Globe Life (GL) 26 Jul 182018 Q2 Earnings call transcript

Good day, and welcome to the Torchmark Corporation Second Quarter 2018 Earnings Release Conference Call. Today's conference is being recorded.

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

Thank you. everyone. morning Good

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

your of XX-Q with questions are Some on for purposes our file refer guidance the Accordingly, general or in 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. for income everyone. quarter $XXX from you, In share Net compared per was morning $X.XX the ago. income XX% $XXX is or per share a net share, per and quarter, or year year Mike, million million good increase to share operating the or and $X.XX million $XXX second per $X.XX

growth reform, equity Excluding been was the on share tax book On of XX.X% return approximately was impact that and we value would GAAP basis, X%. per have a reported $XX.XX. this estimate

and Excluding operations, and value In share unrealized return XX% Direct fixed on to and grew ago margin a premium insurance book revenue premium from Income year growth, increased exceeded a million our $XXX higher per year was equity life underwriting gains in $XX.XX. losses on and at million, life American was XX.X% $XXX maturities, underwriting margin X% a due to Growth up X% ago. from Response. margins to

income year, around we to grow X%. the life underwriting to For expect X%

$XX premium due at Heritage. margin health $XXX to underwriting to higher X% margin was exceeded grew and growth revenue premium side, in health up to X% Growth the underwriting margins Family million. On million,

in underwriting $XX for and For we X%. a with expenses expect quarter, Administrative X% health our were to year the up ago million from line expectations. income to X% the around grow year,

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

up call turn be the around X% compared to his in now on for expenses of premium Larry administrative X.X% expect we to the X.X% and over to operations. will full-year, the For marketing comments X% I XXXX.

At X% X% first X% producing agent Liberty the X,XXX. X% Liberty was agent to were At quarter. The first quarter ago, the were up count the year count of X% and up XX% the producing underwriting million, sales life X,XXX, Net was up million. sales the of margin from up life million, from Gary. were premiums X% sales life end year $XX and $XX from up was life and to ended The you, the at average was life to to health life million, count agent up million million. growth margin by quarter. count. X% and up producing second primarily driven a quarter increased at agent in compared quarter. producing agent were underwriting down American up X%. was second X,XXX, sales for The net Thank $XXX up second increase while the $XX X% for quarter Net $XX count a $X year-ago to $XX ago, quarter X% The premiums The the National from wasX,XXX. Income, to National, million,

increased Our down sales million, XX% $XXX life to Response life $XX life were $XX X% Life, and Direct at to Net operation up were X% million. premiums Globe million. to margin underwriting

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

quarter was to million to count $XX XX% Health in margin year average programs increased At second and sales XX% at an X,XXX. profitability The X% and to grew X% Net Agency, We count year-ago new to At complete $XX quarter on continue American agent marketing the a X% adjust underwriting to X,XXX, increased million, to provide up of effort our sales. of producing premiums the health was General end $XX and Family up will were first net some up To Heritage, million. maximize projections. from refine $XX million. compared health the for health agent sales now million. the to the operations, United health $XX producing the X% the from The my premiums quarter. quarter. I ago discussion increased X% market to

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

income required few to first, liabilities our and was of On we our the interest impact was quarter. excess repurchase investment on a operations; a in per $XX share. want which Year-to-date, flat. income, minutes excess X% year-ago the as the up to investment defined Excess investment million, over net discussing investment dollar income basis, debt program, excess net X% reflecting decrease I investment a per spend was income. less policy X% share share investment

increase resulted by around the expect which to per XXXX, we For full-year income to excess investment share X%. of X% grow X%,

to of $XX.X $XXX below The maturities with of A- the unrealized gains Of portfolio grade, are lower times, including fixed year-ago fixed a of were portfolio amortized costs. average equity, year-ago, the million the BBB+, percentage quarter. investment a of grade billion were fixed portfolio, maturities with year is X.X maturities, $XXX $XX.X bonds compared compared net percentage the assets X.X% rating fixed X.X% total billion the leverage of bonds bonds invested the $XX.X investment of to investment excluding to same grade and on million rated XX%. as Overall an investment grade ago. billion, Now low maturities is regarding is a and below

addition, of we financial quarter, yield BBB+, we the $XXX life market in in and X.XX%, average and unrealized invested investment-grade primarily second $XXX industrials million net an of $XXX In average We at the a maturities, invested fixed maturity changes primarily in fixed rates. average lower approximately the ago years. million an rating of an In have to portfolio in XX than of sectors. million gains year due interest

