Globe Life (GL) 25 Oct 192019 Q3 Earnings call transcript

Good day and welcome to the Globe Life Inc.

Third 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, 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 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 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 you, good Mike, and morning, everyone.

third was $XXX $XXX million million $XXX per share, million the income share year or to per net $X.XX operating compared a or of ago. share $X.XX share, In year income per X% from or ago. a quarter, quarter $X.XX increase the was Net per for

on reported $XX.XX. XX% per book GAAP value basis, a On as return was XXth of and was September share equity

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

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

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

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

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

a the X.X% year $XX were Administrative million from for up expenses ago. quarter,

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

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

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

Thank you, Gary.

seen across to agent distribution of especially all were I'll we’ve going the count agencies. by pleased year-to-date with results our of of our channels. exclusive through each saying growth, go the I'm start we three

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

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

were premiums up X% mailing to in ago insurance quarter. year to down primarily X% life Net from margin X% volume. were were Direct decrease our underwriting a X% due sales increased at life down life million. juvenile Year-to-date, million, million Response Life, life operation $XX $XXX At sales Globe and to $XX

at count to $XX $XX in health to X% Net and million sales The the both count agent increased were quarter At underwriting producing million. Family third due to Heritage, producing to average end and $XX quarter XX% health health X% premiums agent up margin an increased was X% million increase The up agent of was second for productivity. the the count X,XXX. the and from year-ago both quarter X,XXX, quarter. agent the

margins declined to $XX the while health Agency, General were million. million, $XXX XX% health sales Net premiums quarter. X% XX% American ago $XX compared United to At year increased million, up to

now I discussion my operations, some provide complete projections. marketing on To will

XXXX: producing Liberty for X,XXX. X,XXX Heritage, each X,XXX the year ranges expect to Income, agent We count for Family American National, in the to agency X,XXX; be X,XXX; X,XXX full the to to following

net Approximate XXXX, to to full full X% for X% expected down XX% XXXX, as growth, Direct growth; to Income to XXXX, growth. Response follows: X% growth, X% are X% year for the sales XXXX, for down XXXX life year for full to Liberty XXXX, flat, to National the American X% X% be for XX% the for X% growth; to year X%

National the growth, X% expected growth, be XX% for to individual Supplement for follows: full relatively to X% to to Family XXXX, for X% XXXX, XXXX, growth; year growth; XXXX, XXXX, Approximate X% as growth, year to for to X% Heritage American XXXX, for Medicare United XX% the are net X% full X% the year for health flat. full Liberty sales X%

I to will call now turn the Gary. back

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

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

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

and lowest This And an percentage to are has $XX.X years. assets million fixed year is X.X% maturities, last The $XXX is minus. to billion, the the this been fixed fixed below maturities of including A investment-grade a investment Of rating compared $XXX ratio year XX are X.X% compared to billion ago. below bonds in average the maturities million of billion a investment-grade bonds Regarding the cost. of are grade portfolio. amortized $XX.X investment $XX.X Investment with ago.

end rating the of A at BBB first Overall, of since minus portfolio XXXX. been portfolio to Bonds is ago. year A is fixed This compared rated XXXX. maturity XX% rated to the has BBB time plus portfolio total a the compared are overall the the as XX% minus

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

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

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

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

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

X% portfolio At of new rates, we expect around and in in the the the we money on of XXXX. weighted X.XX% the rate X.XX% a fourth a rate assuming and quarter yield in XXXX. new of guidance, annual our around to average XXXX midpoint At money are in these be X.XX%

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

the a continuing invested will interest impacted to it income, rate in extent investment assets. income environment, low will rate same grow lesser a grow; as investment just net pinched the still at While expense, be won't

limited we of rates on to average an investment than money new our less as investment portfolio lower is year of income impact expect the four X% in have over the Fortunately, per next somewhat our turnover years.

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

Gary. Thanks,

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

is primarily Globe cash received Globe excess its the debt from In addition, the define dividends company's flow XXXX. by less interest the parent Life, the the as from paid results will cash generate parent dividends The norm and shareholders. for subsidiaries it, the we as Life's paid to in parent on flow, excess

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

the of accelerated million on paper As calls, December cash. commercial of $XX with discussed Globe repurchases XXXX and parent stock Life prior our into we

million repurchases, the paper million available of we commercial including have $XX normally the excess XXXX the flow those parent, reduce $XX retain approximately the assets to liquid million to We of $XXX for leaving utilized at cash parent. the

