Globe Life(US:GL)2021-02-03 21:52Financial Data and Key Metrics Changes - In Q4 2020, net income was $204 million or $1.93 per share, compared to $187 million or $1.69 per share a year ago, representing a year-over-year increase [6] - Net operating income for the quarter was $184 million or $1.74 per share, a per share increase of 2% from a year ago [6] - Return on equity was 9.5% on a GAAP basis, while book value per share grew 10% to $53.12 [7] Business Line Data and Key Metrics Changes - Life insurance premium revenue increased 7% to $678 million, with life underwriting margin at $164 million, down 8% due to approximately $27 million of COVID claims [8][9] - Health insurance premium grew 5% to $290 million, and health underwriting margin was up 18% to $72 million, attributed to improved persistency and lower acquisition expenses [9] - Direct to consumer life premiums were up 7% to $224 million, but life underwriting margin declined 42% to $23 million [17] Market Data and Key Metrics Changes - American Income life premiums were up 10% to $327 million, with net life sales up 20% to $71 million [14] - Liberty National life premiums increased 3% to $74 million, while life underwriting margin decreased 26% to $14 million [15] - Family Heritage health premiums increased 8% to $82 million, with health underwriting margin up 17% to $22 million [16] Company Strategy and Development Direction - The company aims to emerge stronger from the pandemic by enhancing sales and recruiting capabilities through both virtual and in-person methods [12] - The company expects life premium revenue and underwriting margin to grow 6% to 7% in 2021 [9] - The focus remains on maintaining capital levels necessary to support current ratings and continuing share repurchase programs [38][39] Management's Comments on Operating Environment and Future Outlook - Management anticipates approximately $52 million of COVID claims in 2021, reflecting a significant increase in expected mortality [47] - The company expects to incur COVID life claims of roughly $2 million for every 10,000 U.S. deaths, with guidance reflecting uncertainty due to vaccination rates [48] - Management remains optimistic about the demand for life insurance products, expecting it to exceed pre-COVID levels due to increased awareness [61] Other Important Information - The company invested $359 million in investment-grade fixed maturities during the quarter, with an average yield of 3.54% [24] - Total invested assets were $18.4 billion, with 4.9% of fixed maturities being below investment grade [26] - The company expects excess investment income to be flat in 2021, with a slight increase on a per-share basis [23] Q&A Session Summary Question: Can you provide details on additional drivers beyond just COVID mortality affecting EPS expectations? - Management noted a higher average share price in 2021 and slightly better underwriting results from American Income and Liberty [53] Question: What are your expectations for buyback levels in 2021? - The company anticipates using excess cash flow for buybacks, estimating around $340 million to $370 million [54] Question: What are your expectations for persistency in 2021? - Management expects persistency to return to historical levels by the end of 2021, despite some fluctuations due to the pandemic [55] Question: Can you explain the disparity in life underwriting margins between direct to consumer and American Income? - The difference is attributed to American Income's younger insured population, which has less exposure to COVID-related claims [57][58] Question: What is the expected margin for health premiums and underwriting income in 2021? - Management expects margins to remain around 24% to 25%, with improved persistency helping to maintain these levels [66] Question: Can you discuss the impact of telemedicine on health claims utilization? - While telemedicine could potentially offer long-term cost savings, it has not been factored into current guidance [76] Question: Are there any concerns about adverse selection in sales? - The company is monitoring sales closely and has not observed significant changes in demographics that would indicate adverse selection [80][81]