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Dynamic quotes 
OFFON

GLOBE LIFE INC.

(GL)
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Management's Discussion & Analysis

11/04/2021 | 03:33pm EST

Item 2. Management's Discussion and Analysis of Financial Condition and Results

                                 of Operations

The following discussion should be read in conjunction with Globe Life's

Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this report.


"Globe Life" and the "Company" refer to Globe Life Inc. and its subsidiaries and
affiliates.


                             Results of Operations
                                                How Globe Life Views Its

Operations. Globe Life Inc. is the holding company for a group of

                                                insurance companies that 

market primarily individual life and supplemental health insurance to

                                                lower middle to middle 

income households throughout the United States. We view our operations by

[[Image Removed: gl-20210930_g1.jpg]] segments, which are the insurance product lines of life, supplemental health, and annuities, and

                                                the investment segment that 

supports the product lines. Segments are aligned based on their

                                                common characteristics, 

comparability of the profit margins, and management techniques used to

                                                operate each segment.

                                                Insurance Product Line 

Segments. The insurance product line segments involve the marketing,

                                                underwriting, and 

administration of policies. Each product line is further segmented by the

                                                various distribution 

channels that market the insurance policies. Each distribution channel

[[Image Removed: gl-20210930_g2.jpg]] operates in a niche market offering insurance products designed for that particular market.

                                                Whether analyzing 

profitability of a segment as a whole, or the individual distribution channels

                                                within the segment, the 

measure of profitability used by management is the underwriting margin,

                                                as seen below:
                                                Premium revenue
                                                                              (Policy obligations)
                                                                              (Policy acquisition costs and commissions)
                                                                              Underwriting margin
                                                Investment Segment. The

investment segment involves the management of our capital resources,

[[Image Removed: gl-20210930_g3.jpg]] including investments and the management of corporate debt and liquidity. Our measure of

                                                profitability for the 

investment segment is excess investment income, as seen below:

                                                Net investment income
                                                (Required interest on net policy liabilities)
                                                                              (Financing costs)
                                                                              Excess investment income




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Table of Contents

                                GLOBE LIFE INC.
                       Management's Discussion & Analysis
Current Highlights, comparing year-to-date 2021 with 2020.
•Net income as a return on equity (ROE) for the nine months ended September 30,
2021 was 8.9% and net operating income as an ROE, excluding net unrealized gains
on the fixed maturity portfolio(1) was 12.5%.
•Total premium increased 7% over the same period in the prior year. Life premium
increased 9% for the period from $2.0 billion in 2020 to $2.2 billion in 2021.
Life underwriting margin declined 7% from $511 million in 2020 to $477 million
in 2021.
•Net investment income increased 3% over the same period in the prior year.
Excess investment income declined 2% below the prior year.
•Total net sales increased 9% over the same period in the prior year from $473
million to $518 million.
•Book value per share increased 9% over the same period in the prior year from
$77.60 to $84.52. Book value per share, excluding net unrealized gains on the
fixed maturity portfolio(1), increased 9% over the prior year from $52.39 to
$57.11.
•The Company incurred $82 million of COVID-19 net life claims (net of reserves
released upon death) for the nine months ended September 30, 2021 compared with
$40 million during the same period last year.
•For the nine months ended September 30, 2021, the Company repurchased 3.2
million shares of Globe Life Inc. common stock at a total cost of $310 million
for an average share price of $97.17.
The following graphs represent net income and net operating income for the nine
months ended September 30, 2021 and 2020.

  [[Image Removed: gl-20210930_g4.jpg]] [[Image Removed: gl-20210930_g5.jpg]]
As shown in the charts above, net operating income is the consolidated total of
segment profits after tax and as such is considered a non-GAAP measure. It has
been used consistently by Globe Life's management for many years to evaluate the
operating performance of the Company. It differs from net income primarily
because it excludes certain non-operating items such as realized gains and
losses and certain significant and unusual items included in net income. Net
income is the most directly comparable GAAP measure.
(1) Net operating income as an ROE, excluding net unrealized gains on the fixed
maturity portfolio, is considered a non-GAAP measure. Management utilizes this
measure to view the business without the effect of the net unrealized gains,
which are primarily attributable to fluctuation in interest rates on the
available-for-sale portfolio. The impact of the adjustment to exclude net
unrealized gains on fixed maturities, net of tax is $2.8 billion and $2.7
billion for the nine months ended September 30, 2021 and 2020, respectively.

Book value per share, excluding net unrealized gains on the fixed maturity
portfolio, is also considered a non-GAAP measure. Management utilizes this
measure to view the book value of the business without the effect of net
unrealized gains, which are primarily attributable to fluctuation in interest
rates on the available for sale portfolio. The impact of the adjustment to
exclude net unrealized gains on fixed maturities is $27.41 and $25.21 for nine
months ended September 30, 2021 and 2020, respectively.
Refer to   Analysis of Profitability by Segment   for non-GAAP reconciliation to
GAAP.


