Globe Life (GL) 26 Jul 192019 Q2 Earnings call transcript

Good day and welcome to the Torchmark Corporation Second Quarter 2019 Earnings Release Conference Call. Today’s conference is being recorded.

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

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 any XXXX comments answers XX-K provided may forward-looking and statements our contain that please to only. SEC. to subsequent forms

for earnings a may also contain measures. release Some and and our to website of of measures. comments our reconciliations discussion Please non-GAAP terms these see GAAP

Coleman. I the will now call turn over to Gary

Thank $X.XX In million income quarter was income per net you, year $X.XX good Mike or compared for the share and a XX morning per operating or return the second $X.XX book reported Net million XX.X% $XXX GAAP everyone. per of quarter, $XXX share $XXX On year to June share share, basis, was value a share ago. million $XX.XX. a of increase was ago. as or from XX% was a per and on equity per

unrealized return was value and book XX% on share on maturities, grew Excluding XX.X% per to equity $XX.XX. fixed gains/losses

X% underwriting premium was on and distribution a to life premium million in X% $XXX of Growth margins life underwriting year a Now all to channels. premium our million, $XXX increased revenue growth due ago. operations, insurance up in from exceeded margin margin higher percentage

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

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

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

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

remain and For of approximately the XXXX. around X.X% in expenses we to expect to to year, X% full compared X.X% administrative grow premium

comments the on for turn over the marketing to call his Larry operations. will I now

margin X% Thank $XXX American $XX X%. up $XX Net was producing million. were life X% up life Income, At were Gary. premiums up to million, to average The sales you, underwriting count million and X,XXX, producing end and count up year the was was X% quarter first the agent second ago up agent The quarter of from at second the X% quarter. X,XXX. the life for quarter from the

year million, At up Liberty underwriting to driven the agent quarter million. Net up was count and increased primarily X% at The quarter X% life and life the up from from up million agent count was Health to to to count million. growth. sales life National, down for the quarter. X,XXX, first average and $XX National The quarter premiums $X were margin underwriting X% up sales was $XX health Liberty X,XXX. million to year growth X% $XX margin the from X% the premiums sales The producing health agent $XX were million X% second was ago X% ended down by the $XX and quarter. were XX% ago net producing

were insurance down Year-to-date, life X% year the from X% and million. X% underwriting sales increased Life, life up quarter. margin life Globe are at million, $XX $XX operation $XXX Response Net Direct sales were ago to flat. our In million to

we forward, go we both As profits. expect grow sales and to

to second million American was end agent million. to count health At up $XXX of increased to X% At million the X,XXX. due from ago X,XXX, X% quarter at United was General X% X% margin for $XX the were and Net $XX health from to X% and $XX The up average producing the agent count year up first premiums The quarter Agency, to quarter quarter. Family Heritage, increased sales premiums the health XX% the health underwriting producing million. increased productivity. increased agent primarily

declined X% year health ago $XX Net to quarter. to compared up margins the were $XX million, Our sales XX% million.

provide will complete market I operations, projections. some the of my discussion To now

as ranges: producing Liberty be X,XXX. XX% X,XXX Heritage, National, We Supplement, X,XXX flat sales agent growth. following year to Income, XX% the to X% year net are X% National, X% the Heritage, Income, to end XX% to Approximate the X% each growth; count to be to expected full follows: Family expect follows: growth; Family American National, for sales for to of X% to Approximate Medicare growth. growth; X% growth; American X% as agency X,XXX; Liberty at individual net X,XXX; for expected full X% Response, X,XXX to health the XXXX in are to American to the be to life XXXX XXXX Liberty Direct United

back call the turn now will to over Gary. I

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

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

year expect X%, to grow income full investment we which XXXX, will increase per around result to X%. a about X% the excess of share in For

amortized including billion, of billion Invested assets fixed at are cost. $XX.X $XX maturities

bonds XX ago. $XX.X average million below a $XXX investment-grade to billion X.X% fixed are X.X% investment-grade to rating been ago. million year a ratio maturities, percentage grade fixed is are an lowest the to compared investment of is bonds with below compared of maturities A- $XXX the This has year and this On years. the last The in

as the BBB+, XX% are the at of of BBB rated is portfolio XX% portfolio ago end compared rated year XXXX. the maturity fixed total to same Bonds quarter. as the Overall,

maturity best to fluctuations regardless BBB to rates markets. to peers, securities due is securities the in the we ability the part have asset-backed such capital-adjusted of equities securities. the commercial to risk-adjusted, We provide assets us interest to unique no mortgages While large our derivatives this exposure returns believe higher to in risk little ratio equity or and our hold exposure higher relative or as and

