (loss)—investments0.15  0.06  16,291  7,327  
Realized loss—redemption of debt—  (0.08) —  (8,752) 
Part D adjustments—discontinued operations—  —  (92) (44) 
Administrative settlements—  (0.03) (400) (3,590) 
Non-operating fees—  (0.01) (508) (1,247) 
Legal proceedings(0.06) —  (6,603) —  
Tax reform adjustment—  0.01  —  798  
Net income$6.83  $6.09  $760,790  $701,466  
Weighted average diluted shares outstanding111,381  115,249  





3
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(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.
Twelve Months Ended
December 31,
20192018
Net income as an ROE(1)
11.6 %12.3 %
Net operating income as an ROE (excluding net unrealized gains on fixed maturities)
14.5 %14.6 %
December 31,
20192018
Shareholders' equity$7,294,307  $5,415,177  
Impact of adjustment to exclude net unrealized gains on fixed maturities(1,962,268) (425,961) 
Shareholders' equity, excluding net unrealized gains on fixed maturities$5,332,039  $4,989,216  
Book value per share$66.02  $48.11  
Impact of adjustment to exclude net unrealized gains on fixed maturities(17.76) (3.79) 
Book value per share, excluding net unrealized gains on fixed maturities$48.26  $44.32  
(1) Calculated using average shareholders' equity for the measurement period.

INSURANCE OPERATIONS—comparing Q4 2019 with Q4 2018:

Life insurance accounted for 74% of the Company’s insurance underwriting margin for the quarter and 70% of total premium revenue.

Health insurance accounted for 25% of the Company's insurance underwriting margin for the quarter and 30% of total premium revenue.

Net sales of life insurance increased 7%, while net health sales increased 13%.


The following table summarizes Globe Life's premium revenue by product type for the three months ended December 31, 2019 and 2018:

Insurance Premium Revenue
Quarter Ended
December 31, 2019December 31, 2018%
Chg.
Life insurance$631,470  $600,171  5  
Health insurance275,214  256,900  7  
Total$906,684  $857,071  6  

4
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(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 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 December 31, 2019 and 2018:
Insurance Underwriting Income
Quarter Ended
December 31, 2019% of
Premium		December 31, 2018% of
Premium		%
Chg.
Insurance underwriting margins:
Life$177,116  28  $167,707  28  6  
Health61,024  22  58,214  23  5  
Annuity2,326  2,660  
240,466  228,581  5  
Other income241  56  
Administrative expenses(61,144) (57,381) 7  
Insurance underwriting income$179,563  $171,256  5  
Per share$1.62  $1.51  7  

Administrative expenses were $61 million, up 6.6% from the year-ago quarter. The ratio of administrative expenses to premium was 6.7%, same as the year-ago quarter.

5
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(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
December 31,
20192018
Amount  % of Premium  Amount  % of Premium  % Chg.
American Income $98,209  33  $90,313  33  9  
Direct to Consumer 39,152  19  38,989  19  —  
Liberty National 18,479  26  17,753  25  4  
Other 21,276  40  20,652  38  3  
Total$177,116  28  $167,707  28  6  

Life Premium
Quarter Ended
December 31,
20192018%
Chg.
American Income $297,245  $275,961  8  
Direct to Consumer 209,013  200,410  4  
Liberty National 71,544  69,654  3  
Other 53,668  54,146  (1) 
Total$631,470  $600,171  5  

Life Net Sales(1)
Quarter Ended
December 31,
20192018%
Chg.
American Income $59,296  $54,482  9  
Direct to Consumer 29,788  29,155  2  
Liberty National 14,618  12,984  13  
Other 3,036  3,392  (10) 
Total$106,738  $100,013  7  
(1)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 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. We believe that net sales is a better indicator of the rate of premium growth than annualized premium issued.

