Globe Life (GL) 8 Feb 182017 Q4 Earnings call transcript

Good day and welcome to the Torchmark Corporation's Fourth Quarter 2017 Earnings Release Conference Call. Today's conference is being recorded.

For opening remarks and introduction, I'd like to turn the conference over to Mr. Mike Majors, VP, Investor Relations. Please go ahead sir.

you. Thank everyone. morning Good

today Officers; Coleman Financial Frank our Brian call our Officer; Larry Co-Chief Mitchell, Counsel. Executive Svoboda, General are the and Gary Hutchinson, and Joining our Chief

your of XX-Q with questions are Some on for purposes our file refer guidance the Accordingly, general or any XXXX comments answers XX-K provided may forward-looking and statements our contain that please to only. SEC. to subsequent Forms

for over earnings discussion may also contain measures. release Some reconciliations and our GAAP turn website Coleman. these of I'll comments our to of Please non-GAAP and to terms now see measures. the Gary call

a Thank was ago. due is everyone. to $X.XX late you, In the The compared contacts the morning $X.XX primarily income passed reduction legislation or from share in net share, per resulting quarter, or XXXX. year Mike billion million good tax to liabilities, increase the the and parity of $XXX fourth per $X.XX

and we be more XX per view $XX.XX. reported book million discuss was December over in of on as $X.XX operating On a several share. by reform very income ago. continuing for or next run, as on taxes the the X% tax net basis, was fourth a operations being share While expanded value tax in to was the XX.X% will quarter tax per offset from the years. return equity positive detail $XXX will increase of million the income of paid from Net $XXX year the would $X.XX this lower per in per been GAAP the its and of reform, or comments. a his Without have current for share Frank long quarter rates new tax shareholders largely the impact base Torchmark beneficial impact share,

was X% increase maturities share unrealized million to XX.X%, from insurance $XXX was premium life X% tax an $XXX a impact premium In underwriting to In and growth, ago. value year from extent, X% was and a direct and expect return XXXX, per book to on year to and Growth American losses of around margin margin primarily life the underwriting our Excluding on $XX.XX, XX% gains operations, we favorable and Income. increased income to in fixed million, reform, results exceeded response underwriting equity lesser revenue up in the due a ago. grow X%. life

On grow health $XXX expenses line million. X% the was health a quarter, and around premium X% health to million from up with our $XX million, underwriting for X% year ago to underwriting to income X% X%. to expect up in the we side, XXXX, revenue margin $XX Administrative grew while expectations. In were

of ago. premium to were from operations, X.X% continuing a percentage a compared administrative As year X.X% expenses

In expenses were and year, premium. X%, over of full around For marketing million administrative we the or remain I to on the premium. expect to now his call operations. $XXX turn XXXX, administrative will expenses comments the for Larry to of X.X% approximately grow X.X%

the $XX life and to sales X% quarter grew agent increased premiums quarter life ago the average The you, sales Liberty $XX net XXXX year underwriting the ended quarter Life fourth worksite at year-ago was up agent quarter. year $XX activity. from agent while count up count for full million. million, for sales premiums to agent at increase at million. by in life Net were the up X% to million. count driven the sales the a primarily X% down National were end was X,XXX. higher X%. net net $XX life down XX%. up XX% Net X% producing and XXXX At X% sales Liberty at grew Life, while sales $XX year the from producing Thank sales for to primarily was fourth were the producing down margin Direct to for Response up for sales compared third premiums ago, life up quarter. due million, Life producing life count third $XXX of health the The operation count National, to XX% average Net quarter quarter. the was X% million, growth The million. X,XXX. X%. life full Globe X% American X,XXX, a the productivity. agent XXXX down and grew million, up year million $XX $XXX The margin to The underwriting At Health were X,XXX, XX% Income, life were X% Gary. was from but up our fourth agent to to full year XX% from $X were XX% In was

XX%. full declined sales the For of life year XXXX,

As on is discussed we have previous sales the intentional. calls, decline

segments. We have made certain operational in improve to designed changes profitability

maximizing focus overall premium. dollars rather emphasizing by business margins of grow new or percentage margin levels a marketing is primary as to profits Our sales than

a premiums agent was group discussion and average ago the same quarter. the increased the grew provide some $XX We Heritage, Agency, supplement I'll million. third count in $XX million. are now to Net the At operations, compared United Medicare complete for market for The health of increased producing health at margins. to year X% was The increase forward-looking XXXX end the $XX X% for quarter the X,XXX, million, count the health information. profit XX%. year and agent were million. both due pleased up million $XX $XX my and to sales increases from XX% ago net full American sales as Health units. to X,XXX. fourth with XX% X% health To quarter the in General to individual up sales year producing X% approximately grew At Family the increased underwriting premiums quarter, the to Health margin

