Globe Life (GL) 5 Feb 202019 Q4 Earnings call transcript

Good day, and welcome to the Globe Life Inc. Fourth 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 discussion may also contain measures. release Some reconciliations and our GAAP website these of comments our to of Please non-GAAP and terms see measures.

call I turn to now will the over Gary Coleman.

Mike, morning, and Thank you, good everyone.

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

value and reported was $XX.XX. On was year a on XX.X% the GAAP equity per share for basis book return

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

our life around revenue ago. to XXXX, life expect million, and a to income $XXX increased margin X%. X% In insurance premium was In $XXX underwriting year million, we X% X% up operations, to grow underwriting life from

margin to XXXX, National. X% grow to X%. primarily side, health Liberty X% underwriting health premium in due X% $XXX the at up On health expect to margins In revenue to growth, margin Growth underwriting and exceeded around premium was grew lower underwriting million to we million. income $XX

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

as premium, the of administrative X.X%, percentage same As a year ago. were a expenses

of administrative or we administrative premium year, of in to to around and approximately expenses For X% expect grow XXXX. X.X% compared be X.X% to In the $XXX premium. X.X% were million XXXX, expenses full

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

saying pleased the that going in management in at distribution sales the I'll I'm results of growth agencies by XXXX. growth I'm I'm count each and through pleased in the our you, channels. with Thank particularly start agent to across our middle of seen out with exclusive Gary. go agencies all fourth our we've quarter increase XXXX.

At to was full by year Net was up sales was million, ago from fourth million at the X,XXX, agent up X% margin were up quarter XX% to and $XX life The the XXXX increase and up year was sales underwriting driven count X% $XXX American were the premiums up Income life X%. quarter. X% from the end producing for X,XXX. X%. The average life quarter quarter fourth life million. the agent count. of third $XX grew Net for producing count sales in the The increases

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

$XX life $XX premiums Life, X% we Globe year to million. flat margin the Insurance million, quarter. division At Life direct-to-consumer. were sales And begun non-agency was up $XXX To million were with ago life Company, direct from Globe have term life Accident our at better and X% up business describe underwriting at our the direct-to-consumer replacing at Net response

resulting to in from primarily full juvenile sales mailing volume, response were from life rates a at net a the year due decline flat XXXX, mailing juvenile For our decrease offers.

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

increased premiums health Agency, million. General American United XX% to $XXX At

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

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

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

growth; to X% Net to to National X%. year be growth; up Income follows. down full to life X% as sales XX% American expected for XXXX X% Liberty Direct-to-Consumer X% are the

as to Net to Individual X% XXXX United are follows. XX%; health be the year to American National Medicare relatively Supplement XX%; sales full Family Liberty expected flat. for Heritage X%

I will back call to now turn the Gary.

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

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

excess flat rates, of to by decline share up X%. grew a a basis, basis be X%, we due lower X%, For per grew excess XXXX, expect income it share the to but per on to X% the X%. income In investment while year, interest investment on to impact

invested assets $XX.X maturities are fixed Now $XX.X including amortized investment the portfolio, of regarding billion billion, cost. and

below maturities ago. compared investment investment X.X% grade to A fixed of of X.X% $XXX below bonds percentage investment a year with the to and are a ago. year $XX.X The Now fixed $XXX grade are average million an to maturities our minus, billion grade bonds rating compared million is

total maturity XX% from minus A portfolio to the at BBB of of year the a compared end ago. down is rated plus Bonds portfolio, BBB rated XXXX. the are XX% Overall, fixed

While is with line peers. relative the market, overall this ratio it high bond in to is our

of less We our asset-backed large rates ability than have commercial mortgages that risk risk-adjusted and in the markets. in to or BBB unique hold the peers believe regardless capital-adjusted securities securities. equities, equity such exposure that higher our acquire derivatives, to we best interest to returns maturity assets as due However, provides part fluctuations to securities we

billion, unrealized quarter. previous than lower Finally, net gains we $XX on fixed have million maturity the $X.X portfolio of the

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

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

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

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

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

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

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

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

Thanks, Gary.