XXX,XXX In $XX buy million the of Globe at third shares an $XX.XX. to average price Life we quarter, spent

leaving have shares spent parent So shares XXX,XXX $XXX far approximately quarter. more in which the the we year-to-date, average the $XX.XX. of of million the to October, year we price will use million for than be we have for Taking spent at million full parent, at an million $XX to $XX.XX. the million an around $XXX account fourth today, available $XXX remainder now price X.X spent through at Thus, retained of of acquire into cash company $XX of million of cash, million in purchase $XX average have

forward preliminarily that will be available XXXX, flow in to Looking the cash of to $XXX parent the million. we million the excess $XXX to range estimate

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

subsidiaries. capital insurance regarding Now, levels our at

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

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

respect our guidance earnings to with Finally, XXXX. and XXXX for

forced quarter fluctuations onetime on earnings consent the quarter, our favorable third anticipated, claim bond higher primarily fee plus we due were holdings. during $X.X Our one million to the life slightly of a received of exchange than

the $X.XX are to of XXXX, the income the prior we operating result, $X.XX over range projecting share at midpoint a $X.XX. a be of ended the As range for midpoint quarter XX, year increase December of will now net this in $X.XX $X.XX per

midpoint in XXXX XXXX. we For increase per expect XXXX. X% $X.XX, we $X the of the rate continue XXXX, currently which a income operating will through will be at due in interest range to to impeded environment, the be projecting are Growth from share lower to the net

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

are Thank our you, Frank. Those comments.

for open up call questions. We the will now

you Our come will Thank instructions] Bhullar, [Operator from JP question Jimmy first much. Morgan. very

I couple questions. of had a

Direct First, Response. on

And quarter the in in are reported been they now. also, the XXXX. late marketing, the is your improvement Your to third Response? extent extent And, Direct outlook pricing, you to expecting just what sales is the fourth of given of into XXXX? expect still turn changes you think in this think and you a like that margins recover trend? I are seem in the sustainable Do Direct in had starting sales some quarter on then, To an in Response, positive you -- margins the to do continuation what what

And expected. the still talked of That than quarter. be We're year there at Response margin and -- we there at all, we was as be where going and is for XX% be the third for to. thought is the Jimmy, think think couple a there’ll XX% our the preliminary And as we'd first between a guidance today, where Direct about of that XX.X%, around level. stable. get bit far little we get that that's in that's XXXX. We XX.X% years will would XXXX, it's ago to XX% we now, we that higher

around One I’d there seeing obligation we're Gary, is we're add Yes. stabilization to thing in XX%. real the at a just that, policy pleased that percentage

bit there models And so, to thing and that around that some QX anyway. -- was into for in a that we operating the a amortization don't favorable that Gary forward where we really due we’d from our level, benefited one costs -- Probably persistency, see XX% of we our the little saw bit some QX. just and expect fluctuation from on our QX we I continuing agree into of with updating to looking that acquisition little QX a have

in Jimmy, The to a the expected due due weaker are have the juvenile Direct decline the response fourth sales also to lower rates. than have been third in about And we I fourth question quarter. expecting mailing quarter. has to lower sales juvenile think quarter is you This the in Response. volumes

future how Frank, that's Obviously, delayed contracts? be on much earnings in how long And by you would do duration the you book your then, have accounting do think for Okay. affected a year. insight it? or Gary and/or for changes value But, by been

guidance. Yes. Jimmy, that continue of to we the through implementation do new work

lot sure see that be won't more to as standard think what I another the industry details. just do this to some yet we give us working We are. We are well and a to the have the make time, really understand year through point for ideas of directionally, in on still pleased time, it at implications

detail of share. lot to not there's So a

think I anticipate have current end would the do reserves would levels, levels at to -- going up at up. interest the -- that one say is reserve would that we we thing current

would overall it that have on impact So, some equity. negative

there. And so, adjustments there be will some

be look like, have there's portion anything comprehensive as as certain that's other of what that at what and Now, far are that actually time. income going amounts included point the a we going share this to to really don't that's in in

Our Suisse. Kligerman, next Credit question come Andrew will from

question, of first at XXX basis need from inflation stay? to for margins kind Do points these United year-over-year products? I lower A medical we're guess Supplement level margins, going MedSup -- on the think lower it's the question higher is where health at were margins pressure they will American. Medicare to face a And you

you as we mentioned, think Andrew, clients uptick industry-wide. an year. I it's And the have Well, seen in this

that will forward that quarter I in early. the obligations, have better give the to think, XX%, call, range. feel say we Our I be between fourth It’s going expectation in think that And XX% for our in guidance we'll somewhere XXXX that. now policy the when is in a