XX% end X,XXX; National, X,XXX to as net X% Liberty to follows; X,XXX are growth; expected the each X% to be at Direct now Heritage, American turn of Family the Gary. to net sales X,XXX. Medicare growth; to X,XXX; trends the expect Approximate Income, the XX% Response, life be growth; full sales year XXXX to Individual are National, call decline. year X% expected for growth. to be X% ranges; X,XXX XX% for Income, producing X% following as X% XXXX the X% XXXX We to the Health back agency X% to to Liberty National, Liberty full to follows; Heritage, for trends to growth; I'll to in Family X% American agent American United count supplement,

investment few minutes operations. our I want to a spend discussing

program, year income. we and ago as net The decrease define income basis, debt, negative per is of investment which due less repurchase the investment from carry investment earlier to was the In million, required interest our quarter. excess to X%. investment On grow issue. excess up Excess part the share around share $XX net income income, over reflecting of X% expect on XXXX, was investment X%. a a impact income First, refinancing policy a in decrease excess liabilities debt the we

maturities below year of times, a maturities, grade grade The X.X%, of X% rating to of is with unrealized a are fixed bonds below quarter. bonds fixed investment However, investment the XX%. our we $XXX year of million X.X% around a portfolio billion, the low $XX of on ago. of percentage is were bonds A- Out the fixed ago. investment fixed And $XX.X billion were percentage to and compared grade rated X.X with to of million maturities maturities increase Overall, $XXX equity, BBB+, invested $XX.X to cost. expect assets the In average net grade, on billion investment total compared same the leverage per amortized ago and basis, portfolio, a as is to with X%. including share excluding year portfolio gains investment be an

$X gains unrealized million in approximately we $XXX addition, year In a billion, of have fixed portfolio maturity than ago. higher the net

Regarding an average maturities, of We average average investment in million $XXX quarter, at years. industrial an life the primarily of invested invested XX In X.XX%, investment sectors. rating yield. of fixed yield fourth an BBB+, and grade in we

entire XXXX. quarter portfolio, XX was the X.XX%, in X.XX% points yield yield the For down the from of quarter the fourth basis fourth

was XXst, X.XX%. the As yield approximately December of portfolio

expect For year. XXXX, increasing money rates averaging not income long-term We're will encouraged new an impact a to on rates. Higher interest about X.XX% guidance new concerned were full our of that not by of are operating the money positive losses We year, investment for throughout excess since the have them. assumes realize yield would current driving we income. unrealized the interest rate-driven, by potential higher midpoint the prospect up

the intent, investments our ability the have and hold more to maturity. importantly, to We

we FAS us will write-off or primarily noninterest a don't reasonable up However, GAAP continued under we if to accounted reserves see low not but our impact that statement, Since to rate rise, environment the protection put income for sensitive balance require additional to would rates scenario fluctuations. due rate sheet. interest don't interest sell a DAC XX, products

we addition, foresee impact on do balance In sheet. a our statutory not negative

income environment. interest interest continue from rate extended would higher an definitely rates, benefit would substantial earn we Torchmark in While to investment low

Now, I Frank. will turn the to call over

Gary. Thanks

share repurchases fourth capital an minutes position. average shares want XXX,XXX buy quarter, I to and the In price a million spent discussing Torchmark to of First, spend few $XX.XX. we our at $XX

an of X.X year million $XX.XX. to spent price XXXX, we acquire $XXX million parent the full of For company at cash shares average

purchase to the shares. liquid in parent So purchases the XXX,XXX from made with company's year are we of $XX.X ended These cash million $XX million. parent spent XXXX, being excess flow. The far have assets

to debt excess cash as dividends parent it, flow these the dividend on company's will parent The we less and interest results the subsidiaries, addition cash in paid its liquid the excess by generate received the In to from XXXX. shareholders. paid primarily from assets, parent Torchmark the flow define

excess hand during had XXXX in of year. $XXX the $XXX in assets be of finalized, to to statutory assets earnings of around beginning the and range currently available expect the to have to we liquid we million. not including the XXXX million $XXX at cash million our the Thus, flow cash year, been parent million expect on yet to the While $XXX

use previous will efficiently favorable, If those we use will cash repurchases that be our are primary a of possible. As share funds. as expect calls, continue market noted conditions we as on to

these absent million the year to to at utilize insurance any to of assets -- company parent expect of approximately retain also $XX of funds operations. our XXXX, need end We end support of the the