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

guidance, rates As XX, At year. We would operating Higher have we money driving interest like of yield the excess higher of impact new around income. are midpoint new by X.XX%. assuming up average rate approximately an and see X% for of investment of portfolio income to the our going money rates on June the the was positive remainder forward. a

are potential not rate-driven, about losses expect since realize concerned not We unrealized we to that interest would them. are

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

the rise, don't GAAP impact sell products will low a accounted rates not income if under environment but noninterest-sensitive primarily statement, our XX. However, we sheet, interest for protection since FAS or rate statutory balance continued

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

to call the turn will back I Now, Frank.

Gary. Thanks,

subsidiaries, to to its share few the capital excess by want flow, parent I it, primarily paid less and debt received as and repurchases shareholders. minutes position. dividends Torchmark dividend First, a company's paid from parent define interest on spend discussing the results cash the The we our from the

excess million, to $XXX on and at around we $XX including year million currently expect the to in expect quarter, have million. the assets $XXX flow the price cash million $XX to be parent of hand the liquid XXXX, shares cash beginning We of average the around X an the Thus, year. during of million of $XX.XX. at spend to second we Torchmark available In buy assets

XXX,XXX $XX excess of have we company's price through So $XX.XX. Thus, million X.X were average spent have company cash at for spent parent made price million the of we an from These an million flow. purchases today, acquire July, parent approximately to at average to year $XXX purchase shares shares the in cash full far of $XX.

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

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

levels at our regarding capital insurance Now, subsidiaries.

our goal levels at to is necessary ratings. current maintain Our to capital support

RBC tax agencies XXX% For RBC ratio that the the on past several RBC determine NAIC with appropriate current the to reform the investments factors, rating been insurance discussions NAIC going light we and has a around of proposed an consolidated level of subsidiaries consolidated target are having legation basis. In years, our to for forward. the

our XX% continue with issued for of the into XXX%. the will next range In any auctioned income that months ratio we factors our several estimated adjustments have to over certain level new before These XX%. We dialogue company final roughly RBC the the to RBC the reduction rate these XXXX. will to of NAIC year-end to be in could for be Taking XXXX the decisions. corporate June, making reflect factors tax them from effective account factors new XXX

our target RBC have As not previously we finalized ratio. noted, yet

of then target ratio to price be the that required we appropriate of XXX%, capital. over the if XXX% reach However immediately target understand of XXX we to able or We it would could may point to a additional allowed would to to of and period a to were million not be XXX time. be million ratio require meet RBC set target we

and capital we to our impact excess should adversely any can have debt Given capacity. contributed significant as earnings fund will additional any confident our additional borrowings insurance lease companies Furthermore on long assets. borrowing ratio, GAAP a be the are we form not thus additional cash amount tax invested actual that fact it's without Thus, substantially the lower in impact the to by that capital increase flow. we duration be our

of With on operations. This Direct estimated to the a XXXX. the year-ago our in quarter the quarter of the call premium compared of XXXX respect as our normal quarter XX% range this to higher the would operations, to the favorable attributable primarily On full-year last in claims compared for comments in in percentage quarter. our XX%. we is of the second of few that underwriting be was in XX% year the underwriting claims the margin margin percent Response than Next to second winner XX%

full-year Response the underwriting margin Direct XX% the for XXXX, we to of estimating percentage for range be in to Now are the XX%.

fact the the quarters four underwriting We clients averaged and percentage that margin improve experience are encouraged XX%. last the the for by has

from Direct With rate respect saw to expense income an underwriting reform We the we the to tax the obviously Response increase result the during as are stock benefits compensation attributable excess pleased the with increase decrease to legislation. tax a in our XXXX, again. primarily quarter, tax and of in

these to $XX anticipating a for XXXX expenses to be million. are full range million We year in $XX the of of

channel. respect year ended The underwriting December back described the to my $X, primarily Direct will for outlook I are turn Finally, the comments. share of we call with this the $X.XX operating Response our for are of especially guidance income for to of quarter $X.XX the net range projecting XX, continued for the be XXXX. Larry. in income midpoint over attributable midpoint our the $X.XX prior per to the now $X.XX positive to earnings guidance Those will XXXX for

