Globe Life (GL) 6 Feb 192018 Q4 Earnings call transcript

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

For opening remarks and introductions, I'd like to turn the conference over to Mr. Mike Majors, Executive Vice President, Investor Relations. Please go ahead.

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 Hutchison, 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. everyone. $XXX you In compared morning $X.XX income or share net share per quarter, or year Mike, million billion good to the and $X.XX fourth per $X.XX

quarter corporate remainder, tax XXXX, operating rate. ago. in share year result in $XXX million as fourth a a share, lower income, our income increases of or the remeasuring was a per XX% using recorded tax the net from liabilities $XXX we primarily million a quarter $X.XX Net per for and of assets As

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

in and business. XXXX, underwriting grow $XXX in to to was to In to margins premium around due X% life our $XX.XX. life up $XXX higher Military income gains return on underwriting operations, ago. value a XX% grew In response margin direct X% revenue X% equity and million, fixed increased unrealized exceeded losses expect Excluding to maturities, X%. underwriting Growth book life from year on share we was in XX.X% growth per our and million premium margin insurance

to for at Heritage due up American Income. in X% to underwriting exceeded from premium and higher quarter, the grew margins in a Administrative million. health grow was In expectations. underwriting health with margin $XXX side, Family line up $XX to year and health margin expenses premium the around On income growth XXXX, to and X% $XX we expect X% million million our X% Growth X%. were to ago revenue underwriting

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

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

The quarter, X% due quarter year-ago Net the fourth for agent productivity. in At as $XXX quarter. agent and were flat, third underwriting million. from growth the life were same Income, X% agent but the X,XXX. was count Gary. premiums end count $XX Net X%. The fourth count X% up the was American the for average sales X,XXX, you, producing up approximately producing down quarter to the at the down $XX life year Thank XXXX life were of margin the full lack million life million, to to and sales of was

in new resuming seen not leads drop have their We any sales. or

As an having agent is our across growth. low I quarter, on the mentioned last impact unemployment country

opportunities. seeing unusually high We recruiting, the a in of to we of to number due agent but new continue growth are work in see agents, drop-off retention other

National, were life X% unemployment this persist levels rates premiums We low these confident At future $XX million. Liberty American growth we historically optimistic we are can even work up in Income. if at are to through and about

Net as to million, Our average health same from quarter. the million a was sales direct sales the was grew Life, at X,XXX. approximately sales quarter million, up the third agent agent XXXX productivity. from at X%. $XX Liberty fourth National quarter. producing driven sales were for X% year increased sales health full The by increases million. at life margin the up for X,XXX, producing ended Net life Globe operation were underwriting $X to to net life $XX ago, $XXX The quarter were ago the $XX down count life of was X%. $XX Net In The X% year quarter. Net and margin full the X% as X% year-ago agent and life XXXX same X% up the the to for year year response and increased premiums grew count but million in X% our underwriting sales count million. agent increase life the

net year sales X%. XXXX, For the declined full life

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

ranges. Heritage X% in We agent to end American the for to XX% Income, to XX% growth; to producing the X% National at expect the growth; Family each X% count agency Liberty of X% growth. following XXXX be

to X% for X% be sales Response full year XXXX Direct American X% Our as National expected growth; X% trends are approximate the XX% life to flat Liberty net growth. to to follows. Income growth;

year. growth; to Health sustainable full the we back to of net Liberty then to Gary. and X% growth; growth slowly the to For follows. now at X% XXXX American to X% X% call the be the trends to year begin I'll Direct during point National Family Medicare for growth. X% sales to Response, Individual X% turn United the Heritage middle start some expect year Supplement see expected are as