Next, tax a new the legislation. few comments on

GAAP resulted a $XXX financial million This tax the related Jobs by other into on maturity law. XX% share net Tax in the million other significant the by corporate non-recurring to $XXX adjustment one-time revises you entire in along investments. changes was legislation GAAP Overall, XXst, recorded December income Tax will signed rate XXnd, as tax one-time on adjustment, As in also XXXX reduction treated or long-term adjustments, The carried long-term the required and from XX% tax benefits rate, lower task to which the as fourth rates tax The per book of significantly. million adjustment shareholders. the non-operating gains reduce company the was of But adjustment The the the quarter, significantly profits know, benefit income legislation approximately deferred our Law. Gary, statements. income make of XX%. taxed Cut increased XXXX, be $X.XX at unrealized December business per affecting with earlier the and Torchmark, fixed This to increased liability $XXX GAAP a our a future Act since the share to approximately to on will item. provide makes noted benefiting value

XXXX forward, increase to XX%. in net of resulting rate expect we income XX%, operating of effective operating range an in in be income approximately our to the expected tax Looking XX%

GAAP tax be the will cash deduction the show result of lower rate a the tax virtually by will reduction tax costs. lower paid policy reserves basis, not near will or term. new cash tax similar On provisions acquisition legislation offset the tax in for the While new intermediate in limit taxes expense, that a a rate and

the expect such, from lower rates. statutory increase a in do significant earnings As not tax we

deferred statutory capital In impact lower addition, company reducing a their our will tax rate by tax assets. on negative have the insurance

decline tax $XXX capital for long-term we points, legislation XX but subsidiaries, cash be be reduction will In on tax of insurance Although million and short, Thus, into up we the not total GAAP new will intermediate-term, only as the insurance over the statutory the make will time, we the slightly statutory we XXXX. lower, the further short and be to subsidiaries coming of effects to taxes filings in for in rate infuse to may basis in evaluate range XXst, in deferred the to required capital our the the tax lower our assets. million months, our to operations. XX December of have completed by expect $XXX

subsidiaries. capital to levels at current to Now, necessary return regarding We capital the our -- our to maintain level currently at insurance our plan ratings. retain

past has an around level the For ratio basis. years, NAIC of that on a XXX% been several RBC consolidated

in XXst, reduction statements tax RBC adjust ratio level basis consolidated a as the RBC is not ratio While tax points are take discussed. to in account the we ratio our action NAIC of XX for result in to point range in RBC, reduction rate, end the in will December further that factors assets finalized, approximately would XXXX, be roughly a expect statutory the lower into reduction year deferred the financial XXXX our company our previously of of reflecting anticipate XXXX. Should as the expected, a in we XXX% basis XXX% the RBC XX of

early still Should light in need are the that our discussions legislation can we excess agencies make without RBC our appropriate tax with fund insurance the we'll the rating cash in amounts stages and of any regulators XXXX ratio additional topic. a target determining in for we on to impact our and to are We flow. significant capital of we subsidiaries choose on contributions, confident have required the

obligations from an in fourth growth quarter fourth the fourth policy This margin, of our Direct in again operations. higher-than-normal quarter margin. underwriting XX.X% XXXX Next, premium, provide a In underwriting The compared of XXXX. Direct saw in as the a Response comments the as on quarter. update quarter, the few percent to to was reflects Response lower the up policy ago year XX.X%, obligations of in we

generally provided were on margin the underwriting due the XX.X%, obligations for policy was toward The high expectations. end of was of for end higher the the XXXX fourth previous overall expected underwriting seasonality, percentage calls. lower full range the at to margin While the year our quarter percentage the

estimating are range. the the XX.X% we approximately percentage XXXX, for in XXXX, same be For the Response to to margin as in Direct underwriting XX.X%

expect the percentage in in of then half also year seasonally the the higher and of margin year. the We half the first underwriting low second to be

the operating for earnings XXXX. reflects due income tax attributable will operations my XXXX $X expense to million in million, I ended year respect to range XXXX, $X continuing with $XX December increase as after-tax projecting be XXXX, expense $X.XX of earnings compensation guidance of per offset be midpoint tax for of will rate Finally, to the call in XX% are from range our tax share the lower compared by higher benefits. $X.XX million the to per lower estimate absent stock comments. now the to turn the we reform. now back XXst, are per in The will The the a $XX We our compensation net Those approximately Larry. share of to guidance increase the over to share this $X.XX. is primarily that

