Globe Life(GL) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2019, net income was $187 million or $1.67 per share, compared to $184 million or $1.59 per share a year ago, representing a 5% increase in net income [6] - Net operating income for the quarter was $187 million or $1.67 per share, an 11% increase from a year ago [6] - Return on equity as of June 30 was 12.3%, with book value per share at $60.22; excluding unrealized gains/losses, return on equity was 14.6% and book value per share grew 10% to $46.43 [6] Business Line Data and Key Metrics Changes - Life insurance premium revenue increased 5% to $631 million, with life underwriting margin up 9% to $175 million [7] - Health premium revenue grew 6% to $266 million, but health underwriting margin was up only 1% to $60 million, primarily due to lower margins at United American [7][8] - American Income's life premiums rose 7% to $288 million, with life underwriting margin up 9% to $97 million [11] - Liberty National's life premiums increased 3% to $71 million, while health premiums decreased 1% to $47 million [12] - Globe Life's Direct Response operation saw life insurance premiums up 4% to $217 million, but net life sales were down 2% [13] - Family Heritage health premiums increased 8% to $73 million, with health underwriting margin up 14% to $18 million [14] Market Data and Key Metrics Changes - The average producing agent count for American Income was 7,364, up 4% from the previous year [11] - Liberty National's average producing agent count was 2,290, up 5% from the previous year [12] - Family Heritage's average producing agent count was 1,081, up 3% from the previous year [14] Company Strategy and Development Direction - The company will be renamed Globe Life Inc. on August 8, reflecting a commitment to brand alignment to enhance sales and recruitment [30][31] - The unified brand aims to improve name recognition and expand agent recruitment and customer reach [33] - The company plans to maintain disciplined expense management to ensure branding positively impacts recruiting, sales, and underwriting income [33] Management's Comments on Operating Environment and Future Outlook - Management expects life underwriting income to grow around 6% to 7% for the year, and health underwriting income to grow around 3% to 4% [7][8] - The company anticipates excess investment income to grow about 5% for the full year 2019, resulting in a per share increase of around 8% to 9% [17] - Management expressed confidence in achieving sales growth in the second half of the year despite challenges in the Direct Response business [38] Other Important Information - The company expects to maintain a consolidated company action level RBC ratio in the range of 300% to 320% for 2019 [27] - The company has net unrealized gains in the fixed maturity portfolio of $2 billion, $715 million higher than the previous quarter [19] Q&A Session Summary Question: Concerns on Direct Response business sales growth - Management acknowledged a decline in mailing volumes affecting sales but expects 2% to 3% sales growth in the second half of the year [38] Question: Impact of Supreme Court decision on American Income - Management stated that the Supreme Court decision has had no effect on sales, recruiting, or persistency [38] Question: Financial impact of the name change - Management plans to increase advertising spend in a measured way to coincide with sales recruiting but does not expect a significant impact on underwriting income [39] Question: Changes to life underwriting margin expectations - Management increased expectations for overall life margins for the second half of the year, projecting closer to 28% margin [42] Question: Life sales dynamics and expectations - Management expects stronger life sales in the second half of the year, particularly for American Income and Liberty National [48]