Globe Life(GL)2023-07-28 00:04Financial Data and Key Metrics - Net income for Q2 2023 was $215 million, or $2.24 per share, compared to $224 million, or $2.26 per share a year ago [35] - Net operating income for Q2 2023 was $251 million, or $2.61 per share, an increase of 3% from a year ago [35] - Return on equity (ROE) on a GAAP basis was 22.4%, and book value per share was $41.44 [22] - Excluding AOCI, ROE was 14.6%, and book value per share was $72.09, up 10% from a year ago [22] - Net investment income for Q2 2023 was $261 million, up 7% from a year ago, driven by higher yields on fixed maturities and short-term investments [54] Business Line Data and Key Metrics - Life insurance premium revenue for Q2 2023 increased 3% YoY to $782 million, with full-year growth expected at 4% [23] - Health insurance premium revenue grew 3% YoY to $329 million, with health underwriting margin up 1% to $92 million [24] - Direct-to-consumer life premiums increased 1% YoY to $249 million, while life underwriting margin declined 8% to $56 million due to higher policy obligations and acquisition expenses [27] - Liberty National life premiums increased 7% YoY to $87 million, with life underwriting margin up 2% to $28 million [61] - Family Heritage health premiums increased 8% YoY to $98 million, with health underwriting margin up 14% to $33 million [37] Market Data and Key Metrics - The average producing agent count for Q2 2023 was 10,488, up 8% YoY and 8% from Q1 2023 [26] - Liberty National's average producing agent count for Q2 2023 was 3,180, up 17% YoY [61] - Family Heritage's average producing agent count for Q2 2023 was 1,345, up 15% YoY [37] - Electronic sales in the direct-to-consumer division grew over 4% YoY, representing approximately 70% of new sales [27] Company Strategy and Industry Competition - The company is focused on maintaining target margins in the digital channel, scaling back on less profitable print media campaigns [19] - The company is investing in commercial mortgage loans and limited partnerships with debt-like characteristics, expected to produce additional yields [38] - The company is well-positioned to withstand market downturns and purchase higher-yielding securities opportunistically [62] - The company is focusing on growing its middle management count to improve agent recruiting, onboarding, and training [67] Management Commentary on Operating Environment and Future Outlook - The company expects continued excess mortality for the remainder of 2023 and into the next couple of years [15] - The company anticipates higher investment income from commercial mortgage loans and limited partnership investments, contributing to a higher midpoint of earnings guidance for 2023 [65] - The company expects net operating income per share for 2023 to be in the range of $10.37 to $10.57 [65] - The company is monitoring the impact of new Alzheimer's drugs on Medicare supplement rates and will incorporate estimates into 2024 rate increases [130] Other Important Information - The company repurchased 780,000 shares in Q2 2023 for a total cost of $84 million, with an average share price of $107.26 [44] - The company expects parent company excess cash flow for 2023 to be between $420 million and $440 million, available for shareholder returns [45] - The company's fixed maturity portfolio has a net unrealized loss position of approximately $1.6 billion, primarily due to interest rate-driven market conditions [133] Q&A Session Summary Question: Impact of First Republic Bank losses on the investment portfolio - The company took a $30 million after-tax provision for credit loss related to First Republic Bank [55] - The allowance for credit losses in the fixed maturity portfolio increased by $40 million in Q2 2023, primarily due to First Republic Bank losses [59] Question: Growth in Liberty National life sales - The growth in Liberty National life sales is primarily driven by significant double-digit agent growth, which started accelerating in the latter half of 2022 [17] Question: Impact of inflation on direct-to-consumer sales - The company noted that sales in the direct-to-consumer channel are subject to inflationary pressures, particularly on marketing and distribution costs [98] - However, electronic sales in the direct-to-consumer channel grew 4% YoY, offsetting declines in traditional print media [19] Question: Excess mortality and its impact on financials - The company is seeing continued excess mortality, though slightly less than anticipated, resulting in a $2.4 million remeasurement gain in Q2 2023 [112][122] - The company expects excess mortality to continue for the remainder of 2023 and into the next couple of years [15] Question: Impact of new Alzheimer's drugs on Medicare supplement rates - The company is monitoring the potential impact of new Alzheimer's drugs and will incorporate estimates into 2024 rate increases [130] Question: Share repurchase program and capital position - The company repurchased 780,000 shares in Q2 2023 and expects to continue share repurchases as the primary use of excess cash flows [44][46] - The company has sufficient liquidity to maintain its share repurchase program and dividend payments, even under stress test scenarios [57]