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

excess these In XXXX. in to of as $XXX million to the cash XXXX million compared parent $XXX addition liquid flow assets, generated in

year. company's the the the less from dividends during parent it, beginning flow and assets the million we at as the interest The we to shareholders. Globe parent on of debt including define on year, subsidiaries, results the cash available had Life parent dividends paid the to by from excess hand the received paid the Thus $XXX primarily its

to we the We paper parent on repurchase $XX flow for other into That assets parent. including million $XXX uses the prior Globe of available with $XX at discussed $XX repurchase. calls, for those million and commercial million liquid Life cash left the excess the XXXX of our paper the As we commercial of shares reduce utilized accelerated December XXXX normally of of million cash. retained

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

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

XXXX, in price of to far average at XXX,XXX $XX.X an buy million spent $XXX.XX. shares have So we

assets The approximately parent liquid million. year ended of the with $XX

flow will parent the assets, liquid these to generate in cash XXXX. addition excess In

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

operations will It cash the should and is to made future year expand needs. have parent that on insurance as possible. noted the company we be previous after our calls, as As cash our use noted from received efficiently the technology other new assets capabilities and new our insurance long information fund investments during to duration substantial they cash issue policies, acquire by operational

higher if to market value favorable primary return We and our conditions of return cost shareholders, that that company repurchases funds. we those alternatives equity. parent available flows, other than provides With use share to to is yield alternatives the a will a exceeds that absent of our with better and excess expect are be a continue cash believe

Now at subsidiaries. our insurance regarding levels capital

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

level targeted Globe previous XXX% XXXX. the to a noted company in As action Life XXX% ratio for on calls, consolidated of range has RBC

finalized be the Although for this financial our statutory of ratio we range. XXXX RBC we that will end not our higher consolidated have anticipate statements, XXXX towards

target the will level we company action to For in range a ratio consolidated XXX% XXXX, of XXX%. to RBC continue

operating the share fourth previously XXXX respect with to income our for net was quarter as of Finally, guidance, per Gary earnings noted, $X.XX.

$X.XX. income underwriting greater-than-anticipated Liberty the midpoint income. excess addition, and XXXX In operating above our of for year was guidance, due higher per $X.XX investment net life previous to National is the share at This primarily full income

is net of lower due projecting previous share XXXX, be per guidance are slightly to and healthcare to $X.XX than operating $X.XX guidance The in $X.XX. of pension midpoint XXXX. costs higher-than-expected this the income For range we will the employee in

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

Frank. our are you, comments. Those Thank

up for We will call now the questions. open

Thank from of comes you. Suisse. Credit [Operator first Instructions] Our question Andrew Kligerman

Hey, good morning.

Just guidance that EPS question. sticking guidance, with

impacted that midpoint that sure, make if to than is could outlook other previous. how per guidance lower of a And how any new your sighted a your think the guidance just contributors give much? I of you the $X.XX many to it's the sense cents want you've share I discount So were mere and just there lower and revised rate. us

reduction as in health of Yes, The really I of pension higher primary right for the noted in Sure. employee kind reduction is -- comments, in combination -- the that causes primary $X.XX midpoint insurance the at costs was the our at per kind of cost. those including general, and the share.

also -- But the are guidance was than at look a rates, from that municipal was some to due the of have was. guidance. some are also did items We anticipated -- overall previous offsetting previously acquisition that investments. expectations impacting little our excess investment in we we higher lower bit there income lower interest a lot as what But

also down driving effective each that's that we're little largely offset seeing those So our other. rate, excess of tax a investment income, because while lower

In had price addition, higher impact. some share

-- compensation stock higher but seeing the each also option tax overall of program, are benefits, excess other. impacts are stock roughly an expense. of buyback our less We And getting those again we're having expense, impact which offsetting

health of net-net, degree of pension higher been some the we've employees primary costs expense, higher to has So the higher for and looked our insurance the kind -- contributors. to kind really our

A pieces lot moving there. of

out non-deferred the amortization both line at like in know line of items closer it Looking that XX% materially acquisition average -- the and as each that in were and line both the commissions the & both Health noticed guess Life up Life you segment. I well. north would expense XX-plus-percent in and maybe for was for non-deferred segments, I Health to we maybe

of what would what's number EPS that the expected? the question have kind So, much up is driving versus that we so dampened

in non-deferred Yes, growth during we higher the quarter-over-quarter. see did acquisition some costs

kind they that the timing of due Some of certain where in to year. the some general, are of is But they and up. -- on hit expenses in

incur. costs We our are marketing various I there support incurring that higher we in is costs higher mean agencies. of

XXXX. over various bit in a our costs of meeting little then, we branding some XXXX And saw the Some of increased also changes.