6
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(Dollar amounts in thousands, except share and per share data)
(Unaudited)

HEALTH INSURANCE RESULTS BY DISTRIBUTION CHANNEL

Health Underwriting Margin
Quarter Ended
December 31,
20192018
Amount  % of Premium  Amount  % of Premium  % Chg.
United American $15,353  14  $13,705  14  12  
Family Heritage 18,836  25  17,526  25  7  
Liberty National 10,377  22  11,195  24  (7) 
American Income 13,665  53  12,726  54  7  
Direct to Consumer2,793  15  3,062  16  (9) 
Total$61,024  22  $58,214  23  5  

Health Premium
Quarter Ended
December 31,
20192018%
Chg.
United American $108,311  $97,341  11  
Family Heritage 75,713  70,360  8  
Liberty National 46,691  46,780  —  
American Income 25,586  23,562  9  
Direct to Consumer 18,913  18,857  —  
Total$275,214  $256,900  7  

Health Net Sales(1)
Quarter Ended
December 31,
20192018%
Chg.
United American $31,942  $29,752  7  
Family Heritage 18,173  15,221  19  
Liberty National 7,172  6,392  12  
American Income 4,951  3,735  33  
Direct to Consumer 1,554  1,330  17  
Total$63,792  $56,430  13  
(1)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 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. We believe that net sales is a better indicator of the rate of premium growth than annualized premium issued.
7
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(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 EndedQuarter Ended
December 31,September 30,December 31,September 30,
20192018% Chg.201920192018% Chg.2019
American Income7,631  6,936  10  7,578  7,551  6,894  10  7,700  
Liberty National 2,534  2,172  17  2,398  2,660  2,159  23  2,421  
Family Heritage 1,228  1,129  9  1,135  1,286  1,097  17  1,236  

(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
December 31,
20192018%
Chg.
Net investment income$227,456  $224,233  1  
Required interest:
Interest on net policy liabilities(1)
(144,355) (138,943) 4  
Interest on debt(20,502) (23,610) (13) 
Total required interest(164,857) (162,553) 1  
Excess investment income$62,599  $61,680  1  
Per share$0.57  $0.54  6  
(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 4%. Required interest on net policy liabilities increased 4%, while average net policy liabilities increased 3%. The weighted average discount rate for the net policy liabilities was 5.7% and was in line with the year-ago quarter.

8
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(Dollar amounts in thousands, except share and per share data)
(Unaudited)

The composition of the investment portfolio at book value at December 31, 2019 is as follows:
Investment Portfolio
As of
December 31, 2019
Amount% of Total
Fixed maturities at fair value(1)
$18,907,147  95 %
Policy loans575,492  3  
Other long-term investments(2)
326,347  2  
Short-term investments38,285  —  
Total$19,847,271  100 %
(1) Fixed maturities at amortized cost as of December 31, 2019 were $16.4 billion.
(2) Includes $186 million of investments accounted for under the fair value option which have an amortized cost of $176 million as of December 31, 2019.

Fixed maturities at amortized cost by asset class as of December 31, 2019 are as follows:
Fixed Maturity Portfolio by Sector  
As of
December 31, 2019
Investment GradeBelow Investment GradeTotal
Corporate bonds$13,630,386  $602,915  $14,233,301  
Municipals1,559,736  —  1,559,736  
Government-sponsored enterprises332,340  —  332,340  
Government & agencies89,167  —  89,167  
Collateralized debt obligations—  56,990  56,990  
Other asset-backed securities129,992  14,250  144,242  
Total$15,741,621  $674,155  $16,415,776  

The market value of Globe Life’s fixed maturity portfolio was $18.9 billion compared with amortized cost of $16.4 billion. Net unrealized gains were comprised of gross unrealized gains of $2.6 billion and gross unrealized losses of $83 million.

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

At amortized cost, 96% of fixed maturities (97% at market value) were rated “investment grade.” The fixed maturity portfolio earned an annual taxable equivalent effective yield of 5.41% during the fourth quarter of 2019, compared with 5.56% in the year-ago quarter.