Okay. driving the in Heritage quarter? strong health It was and at United And robust. American pretty what sales Family the growth was then,

greater growth counts some Heritage, In business. by growth a at United of the a individual agencies. driven had business, the from strong individual larger by driven agent from sales the time. was our favorable in market we conditions American, is Family some the At this primarily pricing growth the rise and Also, productivity. are standpoint

interesting came you with quarter. was in the new yields. yield money the Okay. It And money of on X.X% new a that in just lastly, then,

last on quarter-over-quarter? a why that down yield maybe a off and came money was -- given had X% steep quarter little you it a get interest that sharply, new Just drop rates such I but color pretty

lesser was quarter is we rates the in the the And a quality the -- little extent, the than third higher in quarter. Well, biggest had treasury a part the Andrew, there bonds drop in had XX big quarter. second the purchased quarter, of we dropped during the to the of from basis in -- the But, that part the the had it -- pretty were by we same rates that spreads points. treasury out much was but of third treasury rates X.XX% the the the

that's all fourth low, going rates so, our because be And we can impacted the rate see, those and money that we're going projecting XXXX are what’s for quarter new that to for for forward.

Yes.

your a that said the going a I treasury? be next new think, it's right? projection Is you is year money little for to rise little expect X.XX% that earlier rates. in Do you

Yes.

Yes.

do? You

slide through And We first this as was -- move bit do little of treasury X.XX% will year. In toward start average higher Yes. it of out a in weighted year. slightly part rate, the the we That more a the lower the increase that's year. rates. think end the

question Research. next Our Erik come Anonymous will Bass, from

for this looks almost the like And on segments quarter. I you just Direct expectations wanted Response, of more underwriting your in better than to across margins particularly American assuming broadly. mortality touch It this know something And for Liberty, margins else there quarter was touched across businesses experience than they are but or all to on in improvement? what life at came favorable I XXXX? Income the led you the is just that a other life

right. we board, better Across you're mortality did than the expected. Erik, have

has of because in we right That XX%. were the than that We one, to a early that improved over time. lower the quarter surprise sound improvement some American for be we bigger years, revert looking the in change going that from that's I doesn't underwriting at think where improvement XX% it same but forward, Income. couple to seen year. premiums, the for life are underwriting growth we're for And have been for seen but Liberty. we for our especially don't last mortality think, Direct XX.X we’ll change impact big our the or fluctuation margins Income is What we'll overall for does the like American mortality, quite billion going Response saw and At thinking we'll and -- maintain around there, margin And margin year The we in range. the over over And think maybe of $X see of XX.X%. is the we're XX.X%, for there, we still that several on the margins And also last ratio over to American there, a XXXX the earnings. obligation increased at improvement thoughts this the quite a be see back. margin make think we full in XX% going the quarters on are think at in we -- profit Income, was this policy we've business. bit

the as think that XX% and for again, we be we'll well. So, hold around will that right think we XXXX year, in

And guess, then, you're the the you're reflect would It a that margin. that to a the United expectation I assuming looks some Is side. it having of American experience? health reason flat stabilize price just moving to bit. some you around raise like the gave bit to sales

I strong XXXX. think, it's Medicare for given comparable. a us really Supplement tough It's in growth

hard general Supplement market So, predict. We changed sales rapidly. use agency distribution those Medicare market that's our have conditions in and to

guidance. giving give to really flat, that any certainty be it's truly guidance we're to Although to the

you. Thank

next from will KBW. question Our Krueger, come Ryan

us expense XXXX what I growth have of questions a your admin Can XXXX? is sense in you EPS of expectation give couple guidance. about a for the

X% X% expenses. a expecting in growth administrative Yes. Ryan, to we're around

that really -- of the Yes. premium for be anticipating that stick XXXX. about be I was just going to to to X.X% we say should percentage probably that here anticipate we're

rough for income the give also health in expectations you growth could but life and this, missed both for have XXXX? may I underwriting

looking insurance, and looking we're X% to X% to X%. growth; X% Well, for the at we're for at life, health

Ian will from next Our Instructions] come Bank of question Ryave, [Operator America.

Response we at you're is the Direct the XX% to about in XX% if life On XXXX, through margin that margin. look And back for margins, percentage XX% now XXXX to underwriting range.

So, is getting back from that there preventing that's level? anything you to

Yes.