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

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

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

for was yield June X.XX%. XX, average our portfolio we’re of money X.X% At of remainder of assuming new As the guidance, XXXX. around midpoint the the of rate an approximately

at forward, noninterest-sensitive Extended low environment. like rates interest current thrive we would GAAP to rate rules higher will a see we lower-for-longer balance rates While interest products. impact since statutory the sell protection interest under not accounting we sheets going can or

our While continuing it at just the as won’t rate investment the same grow, will grow rate impacted income low interest our environment, assets. be still will net the excess invested income in investment

the Now over Frank. I’ll turn call to

Gary. Thanks,

I position. the want with repurchases million. parent and of year liquid minutes began share capital $XX First, to spend discussing a assets The few our

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

beginning our range expect the including the million $XXX the the to anticipate of year. million. assets to the $XXX to Thus, hand million during cash million year, have parent to around We excess in at we flow on $XXX $XXX to XXXX of be in the currently available

utilized Torchmark’s million accelerated prior calls, flow reduce repurchases we discussed and of for million $XX XXXX paper commercial to with $XX We the paper the As had excess stock the cash. of commercial of repurchases. December XXXX on into those cash parent

to available uses, expect to including of to the $XXX $XXX normally $XX retain million liquid at to assets As be the other parent such, approximately parent. we the we million million have for

million XXXX $XX.X In in far than $XX of far retaining price more parent, an we price spent $XXX the $XX the second we shares the the for acquire $XXX the $XX.XX. parent to Torchmark year-to-date and spent in the spent Taking at excess remainder X.X million company flow XXX,XXX in of an spent first average quarter, quarter million the to July, at thus to the approximately million of cash million buy so on we million average we have $XX.X of will Including repurchases million have year. on million million and $XX.XX. available parent to the of $XXX cash $XXX into for plan at account shares repurchases spent the

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

necessary to our at goal levels capital is maintain rates. to capital levels our insurance Now subsidiaries, regarding at current our support

for a level As the of on to RBC ratio Torchmark discussed to call, action intends previous target XXX% company XXXX. in our range consolidated XXX%

for we respect of of the for to improved XXXX. share operating the underwriting excess part this our underwriting somewhat income prior over outlook reflects favorable year. projecting by are and positive These December income of income quarter half per $X.XX to income net of with the the results XX, slightly will the underwriting life investment and midpoint the in to guidance adjustments $X.XX midpoint year. The lower $X.XX $X.XX second on attributable range the Finally, for of be a guidance, increase the remaining quarter of expectations earnings an in $X.XX, offset second health the year-end the are primarily

will call back comments. turn my now I are the Larry. Those to

Frank. you, Thank

Torchmark X. We have to on more questions. Inc. taking renamed announced be before discuss X Life yesterday Globe that August We topics will

recognition. to listed to and GL. reflects brand be name company’s will on Exchange The name York recruitment Stock to commitment enterprise-wide sales alignment improve, enhance change the We the New an as

Globe’s capitalize eventually We and Life chose investments retain and in Accident individual surrounding exist will years as made Texas the Globe subsidiaries niches entities brand. to Company. sales and name These of take advantage continue Globe All and investments the insurance recognition, and Globe the Life Life have their the name we’ve all and at the increased states. cultures in to unique recent improved will and market use branding legal Insurance on

recruit have operating customers. resilient recognition and we to successful brand and name using a our unified their Our lack new name companies recognition significantly of recruits expand name Despite brands. been success. expect enhance agents that agent will to reach prospective ability branding and own Overtime, customers, among

expect of initiative We over unified strong to years this number a and a create brand. evolve

forward, management sales a maintain ensure to has disciplined income. expense usual our approach go branding recruiting, we to will positive on underwriting effect As we and

Lastly, Life life the is Cowboys. insurance official of we earlier now the that Dallas announced today Globe

opportunity cost-effective We Life’s new recognition brand provides manner. are It a strengthen to Globe great this relationship. excited a about in

comments. our are Those

for call open up the We questions. will

our [Operator JPMorgan. Bhullar first We’ll of Jimmy Instructions] take question from

couple of a had I questions.

to flat to First Direct on guiding Response year. the I for X% in the sales business, growth up you’re think –

almost quarters. obviously First this and you after think in quarters are half, X%, X couple down the I positive quarter of was last down

things are Court last the are year and your the how unions. sales what sales the then to affected market. any to a recruiting Supreme was So or tight or – concerns labor on secondly strong to get if lot if or or to to decision from related wondering just also rates that your there And And going better second – inside that how be affect close any on impact going can Income, confidence of comment half? you’ve recruit seen things in gives American on just economy your the side going by were you the on on the you ability

was X%. I slightly first the If go stated, as up quarter, you could first, at

the a X%. decline mailing That expected, decrease in was to primarily was volumes. down second As quarter due

question of I agent third in is Jimmy, X% the reflect short between veteran year, equal first Supreme the to the seen count the sales quarter, agent to will sales, retention. our as term with X,XXX, count down is since had agent has agents to that decision case, generally slowed to in growth to are increase growth expecting on agent our that’s year-over-year recruiting. expect The compared up that, terminations have With to do on for have had second recruiting guidance what persistency. our to to our is an agent year. new and are in increase X%. But and half no agents. and for growth seems guidance positive Income, retention the And our or we’ve think appointments. quarter, the didn’t second our for the we in and X% X,XXX be and respect effect is We then sales several will Thus, new productive the American flat Court but that the less be in the because second months compared the agent the

maybe financial it, either or more if in year? you the on like expand name Okay. just could or of efficiencies build negative from from and financial the change, increased change any the one ask expect impact form the maybe name or further, something spending to And I over maybe like initially next the brand positive impacts

Well, Jimmy, to there spend distribution spending time underwriting channels. this increasing on the with increases impact in one income. recorded a our with coincide our we alignment measured on line various not our recruiting. sales for advertising amortized is do initiative in way We plan in believe We will be brand

Okay thank you.