may of of in going of process -- noted materials, you noticed as the all agencies converting in individual some through our So, Globe the from the of agencies we're Life. divisions we're as have to and

a there's helping that just that the the the so we've agencies and conversion brands And overall expenses associated fair with quarter, well. fourth change in individual as particular amount of make agencies incurred in of those

experience agencies. the as the So the the the and percentage and to really depreciation anticipate of in agencies, key are then CRM benefits and just IT we incurred those increased support to the higher that on systems systems, levels agent a really systems just that do -- overall, in the a commission the future. starting a their at of see then, well new But some some year-over-year. We've to And implemented really couple agency service of as trying new other overall began driver costs we've improve of XXXX. we're

I see.

going and at the out. see overall increase. do to expect will. say that XXXX, We closer or level to increase near like of a should was it be X% midpoint not It I to willing in our X% at guidance to it the leveling

that helpful. in was that for just count lastly, wonder, even the which on Got it growth? your so that you both robustly. increased one, I agent rebranding could then guidance at call And XXXX? your very And the look the And provided across as it, just maybe got segments, that's kind is just sales two, of exceed sales compelling you I guidance,

recruiting the growth two growth. first, for about and XXXX the middle think talking management were drivers growth So, agency activity in our I

management growth. the recruiting increase across steady had a in retention growth was look XX% management XXXX. you middle XX% had of X% in XX% result Income in National We had If had Income three both American had agencies, American agencies. increase management steady the Liberty XXXX; recruiting. retention Liberty at National growth. middle The middle

Family our were the growth. retention recruiting a branding Heritage. redoubled year-long primary the At it increased activities by and we X% agent recruiting, had in Heritage, factors those the That XX% middle We recruiting think Family was was I at driven helps that management. year-over-year increase really but our count. with

our As you helps training, know, our middle and drives management Release also so growth. really and retention recruiting agency that

the think given we've I good guidance this is year guidance.

you the that, growth don't agency possible same a stair-step growth we is in It's that process. Just remember And early XXXX. exceed we're percentage expect but year-over-year. could

will better the in call of count guidance of have the final agent next each Our terms for three exclusive agencies.

much. so you Thank

question next comes Jimmy from Bhullar Morgan. Our J.P. of

question that just they've Sir, recruiting. good I as a the have been. strong I would recruiting trends been wouldn't have had the on with thought market, as labor

if So could just... you

greater employees, of really Most Surely, for this make people, retention not Unemployment people looking our [ph] comment. were recruits recruiting. first I'll they're rather and opportunity. not

And increase so low an despite recurring record we really saw the this in year. unemployment

better help management in agents stay of managers, are and with I and the middle trained with most from growth those retention, comes and think productive, training longer. they company the middle the because more

real Heritage. that steady saw driver was and increase at saw Liberty Income the for we retention at of the in the I retention course and we American So National, think Family

any that you or on any could metrics of And the you of comments the sort new have recruits. quality share

And would so, in the track, recently? sales how can -- the idea sales given get agent just count we would an on strong growth so follow

recruit the recruits, of that we growth quite productivity. fairly across little average always of fact of agencies tells all as you the is in new we less a with think percentage The have I terms are high but business more the just three the had me quality They submitted. agencies. agent, not Jimmy, three sales better see in that premium a productive

quarters your this how on next you been you much the up they your in And two and the Do the the slightly. just used They turned where of in last growth from direct three response, sales to lastly years? down in terms of couple lot think in have are sort what's of channels have a that corner expectation business be. to

adult In product strong juvenile quarter, to across the sales and both electronic fourth lines. were better sales expected the the than due

the those about primary And up there think look guidance direct I XXXX, early in if insert drivers look If at at four media versus metrics will response. I referred is four XXXX, we X%. XXXX, are guess it I for be

up We expect electronic media to X%. about be

about And be stable. will circulation Our up X%. will mailing our be volume

So I think to the guidance really X% point. at a range positive of negative this sales X% is good

dollars. increasing on on profit focus the remember, increasing is Let's not total is our really sales,

you. Thank

next Ryave Our Ian of comes of from America. Bank question

Hi, thanks question. for taking my

Just wanted health margin. the to ask on

The down. the year-over-year. So underwriting little nicely increased a -- while percentage margin was margin income

in you're utilization see the anything if products any know horizon? Medicare if or seeing on to for there's changes you wanted Just sup