Frank. comments. you, Those are our Thank

questions. up We now for open the will call

go Bhullar with Jimmy first to [Operator Instructions] JPMorgan. We'll

a to are on the that sort expect rating some don't buybacks, had their capital I if question, And you're capital RBC of subs? the especially share agencies at actions of thresholds? What replenish and this affect Hi. you the cash do the just considering to change first flow.

to have think for At determine in levels really changes really given we Jimmy. appropriate organization, yes, are target the RBC they the what indicated, work in this tax still Yes, the some point rates. time, we the

to we're assets a cash deferred that through rather work type that have any make any excess do with up something extent -- to being can than for have the at be financing to respect able anticipated put do We debt really that need a at do we that taking look flows, tax some additional that real think, we levels. lower capital have to to yet in in-depth will agencies the have least any the with of rating but We discussions to we'll to to through. our through

the your Response Okay. on And improved. business, then margins Direct

higher I than results the magnitude on something else quarter the or pricing? was been Is taken is and improvement because aberration the you've that that like helped there an this the just was this and past Or actions of this in they third limiting the that that quarter think the of straight marketing quarter? improved few.

expected the block. on think, little I impact as more the came the far lower -- as just had on Jimmy, overall we the that that year sales, first quarter, we fourth claims in than a business in bit in it's fact that seeing the are profit to the business higher new -- margin, we're margins changes but not is the making one The high. on we contribution new sold, in

in the quarter really increase lower fourth claims. to the the due is So, more

Yes, just seasonality. fourth percentage around expect maybe range, also, XX%. is came XX%, part obligation probably We that quarter of around really that, the policy the Jimmy, in the be to didn't XX% in

what -- the was end in it's it expecting So, fourth low really, our the quarter. where. were there But improvement we expectations of

XXXX, we've expect in year. again, half we really lower the the little then be in Now clients so back look again a first we year, up expect kind of the underwriting high and to half in of that -- we seasonal as some the half second percentage of first margin come the to

the just and And if don't then missed but I guidance? embedding that know new you EPS lastly, tax you're Okay. what's in I mentioned rate it, your

XX% Between XX%. and

Thank right. Okay. All you.

We'll Bob with next Glasspiegel to Janney. go

the causes go equity that. on just GAAP have your tax understand, agencies GAAP go intermediate time, your look follow-up interplay? term. paid capital happening? they rating are it GAAP and I the regulators things and to need me one question to you taxes Good your morning, thinking intellectually at or they to more when Believe that at the math short help Torchmark, these would just extensive up, on formulas, all the I'm That over actually an discussion. Why how although about trying are we thank you not, not go for to to event earnings would events those over down, look you're is, Are assuming up, -- or historic how

a questions. do of -- talk -- haven't agencies I -- part a Frank, that's but think we as have talked -- Bob, that that's we anything we the to And Frank one talking same yet, we had when lot be rating discussion of you those would our mentioned, to thing to--

no. Yes, down, the of be which long-term goes capital. have anomalies those rate required of kind but should additional It's good just funny where tax of one benefit, you

some are to there's So, answered. of questions get we'll have the that

But you the they chance hold blindly think more would likely is you a to math there calculations? that that scenario prevail, their logic is or think

I -- just think, us, We to with Bob, have it's enough know. wait have have to so see. for them, we don't discussions again, information we'll haven't we -- and

Okay. Thank you very much.