Thank Those our are comments. you, Frank.

open now call questions. up for will the We

Instructions] first [Operator question Ryan Krueger from with comes Our KBW.

the the to gradually to First move as on Response, at as margin margins look this we XXXX, beyond Direct about that be updated would expectations, point more point? that at this back something as continue or would up expect stable you we on think

information point have range. this Good the do we really do At morning, today, we that to margins with that XX% anticipate Ryan. of the continuing XX% is time

underwriting that, business know forward that the always, putting but margin the really a some we of higher the won't take I little result. has will that new on for As we give into time but looking after, one than that really books we’re think year bleed guidance to a it bit

And then indicated last quarter Gerber you've interest Life. in

has process at? move and is in interested still a property continued that that sale looking the acquiring As forward, to you're

take Frank, why you question? that don’t

such with policy, Ryan corporate regarding formal an taking transactions prior we not when a if or questions any accordance is announcement, in made. possible to any addressing and are Certainly, announcement our

with Jimmy next JP Your question comes from Morgan. Bhullar

without do your you really So some issuing into potential could just and capital how how do on without of a within think a deal, capacity the deal? just do the acquisition, large you your using of capacity subsidiaries? tapping about maybe equity, really or that And to using actually so

year, or or to its to are whatever we with analysis large terms We any far and of potential transactions respect rating said our we the general of course, keep stand ratings. just any million have agencies end would some merits of have within we any around in some do the around anticipate to as $XXX we the guidelines on look or Just as do as of concern. current stay of debt we acquisitions have to established capacity own

get with we on to think -- the the able in there said I is connection well, past we as acquisition as would a be probably underneath that as long cash appropriate we would within in and from flows as over go as at debt we’ve to the the noted call, plan get using the least that -- those, of entity last of in had past, ratio. ourselves some some to our able established that any back to capital guidelines we to they have required

that’s type of or with some of transaction. can somebody of So, equity to we probably some issue at having the on do least partner without without extent having type what

the margins pretty are the to anything to XX% of your just recently the specific this possibly Is plus of trends than XX% quarter. good the in be, terms used claims business ratio? on there in in the normal think overall versus in life going I XX% have range past. benefits on in margin But weaker Liberty, then they And quarters in last been the couple

even -- that's XX% gradual a below year in I we rise fact think the declines expect had where additional quarter are over will the but XX.X%, difference. high But and Jimmy, XX% our that little lower are for back We the in second be the underwriting to in range just new first the acquisition was our is XX% that -- just now a we're quarter, last to not in higher, amortization cost recent quarter It's higher, than we the we was due in because proven were as were margin were little in at operations. the will we a think bit trend. last than not huge were last shouldn't expenses year, margin bit older That and a for It's go range XX% with going claims But technology again little XX% XX% the that that -- that agency XX% even that, it little versus has X% years rate we the amortization, and off. last this year so are over getting was the in non-referred to running along I year a business, we reason we year to that's is that’s year. be put the forward. because the on lower our more it X% higher for and XX% margin volume amortization higher books out. the and

for lastly I Direct And year drop. mentioned you this expectation Response you that to XX% sales, on think XX% X% for then expect just

down You in down X% XX% only were year-to-date were but XQ.

results expecting XQ to you half? your is are get somewhat the from conservative? is in worse So, second guidance Or than

half Response. of The the lower to in X% the entire year don’t the guidance but expect volumes for XXXX. weaker, terms to second down is we'll sales of get XX% the in the We year Direct be

think to that sales Direct in I XXXX, channel. we So early Response will a start positive growth see the be

question next ‎Autonomous Research. Erik Bass from Our with comes

the underwriting guidance margins growth the materially for up for year. moved pretty help You

you drivers that So better for just hoping the about of can business? talk outlook

experience that the experiencing little is than we're quarters improved the two that's expected. been -- really the we we distribution -- it's other continue a the Income across really guidance, National. it's for Heritage, year. it's American And Liberty and the not really now claims of and board just one particular the health to And expect there better Erik, terms in or Family

so, we’ve underwriting And increased there -- do estimate. our income we

for also there to guidance was well? pick-up we should sales as pretty start I your health expect premium promising, to And growth guess,

but bit will just year flow of the the more remainder or year, this of some Within that, that impacting definitely time growth year, in so but the the particularly through of probably additional premium here maybe much not little here, with XXXX. a