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

program, income. investment less excess which increased First, Excess net share On reflecting liabilities required investment on investment was investment XX%. income a net increase the repurchase over interest year policy the quarter. as ago basis, our X% million, impact income define income, share we a per debt, $XX excess and of the

per year, around X%. investment around in grow income income For increase X% expect on investment excess XXXX, by X%, share X%, we of the per-share to would result excess a In grew basis. a which

maturities, investment grade with assets of the of bonds year percentage below-investment $XX.X X.X% an X.X% high leverage below-investment Of lower around XX% is the total were excluding percentage regarding Company peers. is unrealized XXXX. BBB the portfolio, BBB Overall, ago. of rating equity, of peers. Invested which average bonds plus, times fixed maturities $XX.X of is of This $XXX $XX.X been including million to and below-investment since ago. were this a grade were a peer grade is costs. to and our bonds The portfolio. ago. minus, relative Now, amortized billion, billion maturity Bonds maturities, as billion on to has investment to compared lowest fixed compared same rated than our the X.X year in portfolio A the fixed average of net is maturities to is X our compared average million are fixed percentage gains times, With a grade $XXX year the to rated the a which XX%, portfolio fixed

the leverage, peer of our to BBBs companies. line due asset is low to in equity percentage However, with

In securities. exposure commercial addition, derivatives, or as and asset-backed exposure no such we assets to have and mortgages equities little to higher-risk

interest net the approximately gains rates. quarter, lower to of $XXX changes fixed primarily have than unrealized in the we in Finally, portfolio due $XXX million previous maturity million, market

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

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

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

our yield year. the of for full at current of money assuming the we are XXXX, X% average an guidance, new midpoint For

the to turn over I'll Frank. call Now,

Gary. Thanks

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

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

far in parent average from an price purchase spent Company's XXXX, made $XX.XX. are So $XX XXX,XXX to purchases the flow. shares million being of at These cash we excess have

and approximately accelerated into average repurchases issuance the due should and at of to from paper. market, noted pullback be of $XX with repurchases of we stock from made it were of of December, However, XXXX. $XX year assets the parent paid million. the million ended in commercial approximately price liquid overall The the XXXX an approximately significant $XX parent were These of at that cash the

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

cash million by $XXX cash to available retain. expect around the excess in will of to XXXX not $XXX of the finalized, the anticipate of including beginning around using in year, the million available statutory commercial to While the million year, We the normal leave paper. expect we million to That around $XX currently pay in the for $XXX of have to to range parent be we $XX to on assets expect of million. repurchases we excess $XXX share accelerated parent. million assets assets Thus, million $XXX our the included hand to XXXX our the $XXX earnings yet liquid million been cash to XXXX during flow reducing parent at and have flow

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

regarding capital Now, subsidiaries. levels insurance our at

consolidated Our of discussions RBC maintain the to noted target rating with our After levels necessary intends current goal Torchmark XXX%. a is call, the and agencies support on XXX% last ratio the ratings. range at to in to to as capital

not statutory we be ratio around at consolidated we anticipate finalized, that XXXX XXX%. to will range our XXX% that financial statements, RBC our have within Although

XXXX, remain XXX% will For XXX% to expect target we the range. ratio in the

changes Association considering commonly it might to referred be As the as fixed a Commissioners such Insurance change been not the the maturity included time, this latest relate agenda discussed, it the factors factors. the that National as CX at capital in or are meeting. on unclear of was implemented to previously factors NAIC, These has is when investments. is any At NAIC's

the before CX as do of such, expect capital range of of $XXX our amount occur $XXX implemented, a we any that the result percentage, portfolio CX the fixed As the new have investments. we XXXX, our factor new percentage year-end as required the factors would to in reduction retain the capital maturity If estimated maturity generally XXXX. increase not RBC of of fixed million new implementation year-end Using change. to XX in for the to to factors the requiring additional million XX-point same would RBC before impact in

within are million current of additional any duration resources be additional long invested we our by adversely capabilities approximately capacity we assets. the Company holding $XXX Furthermore, flow borrowings borrowing incremental capital, to the as our fund at generation operations, companies if the not insurance and will the have necessary capital additional to capital confident additional our cash insurance in needed. earnings, should would the provide impact Given

