Globe Life Inc. Reports Second Quarter 2020 Results
Globe Life reported Q2 2020 earnings with a net income of $1.62 per diluted share, a slight decrease from $1.67 in Q2 2019. Net operating income was $1.65 per diluted share versus $1.67 year-over-year. Life premiums rose 8% in the Direct to Consumer Division and 7% in American Income Life Division, with net sales in Direct to Consumer up 43%. The company faced challenges due to COVID-19 but adapted to a virtual operational model. Total premium revenue grew 6% to $953.7 million, while insurance underwriting income declined by 6% to $167 million.
- Life premiums increased 8% in Direct to Consumer and 7% in American Income Life Division.
- Net sales of life insurance in Direct to Consumer rose 43%.
- Total premium revenue grew 6% to $953.7 million.
- Net income decreased 3% from Q2 2019.
- Net operating income declined 1% year-over-year.
- Insurance underwriting income fell by 6% from the previous year.
MCKINNEY, Texas, July 22, 2020 /PRNewswire/ -- Globe Life Inc. (NYSE: GL) reported today that for the quarter ended June 30, 2020, net income was
!["Globe]("https://mma.prnewswire.com/media/784039/Globe_Life_New_Logo.jpg" "\"Globe"){kind=logo}
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, Globe Life's operations are being conducted successfully. We continue to support our agents and serve our customers in an effective manner. The fluctuations in underwriting margins between the second quarter of 2020 and the year-ago quarter are due primarily to the impact of COVID-19.
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 was13.6% . - Life premiums increased over the year-ago quarter by
8% at the Direct to Consumer Division and7% 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, "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—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 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 June 30, 2020 and 2019:
Operating Summary | |||||||||||||||||||
Per Share | |||||||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||
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 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—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 June 30, | |||||||
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 | % | |||
June 30, | |||||||
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
Health insurance accounted for
Net sales of life insurance increased
The following table summarizes Globe Life's premium revenue by product type for the three months ended June 30, 2020 and 2019:
Insurance Premium Revenue | |||||||||
Quarter Ended | |||||||||
June 30, 2020 | June 30, 2019 | % Chg. | |||||||
Life insurance | $ | 670,822 | $ | 631,201 | 6 | ||||
Health insurance | 282,877 | 266,282 | 6 | ||||||
Annuity | 3 | 1 | |||||||
Total | $ | 953,702 | $ | 897,484 | 6 |
GLOBE LIFE INC.
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 Globe Life's insurance underwriting income by segment for the three months ended June 30, 2020 and 2019:
Insurance Underwriting Income | |||||||||||||
Quarter Ended | |||||||||||||
June 30, 2020 | % of Premium | June 30, 2019 | % 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
GLOBE LIFE INC.
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 | |||||||||||||||
June 30, | |||||||||||||||
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 | |||||||||
June 30, | |||||||||
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 Net Sales(1) | |||
Quarter Ended | |||
June 30, | |||
2020 |
FAQ
What were Globe Life's Q2 2020 earnings per share?
How did net operating income change for Globe Life in Q2 2020?
What were the main factors affecting Globe Life's performance in Q2 2020?
Did Globe Life's total premium revenue increase or decrease in Q2 2020?
What were the challenges faced by Globe Life in Q2 2020?