And 'm health last I guidance Erik, if of year grew right, a Yes, in premiums increasing think midpoint to I XXXX. of higher X% little our X%. or more expecting the we're bit

have recently mentioned you outlook others. script just know much A.M. would But A+ on And Torchmark needed? having your or then maintain if rating it a is than or that important again, you your ongoing with in sensitive discussion lastly this, and Best And for negative business rating? you do your the how agencies, and put you to rating actions many discussion I to the realize what I is contemplate

-- that really we A.M. even retain Best rating not new operations. rating, it's Well, our in is would marketing much like that to but it

know it's grade So, say, rating the Best, I has as had there hey, to but be Frank A.M rating, I We to with we that that don’t would agencies. effort. retain to to down work like big think other we a mentioned, would that if got --

Frank, capital there feel levels and our we work have think make need any to think where comments? with I as and case them do see we we to you I we we go. have like appropriate

make more And that with but this add we're we our to work we don’t for said. than levels able bit arrangements case continue be like to -- to target why we'll I to where could really have maintain coming reasonable what at, think over we'll XXX% And months. there are continue would them. anything and you to and we'll do less

Sachs. comes question Alex Goldman with next from Our Scott

related around public the, unions. and sector a labor a that I public and ruling I recent just to Supreme guess the bargaining reductions fees. members there's collective unions speculation could about labor is just been some question And Court it lead there had of like

I any about question way versus the for for sales, sector much have Torchmark's public from you of there how what you the So is sector unions? currently portion comes from us I it private just. think the guys earnings to mention comes stream When was and help to And unions?

comes lease. relationship address unions, issued from the sector from to of XX% percentage versus the the comes that try American dependent union And our other drop years those that what relationships that last our business only we union the new referrals. but of certainly And important non-union or Income upon XX union currently The go percent come public relationship. the referrals. those only from Let’s still or are union as with members

this and that the major unions so material I the don't and have the international public have of on will of hopeful on have Torchmark. see it all we’re So, impact U.S. the But we a unions. relationships impact local any

the would are it union? were which when a unions. reduction about the paid some specifically I stay with And do individual case, the expected is, paid in maybe affect by it than you would union if in think Or asking the I premiums greater they -- they are if I'm out it dropped by the guess think cases? it in enforce, them, And Would of what persistency? even

the The union. individuals premiums were paid not by the

in it does do And so, union a if with the is payment have process. to there members, reduction

John with Our comes UBS. next question Nadel from

would mentioned think quick X% of on just a you in dollar terms, I investment that grow income One, couple expectation ones. Garry, got around XXXX. it a in and excess I've

only Is of know Is money think just the the a modern. in about X%. new sort stronger? maybe the it's driver that I yields being about better? cash of it about year of at bit first I it's What’s being just the half acceleration? flows running

of impact would the bit the have money small. John, little would a be new

in in a second impact think and I that quarter regain little timing maturity bit the have, a should that have the half big bit up. the partnership We on that of difference lower the the income some but should limited second we non-fixed we year. pick of is income, little

also -- the believe we the short-term expense and going stabilize, I interest the itself. is think to debt on that's

will combination growth. give of us give a X% things two X% us I those that to would think -- it's that

know quickly. pretty on we been think the agent than talent is than in Liberty, or you count improving. course growth sort productivity What account growth sales seems that producing not off pick-up demand product Family changed? I changed? Income something growth. like something sizeable correlation Heritage the American that of It is then, has side growing, there? on saw happening Is there but though is been Or growth And agent nearly in a and a there certainly has sizeable has offering as pretty your side sales it's there agent

Heritage of John. driver then so submitting on The Long-term, submitted increase it's increase are basically quarter-to-quarter. a premium Something consistent productivity the seen the and in side, is but in also production, we've an producing. our really agents bigger seen operating average between an and -- In agent percentage the of the has agents percentage increase as emphasis growth emphasis same an short-run, products resulting for the for have should in Family We've correlation close in production, the a business. the its agent.