the of the or current portfolio that our in tested economy downgrades the the also impact years, capital could would maturity basis, ability an and have and stress could over related cycle possibility in in likely RBC economic million we XX the that would a experience annual requiring the time. RBC have the capital statutory downturn Moody's XXXX in coming more severe our our through importantly, same of downturn. ratings approximately provides any points, additional downturn. three-year over parent flows this on period Given the before maturity capacity have same approximately fixed could to period $XXX borrowing to on occur and that RBC well migration some default especially Even $XXX scenario, that the credit actually well defaults excess In given the as published decrease to the the is Again, address cash occurred default in that this in Under three-year study. annual period we to capital confidence Company's migrations in the liquidity by of test, additional ratio rates likelihood we over as any the retain $XXX utilize XXXX XX and percentage. million our necessary, of incremental million generate percentage excess ratings an the needs to necessary defaults

As be previously impact invested additional assets. be earnings will significant, should of proceeds noted, duration capital any since the financing in long not

range a on amortization full-year claims the for XXXX lower favorable in in Next, our fluctuation. higher on XX.X%, of With Response provided underwriting to margin the XX% the percent a as operations. the due due comments ago respect year was well Direct the of last toward quarter to our the The percentage as slightly quarter, compared call. our premium margin current a quarter, underwriting the few as to XX% in end operations, to was

For percentage Response between XX%. for with be XXXX, same XX% - to underwriting Direct and XXXX, the we approximately are as margin a percentage the estimating in the range

We excess margin increase also underwriting the XXXX. year, our expense, seasonally expect an fourth tax stock anticipated in of percentage the in and last compared of to respect during the versus quarter the the rate benefits half With this two year compensation second first year. the to lower the quarters tax be we in decrease attributable primarily to to

in employees a anticipated expense expected. which higher reduced lower of tax quarter. than benefits the our the excess fourth by However, to the direct the exercised the quarter lower stock result greatly than in price options was December, lower excess tax for of number we were The benefits due

XXXX. than lower the our for benefits our is tax be at is to the For guidance, of guidance in of This primarily expense approximately projection anticipate previous midpoint the XXXX, year. currently we attributable same the higher and to the excess as

the our are XX, Those respect with turn December $X.XX will operating $X.XX guidance to our previous comments, is midpoint $X.XX back from net The XXXX. guidance my to guidance. Larry. share per projecting year we of will to XXXX, in earnings call for range Finally, the be for I income the this of now ended unchanged are

Those comments. our are

for open will call We the up now questions.

our question first Jimmy take We'll Instructions] [Operator JPMorgan. from Bhullar with

XQ an aberration Direct that of just improve of They or been was on first expected couple questions, Do past them to of off trends? Response than expect of margins. life Couple better quarters. the loss the have terms level you just in

Jimmy. Yes,

on little I the higher, see bit of that might fourth quarterly kind think see some basis going the being is seasonality a same might given quarter range. in we some forward, even percentage that you though

for expect to similar to overall we what think it I in overall be XXXX. pretty XXXX, we saw really

the in and XX% between there Somewhere XX%. -

various that trends. in also the results It the comments a levels and on you're are given projections suggesting little channels? confidence optimistic labor have been count. And what then agent like that the seems the recent just the gives just you grow your the at you market on can What

primary I first agent are there encourage Income and and increase - bonuses year to we focus, changing to think attached American American to our Income our is retention, retention. commission too, the

agents. We training increase who have middle in we also agent for retention, XXXX. new and increase bonusing think count of managers an an and will are those to We're agency changes in for lead bonus our owners agent managers recruiting new so

Sachs. Goldman our take Scott next We'll question Alex with Instructions] from [Operator

that actions costs follow-up some a mean, you're and through? of think come say, do When of in and Just, of bonuses I question. paid taking on all get sales that get as part so to laid make your you get the we about the the their or sort today? with out included that forth, expenses those I expect of amortized? they some last Does where you've of the guidance Do is there bonuses they amortized first

not the the of are just to production new new increasing retention. the restructuring We agent and amount commission. We're encourage commission agent