Well, the But XX%. high I which most now during little the implementing percentage an The forward, increases obligations slow those will sup -- the going in factors back maybe will in saw the increase year, that closer and we That's one of is where policy to that business, claims and compared rate previous for years. was the the -- that's we in only is XXXX been over industry-wide. bring think XX%. it contributing hopefully have increase Medicare we Supplement something a be and to that obligations maybe GI the business, the Med was policy in

Great. just on And clarify then the to investment excess income.

said guys to was X% to X%. it I think you going grow

income expectations Just your to for growth excess year? wanted next what investment are clarify on

X% share be issues -- investment X%. income decline X%. to X%. a Well, dollars be -- investment we're the for a to thinking excess to On of be the What for X% income next is basis, will a per flat there XXXX, will that down in decline will it

off is expecting that just And of money it yielding to you're lower a new the yield or that's roll just higher get? based on

to rates. X%, are growth to X% X% rate reason decline is the basis income investment in money having we invested X%. is did saying going what from that we've XXXX, this lower sort year, me, X.XX%, points down that's grow in X%. impact the because we're of XX whereas new Investment almost of And the grow XXXX. going to of Excuse to we're assets It's lower income whereas

So they investment than components what the expected are in as excess about other had as income, XXXX. that's far what of we we --

great. Okay,

calls do the add that XXXX. just that, volume in is would clearly of some the anticipate of additional we I did we first XXXX, the that to part have it and calls in

the lower rate, reinvested money So having also the as those new rate. effect that's get at and a off dampening books given roll lower a

Build while. had Yes. to I'm calls in after year XXXX. glad about opening going to a be X% in portfolio be It's be that X% it million forward XXX and X% years coming callable, expect per are had -- XXXX. that Frank mentioned And X% the called mentioned the Bonds, And America I [ph] we that. Frank expecting only there the forward bought XXXX, very of that, ago was we around on. That in mentioned will comments in will those going little XXXX, We going be in would calls. we calls. another now then and of those million XXX XX so we're for

impact and the agree income in with Frank activity on investment growth. So a I XXXX call XXXX big that, has

details. Great. I the appreciate

[Operator Our Scott comes Sachs. next from of Instructions] Goldman question Alex

of peers do talked I about a have reinsurance. where increased I lot reinsurance just costs, A just question costs your you had guess there. a around

interest box. towards I sensitive a more little think probably geared

beginning fully just if at of you've any was gone and if anything the kind that we consider So is should wondering reserving of of there principal-based effect XXXX? seen into around I

Well, reserves. the I will think I'll Frank of, mention, cover principal-based first

do very As far we very, little as reinsurance. reinsurance costs,

impact -- amount are we on $XX,XXX, really policies Remember sell range. that the us. we it $XX,XXX -- face of the from the to in no $XX,XXX So has

Frank? So we reinsurance. do just don't

pretty those Yes. of had companies. the companies new for all smaller for lines, pre-PBR anticipate term, and way And are our those focused really the couple XXXX. with one us small much that principal-based to for secondary net-net, a versus UL or business finding, methodologies our a with a on We've policies that our slightly the write primarily We of much favorable all real of the in respect impact of reserving implemented probably businesses, we those here -- do not We're other. aggressive pretty just bunch for we lines. PBR guarantees, reserves, implementing write were don't -- got that but meaningful their a and --

a overall So significant impact have it on doesn't us.

cash just the flow Got it, you And probably mean primary buybacks about terms you continue at of method. something there would the know just to share you you be the know you in then $XXX mentioned, I can I there? still okay. is excess in are just I priorities to past. talk said entertaining? have looked acquisitions $XXX guys

absolutely. Yes, Yes.

those we of ratably in year, So buybacks we the spread flexibility intend year, provide a gives spread do redirect out, find alternatives to We over that course us later that it take. -- out throughout greater the to if the shareholders. that the other return year, to the those the

of M&A. those One clearly is

focused on in that organization is the be to controlled would and an helps protection us are very to a strategically that and We're -- us products We market distribution. that oriented write to middle M&A. wanting has to accretive interested target

we year, continue into clearly do be we so. some at flow come And opportunities across free continue we type that of opportunity. of cash so during to look redirecting -- the if then opportunity and for that And look that would good to we'll an would clearly,

you. Thank it. Got

in time, at queue. And we further questions have no this

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

ladies today's and gentlemen. This you, teleconference. concludes Thank

You may disconnect. now