Instructions] Ryan with to We'll next KBW. [Operator go Krueger

can touch point. about you Can -- GAAP Hi. thinking a this with on I meaningful little where are uplift the capacity? where how go, book tax you could thing you you talk that was, I you know to much reform believe got how you've was hoping you debt value. a at one have to happened cap capacity that about and debt

Yes.

some the bring $XXX which of were that probably level. capacity, if before XX%, you the around us to give that that of kind our -- XXXX. been we just cap we end of debt concerned projecting think end so of even capacity back up at would little our to about some go ratio cap is Our that higher it, -- level by million we years, if -- usually to if the needed at we we're be respect debt additional will, they XX%, that, be at XXXX to it. had our if really with ratio a going has too the ratio if debt with will under down to of we've last going the And would have have rating then, above and limit, agencies, of the around that it looked and just cap XX% we'd to below We discussion keep we to ratio a couple and

And not you XXXX? did it this guidance issuance at point debt you -- any not it. that correct your Got for is did assume in EPS

is correct. That

to one XXXX year last obviously flow as forward then for -- amount And in -- we cash free million and changes If financials. into would XXXX $XXX the cash another expect cash on similar was It's flow more Okay. guidance consideration taxes, $XXX you it million of still the XXXX. taking roll of free XXXX? based and for the into a on

year, taxes, of being $X from statutory a perspective, really forward Yes. probably and the solely anticipate earnings between thing cash we of a reform. million With else $XX because tax all million equal, lower looking

other in could going then we be think there. that starting it that items we little flow from that level be But a to the expect cash or could bit it uptick there's and forward. So, from a affect would slight to there perspective obviously several at tick-up

Got it. you. Thank

Sachs. next Alex with Goldman Scott to go We'll

Good morning. Had a RBC. question on

the XXX and Just NICs, in less a guess, know, at field optimization used and I wide XXX those range applying that a of of guess light calculation. If the bit having you have level that with of and statutory sort capital the of playing things capital options, of looking think kind AXXX those guys haven't. PBR and of, to is I transactions between a done sort I those group of I one

RBC, like would like numbers? tax a occurring, for around, if rates surplus like If how just PBR? or a that like, tax declining was use that if much like, kind that just how of you you thinking of optically of around you would that -- apply or rough would something in benefit methodology, you want alleviate just totally reform? rough, reserves of I about get much sort to had guys, be any your in for Just issues decline feel

secondary the we it's Yes. aggressive The products and some focused really UL on out, Products that's of guarantees. come term write. insurance don't more the PBR that and

have effect, the of but And it we minimal. come business statutory impact time, don't of this on blocks few a -- real point have that PBR at is where our into anticipate PBR will we really in any amount much pretty will material So, reserves.

guide guess, in I if just there on second are of other question, The just the other And there adjustments, there, provided previously. you to could I And guide highlight XXXX. think tax Okay. versus about for sort any guide than updated parts mean, rate? the you how the moving just those?

Sure. a we the lines, really better kind we previous health on Really, into saw from little guidance, the that XXXX. of so following experience bit are

little I had overall, XXXX. we expecting be -- what be we similar was think So, little the improvement are anticipated a bit, in of October. that pretty actually overall, back the for where in side, an margins are health That from to to they to on bit a

those So, saw while benefits the the share really higher uptick, expense that option the little then of fourth to little just then kind I buyback with impact -- a the a a we at us think up that offset be is, so or the a administrative We're share bit expenses. rates going Short-term in is And our items from bit about had, experience maybe expense. really that per that bit for of with our have be little in earnings looking rates, looked affecting -- due expense. to short-term bit, costs, expense our decrease at offset drag that. XXXX, look change of of headwind. a additional a the then the helped gave quarter debt, we've going the higher that overall some interest will rate. tax interest The of And of we to stock against in But us an that's as pension some the one higher of in of excess little will price, again and increase course, well the the our of respect option in a bit $X tax that program. a

respect to excess tax the stock have, Of a plus option lower course, benefits. tax we expense, have we benefit, lower have you with

decline causing helping the at of benefit what's the impact kind of that's or -- tax overall tax that -- So, rate. the of to

you. Thank Okay.

Bhullar with We'll go next to Jimmy JPMorgan.

follow-up to Is as the Hi. just on is there lower America rate Bonds being something I wanted on than preferred of rate. rate primary Build tax XX%, for else tax statutory the like reason or investments, tax the well? the

credit low-income primarily housing tax investments we've years. that over It's made the

that to should are Okay, tax duration, about so and two of of that longer to the expect we three the in XXXX over shouldn't into your Is the a in think you years? next Or rate they comes change something duration how those? play much XXXX?

continue years. XX years, Yes, a receive a bit a of generally to years. XX to -- over duration those, build the portfolio the grayed-in over period. is They credits XX longer there's we little of

still out, several years respect with to there's So, those benefits.

Thank Okay. you.

further there time, this at And questions. are no

morning. we'll thank us this Those right, comments, All are you for you our joining and talk to again quarter. next

you thank This for today's We participation. conference. does conclude your