Alex, particular And then, sale. yes, bonuses that into tied those are many of directly

overall our - over and part And guidance. reflected as capitalized are get do all they they in those are acquisition So cost calculation of time. deferred amortized our

of It's those just you're allocation restructuring that overall expenses going of them? what of is sort up, - it's saying? a So really aren't the

right. That's

when to compression. for your you know on case excess you expecting spread investment yield you're get investing in base ends you can And new portfolio of just - when a neutral a spread interested point you then was of impact you but talk where money high-level about know compression I I to maybe question sort already, in from a - sort guided when more income versus new guys? have and if

of works almost the policy bit little are Alex, on versus interest bit issue little we - a the liabilities a there way but timing is net assets. there's the there, of through the

should - expect investment in at the coming is or we're we see investment our next higher we spread, we're now right that least equity we're back or next we point so, within or should slight that excess on improvement So really the almost year getting assets. - which income of than negative are as see our where become but at is showing means investment to a our XXXX, all from neutral average we But rate a most year, where excess what required a the interest. to

one that. if policies, little just it - or like maybe ticked lapses year a me. And sort were normal on fluctuation. Interested I one would mean bit there's was just color of for it provide anything on that's interested it abnormal. up there. then know be you can maybe Looks to like here I if looked any final mean that's first

there you rates, in both but growth last year Well, is continue first tick-up to higher to the years, it's had in when you're an At We you sales to the but National. for - have seen sales fluctuation. in think see first bit or and just rates lapsed last in - actually referring tend Liberty year tick-up we'll growth first have continuing actually rate, the at you we issue did - in I there, improvement National. Liberty three probably year Income we've American think the tend a I but right businesses something renewal and a quarters two a that's little to watch, and to don't but now two we think see we we're

[Operator Instructions] Nadel We'll John with our next from take question UBS.

go you've on of do and mean, consistent you It could stress have capacity. stress some were got with understand changes that of and factor pretty as scenario, through portfolio. agencies factor on earnings hoping I insurance shore you just some think our up end. seemed that layer and at that there's changes, it CX borrowings had I Do that on related was rating is you though, then guys power the curious how company, of with I - the as scenario? capital borrowing in some up be the the under some Frank, the predictable coming to wonder, we the earnings you a prepared CX kind how that we you guys respond to you in significant of sensitivities entities met remarks and, very the think to frankly, would Maybe, kind think analysis would your numbers with ratings? they at I incremental conversations power stable I'm with just did

agencies, to talked guidelines to greater as already ratio that that obligations to our the they at be capital indication fulfill earlier increase we no extent calls, we've the see debt-to-cap within we borrowings staying existing were than like especially be underneath any that given on And problem us. some to would or to rating for that have ratings. they support been are set haven't We up XX% if a the

would over some the So, as growth comfort that about the to downgrades should were the in of that time, be still overall we equity, end of at period a projected less and one in as a look we a debt-to-cap our If us million, it given $XXX of gives we the should stockholders growth is, and a continue defaults period grow. our over ratio. of our of XX% to little time, than take at they XXXX, say, we overall borrow really thing capital our think occur

case, our a from current and I And too kind say that that If more of close and levels that's all perspective we're maximum from amount think - be of agency happened - capacity, several will now. capacity. that up if over debt cap that from this would a give assuming worse even So, standpoint period a to use not ratio to we rating that years that us coming that its really happens that getting they all have think I comfort want I not but down

lines to sensitive Jimmy. growth, to a Can back number flipping for question Income. Liberty - I cetera. little as agent like Maybe I there? Heritage feel count target commented on little but robust; a know, levels, Larry, for then at to your you outlook why why rate the et American number growth agent count area an guess, you employment one, - different bit is your you more the And obviously that's I and confidence similar are, think two, just maybe that's more contrast along same Family