I to on we taking frame, that into if say account that least to we that it's think, this to that in the think recalibrate kind to we the closer the XX% going work results difficult the But, back during XXXX XX% to information process, as can get having underwriting time, be we had in through to we and in It's changes, from we the really that and those -- of as are continue levels. our thought XXXX and our time term, term, continuing to point getting be XX% to near additional through at the time testing over range. near XX%. in work this we're think at we'll

anything And it that products? to new Is have consideration a well? on the does IRRs do as with

right a grow percentage and -- not at getting think and the really but don't much new us It's trying margin as that same. through essentially we're I get mix the to and the and products are sales, IRRs those to as on all dollars can of as right a it's are The give price dollars. really dollars, to more ultimately mix the underwriting working response underwriting in underwriting just the underwriting we the so than rates, growth -- maximize to the on we the products. trying grow right the so pricing underwriting we focused can

American just then, Got real sales. Income it. on And quick

offices. assume about busy, middle new kept I you So, opening some this from talked just just management and up training new onboarding agents. near-term pressure

turnaround couple sales? see we the in to were this starting quarter, headwind abate? of good they last this results particularly starting Is a are to Given quarters,

several the American had to led in that industry we've growth. think I factors Income

that X%. the recruiting strong was we compensation. in our a caused Year-to-date, First, recruiting, by restructuring up part is terminations had fewer

year, got important I of factor middle X% think, for is another this that management growth year-to-date. we

offices As new opened recruiting are count starting factors we you now. agent at XX since increasing All management Middle at have stated, see those offices. activity replaced that have to Income. been and American those XXXX. the January XX work and new in officers We're

question Alex come from Sachs. next Goldman Our will Scott,

and and take recruiting. these agents allowing what it had And around looking First a result a your agent online strengthen business hear or at sounds now a for for some approach to pressure just gig, conversation to economy versus and yours. what's rates on higher that there's on any you this and distributors interested that from to type be kind I color was you looking you're gig sort I here? forth. like so count just provide you're of agent and that guess the feeling question bit model agents I'd of growth to could landscape more your leaving of recruiting doing -- are on

underserved To an generally, marketing in discuss the market. we operate

agent in So, that home. typically, only we're the

agents looking And a a filled. not sense need from competition a competition that's this life there so, other there's to nor is digital People buy is that in insurance. aren't

really explaining buy the insurance people they need and the need. if understand You're

because a there's life of insurance So, market And so other that control I think control competition and is lower who you're can't smaller for agents policies. in be companies other there part selling The important thing place or expense in writing face policies, face will forward. as the we're expenses. not agencies is go we real

and an market. serve, So, for of the control think, agents for both, fill important the market issue I that expense we

it. Got

thinking like years, you to in-home Do all not way there you an consumer longer any seeing believe signs in long this with model you're now still still there is that couple of business to be the shifting feel versus in purchasing last for in I online mean, trends term, would So, person. are preference term? lead for any the the that agent

Yes.

we agency all are grow continue there. And think, I force. to the the trends

We continue to and open grow management middle offices.

our persistency said agents retention seen unchanged. a as losing in that and We persistency remained we're policies, haven't change of we

earlier training focused and new and much So, that compensation our of the unemployment dealt on was rate, in low discussed we retention factors we've really and the research and agents. calls, and short-term with

So, I’d works. model say the long-term that business

Got it.

one last you for one Maybe guys. Okay.

subs think maybe they company with with your of some a multiple about different One I and organized under talked were similarly has brands. holding efficiencies, peers

I'd anything Company be are name guess the on. know guys just if or level. interested at know to the changed if I I structurally at parent looking there's anything recently you going you So, of the

So, on new through particularly are the efficiency, some the I some more progress towards requirements, know sort thinking companies in insight more terms as structure of if accounting any -- holistically, like the thoughts there? and there's come to of tax of thinking and any systems

There is no change structure. major to plans

time there First, from structure, operations, a really legal companies, now upgrading plans. continue have is systems, We've have had some doing ago. that as what those we now example, are systems will as provide consolidated more upgrade them is the and we're doing no service. operate better -- We'll Globe enterprise-wide. far for But, our What -- we're efficient there several some but those benefit that back-office systems to is brand. that under will is systems quite to we're a will lot of, and we'll

working and to have operating we from And structural look to or that policyholders a begin of to changes pure together that. from a at add worth policyholders that the perspective, moving able transferring all the considered of we cost along be would don't entities as some Yes. think, really many it we might the -- one putting through to branding merger, ultimately with strategy, the achieve additional have benefits that, that, of type thing getting I through wasn't the just a companies taken with, I and

systems comfortable able from unified and -- we efficiencies being the working operating and felt structures operating current get to we still then said, have the legal overall brand. current the under that within consolidation Gary As of

at you queue. much. Thank [Operator no Speakers, in this we time, the further very instructions] have questions

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

much. this time, at concludes and today's this you Thank gentlemen, Ladies conference. very

You may great week. your Thank a you. lines and phone have disconnect rest of