is if had will, year-end around? something period speculating? initial agencies think the with in risk discussions or And opportunity sounds your maybe Frank, it for if you the interested last Gary -- the having that to or risk sort time the comment to-date is there some something Does an I what than based base just that capital dialogue was agencies? might over you rating a level you that necessarily XXXX. that long-term recovery, by that there capital of are ratio then you Frank that you've be raise like rating of get with your had Or one to

giving that on would that least a we've at at and They those there the there so had basis with be potential A.M. that little we if Moody's we've outside Moody's. bit discussions for have limited of give and to to, favorable companies have have a that their But time indicated were their at willingness in realm. some we to ratings be some a indicated or favorable a and least to below least at company-by-company capital, of that, RBCs generally we target with are it's law, the discussions replace with of -- coming generally new fact least with at discussions event. far be a credit to least creases some capital was tax obviously there Yes, out that period the considered had that John, some, Best if they would

So, having order we build give again need a making to do type and time. method to be some would companies commitments that, to but so, the for of in them a plan order of in

still those these So, in have indications.

your had? And rating much assuming you capacity downgrade, borrowing Torchmark then levels current would estimate at they how would incremental

end as the the we estimate would have that of year, to above Again, $XXX time we the we'd by get million.

$XXX you million push anywhere upper does limit, so close million $XXX if you estimate, okay, this really anywhere Right, to will? push your not to you

Yes, at that’s the way it. we’re looking

assume. a too I coverage, that comfortable feel from flow very cash with you And

times its have we're really on been cash currently what we've a to agencies that. feel for the and about we comfortable look with -- five have, and we us -- flow Absolutely, above of a coverage rate

those a some that and to nine quarter us evaluate We're at additional lower coverage that that's some will But that, rate coming got able and XXXX. give looking also we'll that be here that would obviously We ratios. as optimism our a in on refinance we refinance in due that. if debt you cushion, at knowing

Glasspiegel question Bob next from Scott. with Montgomery comes Janney Our

a improved the pricing little bit you its whether pedal way bit. you one? us Can out? Direct And working since give system think bottoming little your a put more for color this just soon the it's through on can gas on The foot experience or outlook Responses how on you

point of incremental in us guidance, some the respect really time, part, respect for and to confidence in kind due to to additional claims at XXXX. is, emerge in way with of go is there did really make with we marketing some but again claims underlying here Bob, settling quarter, the most what's process that the of In where give did to second this changes should our the into those drive it's really changes remainder XXXX. the of overall didn’t

not from of seeing lot experience a So, we’re again. that

So, settling of just with to era a a some other down claims in policy. that is of XXXX really it XXXX lot of

some again, the added to So, sales respect gives volume… With that us comfort.

Sales that, volume, or our enquiries X% fully meeting what we’re seeing for down XXXX is X%. our of

down or Our will main X%. volume be another X%

certain rates depend in on pickup and Those time, -- our the profits, XX% phrase be previous enquires year. electronic face. quarter up will And the to circulation we to or first we’re those to and the will look the X%. of rate that to in reduced future X% analysis at in results. that and to second result adjustments and X% we’re of is quarter implemented when third at end same our sales should a profitability increases next of additional total about Any going the XXXX maximize were all up 'XX recent to For capital we most states, in of in going

really just We’re not total to focused profits, maximize try on the maximizing margin.

frankly, now, is lower summarize, the improvement really -- to -- it's well claims. it's right Bob, in this the but

the Now, it but to positive. We in underwriting, as we think year the of that we seen prices, far impact we sales, have changes -- we mentioned, Larry as will haven’t give from we as what so increase. full don’t sales seen is guidance mentioned we far past those but

and while bottom with we low will we'll to higher will best premium going think this the continue. Response years we We see think two really our about and increase income. positive we're After think reached the combination of of sales very is growth growth underwriting get that growth where it anything improved the underwriting that having growth, think we're with so, positive. in we positive the income margin as we because was although will growth the see greater year declining, and Direct we And that

think follow-up material? you And impact cost I roughly borrowing, Frank's wouldn’t match income borrow, the you can on potential so for invest or you now with were but seeing was borrowing just whatever a on be it color your of debt

I do think Bob. that's correct

more no questions time. showing [Operation at in Instructions] the this am I queue

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