Heritage agencies. There's the and smaller agencies, two Liberty much are Family

X,XXX the same. of growth, agents of agents, wouldn't expect American Income Liberty, a So as for percentage of versus a base be we the X,XXX percentage to

American as there's two Income agencies is a those recruiting presence. the employment, difference other at employers. located Internet is Why is a for contacted resumes areas the more too, low than item be other in in Income continue have bigger think to other much rural it agencies. potential companies the I two - American in urban recruiting versus seems by three the a of it

why of has of we American at is in in retention just agency Income was saw X% agents terminations increase and have the an encouraged retention that been growth. by we Unfortunately, did in new not drop XX-month we that above three-month are but retention, that's not XXXX. the So those we've level, seen recruiting

our initiatives, growth agency we'll I year. we'll American with think Income think in see settle see I that this some down,

flat recovery. like what recently? quarters, that one I like actually, just seen last know. underwriting the you on anything what you've seems last Do Response. margin Is or in then It a like nice the seen don't Direct at XXXX, least real say underlying to improvement And that's for It some you've outlook relative is couple a could conservative seems given conservative. of sort there that's feel mix - outlook of

I outlook. a pretty think it's realistic

you in XX%. last If I quarters, increases in - policy of kind quarter some be higher in the see and percentage again, this seen non-medical would We've that same of at call, the to but think of claims have - of we we've that between some our our where obligations really XX% look and years. normalization our, over several XX has stabilized type seen continuing couple some settling we've down last quarters, some it having, - potential that should overall area. We we just still individual always on of

Response. would on Direct think are where pleased I I with add, we we're John,

we a you to the pretty a XXXX When in it's big in we as an earnings, had and around. margins had improved. turn 'XX, earnings this year increase shift - So decline 'XX, consider 'XX, so

And grow year, in very that we're looking margins that. we about you over on. years expect hope to feel that we go to range. When that's acceleration we X% would look - X%, the same Next range, in good last few grow premiums the the back would

Response, levels? opportunity sort of to I you level to underwriting you if was margin, prior an - pre couple out return - next I for want I look to going it don't the just of for the Direct years see to follow-up. of as if margin to you a the return Yes. do just to mean, call know kind ask, XXXX quick

I Well, years more as XX% stay or project but - I would the XX%, had four don't that going we we more ago. out and XX% years around it's level five to now assume far, posted, think

take question with next from Gallagher Tom Evercore. We'll Instructions] [Operator our

Tom. Yes, just have behalf this flow. cash is free of I Scott a on question on

generating? that been you just free impacted it how or strain? flow capital should you - help much words, time. to - - how much other know, a see If ever around pretty it's much stable of stopped cash what much be - expect by of if you ever would is you how business the flow higher step with, you over seems be then will like could And we new Will cash it how these growing, would function, In levels? we us

free I of overall, over cash cash on we flow perspective, a an that a kind expectation grow anticipate that I in from and slowly think think, time. flow, free a normal would growth - to with steady

little does very And that on growth new well. where specific period drag grow on takes before some sales the catch be you or Where good clearly sales the seven flow the a reductions helping of and what it end years, it a totally couple statutory on to years the free flow, negates investment up - take exactly of have far of has earnings. then bit than the potential levels. sales will continue that eight a the - up a those kind year - spikes we several so year higher on slow-down we I of tends in the the sales, sales, years. and that may - - then from as end impact to our up it that current has profits flow of that that - it our numbers it cash And front on though we that have up a in see the we years, growth certain higher ends that as in and on up free bit cash from over definitely drag a end that that has are don't to and our does free have where putting sales. tend to prior overall emerging ultimately the and of and takes having what And payback, of if expenses having as level profits growth a do cash high is as we year sales the associated but then with

time, this showing the in At questions Instructions] no further [Operator queue. I'm

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

today's Ladies concludes you. gentlemen, and Thank this teleconference.

now may disconnect. You