9
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(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
December 31,
20192018
Amount$449,101  $409,050  
Average annual effective yield4.1 %5.3 %
Average ratingA+  A-  
Average life (in years) to:
Next call15.2  17.6  
Maturity31.4  22.5  

SHARE REPURCHASE:

During the quarter, the Company repurchased 930,044 shares of Globe Life Inc. common stock at a total cost of $93 million for an average share price of $99.82.

For the twelve months ended December 31, 2019, the Company repurchased 3.9 million shares at a total cost of $350 million for an average share price of $89.04.

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. Capital at the insurance companies is sufficient to support operations.

EARNINGS GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2020:

Globe Life projects that net operating income per share will be in the range of $7.03 to $7.23 for the year ending December 31, 2020.

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."

CAUTION REGARDING FORWARD-LOOKING STATEMENTS:

This press release may contain forward-looking statements within the meaning of the federal securities laws. These prospective statements reflect management’s current expectations, but are not guarantees of future performance. Accordingly, please refer to Globe Life’s cautionary statement regarding forward-looking statements, and the business environment in which the Company operates, contained in the Company’s Form 10-K for the year ended December 31, 2018, and any subsequent Forms 10-Q on file with the Securities and Exchange Commission and on the Company’s website at https://investors.globelifeinsurance.com. Globe Life specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.

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GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(Dollar amounts in thousands, except share and per share data)
(Unaudited)

EARNINGS RELEASE CONFERENCE CALL WEBCAST:

Globe Life will provide a live audio webcast of its fourth quarter 2019 earnings release conference call with financial analysts at 12:00 pm (Eastern) tomorrow, February 5, 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.”

For additional information contact:
Mike Majors, Executive Vice President - Administration and Investor Relations
Globe Life Inc.
3700 South Stonebridge Drive
P. O. Box 8080
McKinney, Texas 75070-8080
Phone: 972-569-3627 or email: investors@globe.life
Website: https://investors.globelifeinsurance.com

11
GL Q4 FY 2019 Earnings Release
GLOBE LIFE INC.
Earnings Release—Q4 2019
(Dollar amounts in thousands, except share and per share data)
(Unaudited)

APPENDIX

GLOBE LIFE INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,		Twelve Months Ended
December 31,
 2019201820192018
Revenue:
Life premium$631,470  $600,171  $2,517,784  $2,406,555  
Health premium275,214  256,900  1,077,346  1,015,339  
Other premium—  —  4  12  
Total premium906,684  857,071  3,595,134  3,421,906  
Net investment income227,456  224,233  910,459  882,512  
Realized gains (losses)2,195  (16,600) 20,621  (1,804) 
Other income241  33  1,318  1,137  
Total revenue1,136,576  1,064,737  4,527,532  4,303,751  
Benefits and expenses:
Life policyholder benefits410,437  395,174  1,638,053  1,591,790  
Health policyholder benefits176,361  165,534  687,764  649,188  
Other policyholder benefits7,740  8,412  31,532  34,264  
Total policyholder benefits594,538  569,120  2,357,349  2,275,242  
Amortization of deferred acquisition costs139,290  128,501  551,726  516,690  
Commissions, premium taxes, and non-deferred acquisition costs76,745  69,789  298,047  278,487  
Other operating expense78,413  70,082  304,825  279,585  
Interest expense20,502  23,610  84,306  90,076  
Total benefits and expenses909,488  861,102  3,596,253  3,440,080  
Income before income taxes227,088  203,635  931,279  863,671  
Income tax benefit (expense)(40,027) (38,929) (170,397) (162,161) 
Income from continuing operations187,061  164,706  760,882  701,510  
Discontinued operations:
Income (loss) from discontinued operations, net of tax—  11  (92) (44) 
Net income$187,061  $164,717  $760,790  $701,466  
Total basic net income per common share$1.73  $1.48  $6.97  $6.22  
Total diluted net income per common share$1.69  $1.45  $6.83  $6.09  

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GL Q4 FY 2019 Earnings Release

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