Autonomous We’ll Bass Instructions] Erik our take next Research. of [Operator question from

your targets first and/or you. full term Thank of Hi in good are strong from business? longer making to margins expectations margins year any you the the underwriting half changes your year, morning. by the Based on life

Erik, respect the second the year. life say, are of we I with expectations our increasing for Yes. would our overall half that to

we we’re remainder saw uptick an little year thinking going what If a This probably that at that’s of we’ve XX% than bit you life we last we just to last we closer favorable so probably, first under little year, the the of of a last probably the a we in than half year, seen of given what half just a look our the basis, to were margin year, for as be the far second year. the experience anticipated total year, little the call. on for XX% and better had bit bit greater of

I think American with seeing to only also a most slightly Income, we’re just better as Response respect really of to relates but expectation this Direct well.

premium half growth growth the the The that of year from second would increased coming the in Frank year there mentioned. Erik, is. be that will I to of add growth first it close half mostly the The what is improvement. margin very margins year in is the

that XXXX? Got to little expect would it. bit you And into would that XX%? margin above a be mean continue something I

we’re taking Well, some the XXXX here that going quarter to obviously, in a where at again of kind quarter, coming next we projections see those at. look give guidance on the next better

variability. add, much I But I we to think don’t expect would see

we’re year. example, year, going numbers. we For last XX.X% those be this not XX.X% It’s in conventional were very to

your a on bit full Got then you’re little sales, trending it. And lower targets. life just year year-to-date I think than

dynamics for about activity half So, can you it that second be seems year, to behind where expectations up talk some guidance bit? of the of you and a the your a the that expect to pick

of Erik, your second question the again in was year? life sales the

Yes.

Income, see had weaker should remainder easy And it, year. net National When XX%. the We Again, year the be the The life think positive X%, guidance going in the second we’re and second for X% see life our On to for again comparables. of Liberty full American X%, question, guidance sales you of this the the sales the to third out X%. the the in of quarter year fairly sales believe had life second half last sales X% fourth we to Response, still third is quarters. X% is Jimmy’s sales, those life Direct flat and year for is to I first to full distribution. and guidance for We about year and are answer think strong. I quarter. the stronger fourth

Thank Got you. it.

Alex Instructions] Scott Thank of next Goldman take you. [Operator question We’ll our from Sachs.

Hi good morning.

I bit First a a question. is have question of housekeeping just

about so think have business I your expect rates, reviews so is lot to a at in XX, would any impact and As Like when work? think the risk and mean, in we you of think use actuarial is I forth, no would decline you the do flow that that cash rate testing. What do of margin and long-term for probably you case? assumptions plenty there’s I

us based year, we issue rates an businesses, DAC had thing they we interest each flow affect current and the one off could write that select Well, rates cash you’re don’t businesses. XX doing we liabilities. our that It’s to rate are. where we on as cause far in we in right testing that our have just change But we for a rates as almost sell interest each our year an we all issue, the basis do of rates or never use, where are for to

we The in make strong never had that to the we margins kind the other such would business thing can point I adjustment. us where getting of to any we see had

that time guess standards upgrades, system I And year. and question Torchmark, expenses I headwinds in might any second of of know impact general, a then just of rate like got expenses. numbers of anticipation And more though or that I on and going and new increasing Is scale you kind is any us and insurers. feeling which the the of that just some that’s the expenses year of on pushed maybe those converting, all think going think into and industry the of accounting you it things those dealing Are improving it. facing you effort With Got over Any is next even are bigger the tech there’s a I bit run the these would X? I life in already some with back than the guys are that? probably that all today? showing have some of

yes. The answer is yes and

our are So, filling numbers guidance. it’s in it and in our we and

we you’re hit all and most industries this up ramp security And So, this IT of trend is expenses. being information expenses. and increase the administrative is that last a are X% over that And that. think right, few related by companies year expenses, to in years these the I

in we information our we the as so. year increase to maybe and what say, expenses, continue be year, But mentioned. the includes for costs administrative I’ve expenses expect or that not guide, to the security IT that rate last expect have all to at these X.X% we We just the in

very Thanks much.

Instructions] there this queue. are time, further [Operator you. At no Thank in the questions

you for again us morning. you next joining Thank to quarter. Those and our comments, talk Alright. this we’ll are

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

disconnect. You now may