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                                GLOBE LIFE INC.
                       Management's Discussion & Analysis

Summary of Operations. Net income increased 7% to $567 million during the nine
months ended September 30, 2021, compared with $528 million in the same period
in 2020. This increase was primarily attributed to $45 million of after tax
realized gains on investments in the current period, as compared to $22 million
of after tax realized losses on investments in the year-ago period. See further
discussion under the caption   Investments  . The increase in after tax realized
gains was partially offset by lower life underwriting results due to higher
COVID-19 net life claims. On a diluted per common share basis, net income per
common share for the nine months ended September 30, 2021 increased 11% from
$4.90 to $5.46.

Net operating income is the consolidated total of segment profits after-tax and
as such is considered a non-GAAP measure. Net operating income declined 3% to
$536 million for the nine months ended September 30, 2021, compared with $553
million for the same period in 2020 primarily due to COVID-19 net life claims.
On a diluted per common share basis, net operating income per common share for
the nine months ended September 30, 2021 increased from $5.14 to $5.16.

Despite headwinds with COVID-19, the Company continues to see positive signs in
its core operations, including strong sales, favorable persistency and a strong
ROE, excluding net unrealized gains on the fixed maturity portfolio.

COVID-19. For the nine months ended September 30, 2021, the Company incurred $82
million of COVID-19 net life claims of which $33 million were incurred in the
third quarter. The third quarter COVID-19 net life claims were higher than
anticipated primarily due to the impact of the Delta variant, which resulted in
higher infection rates and death totals than forecasted. Per the Centers for
Disease Control and Prevention (CDC), there were approximately 95,000 U.S.
COVID-19 deaths in the third quarter. Compared to prior quarters, the COVID-19
deaths were concentrated in geographies and younger age groups where the Company
has greater risk exposure. As such, the Company's level of COVID-19 net life
claims increased in the quarter to approximately $3.5 million per 10,000 U.S.
deaths, up from an average of approximately $2 million per 10,000 U.S. deaths
incurred in prior periods. While changes in the average age of deaths from
COVID-19 and the geographies where these deaths occur will affect this ratio, we
anticipate this level of losses per U.S. deaths to continue through the fourth
quarter and be in the range of $3 million to $4 million per 10,000 U.S. deaths
in 2022.

For the full year and at the mid-point of our guidance, we estimate COVID-19 net
life claims will be between $110 million to $125 million based on an estimate of
approximately 75,000 to 125,000 U.S. COVID-19 deaths in the fourth quarter. This
estimate of U.S. deaths is based on various third-party models. The projected
life claims are dependent on this estimate and many other variables, including,
but not limited to, the timing and availability of effective treatments for the
disease, vaccination rates, and effectiveness of vaccines, impact from potential
variants, and the actual ages and geographic areas in which infections and
deaths occur.


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                                GLOBE LIFE INC.
                       Management's Discussion & Analysis

Globe Life's operations on a segment-by-segment basis are discussed in depth
below. Net operating income has been used consistently by management for many
years to evaluate the operating performance of the Company, and is a measure
commonly used in the life insurance industry. It differs from GAAP net income
primarily because it excludes certain non-operating items such as realized gains
and losses and other significant and unusual items included in net income.
Management believes an analysis of net operating income is important in
understanding the profitability and operating trends of the Company's business.
Net income is the most directly comparable GAAP measure.


                      Analysis of Profitability by Segment
                         (Dollar amounts in thousands)
                                                       Nine Months Ended September 30,
                                                 2021              2020          Change         %
   Life insurance underwriting margin     $    477,395$ 511,205$ (33,810)      (7)
   Health insurance underwriting margin        223,619            200,565         23,054       11
   Annuity underwriting margin                   6,541              6,788           (247)      (4)
   Excess investment income                    179,737            183,200         (3,463)      (2)
   Other insurance:
   Other income                                  1,004              1,021            (17)      (2)
   Administrative expense                     (201,715)          (188,194)       (13,521)       7
   Corporate and other                         (31,549)           (34,191)         2,642       (8)
   Pre-tax total                               655,032            680,394        (25,362)      (4)
   Applicable taxes                           (119,468)          (127,021)         7,553       (6)
   Net operating income                        535,564            553,373        (17,809)      (3)
   Reconciling items, net of tax:
   Realized gain (loss)-investments             44,714            (21,936)        66,650
   Realized loss-redemption of debt             (7,358)              (501)        (6,857)

   Non-operating expenses                       (1,894)              (816)        (1,078)
   Legal proceedings                            (4,020)            (2,587)        (1,433)

   Net income                             $    567,006$ 527,533$  39,473        7




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                                GLOBE LIFE INC.
                       Management's Discussion & Analysis
In 2021, the largest contributor of total underwriting margin was the life
insurance segment and the primary distribution channel was American Income Life
Division. The following charts represent the breakdown of total underwriting
margin by operating segment and distribution channel for the nine months ended
September 30, 2021.

[[Image Removed: gl-20210930_g6.jpg]][[Image Removed: gl-20210930_g7.jpg]]


Total premium income rose 7% for the nine months ended September 30, 2021 to
$3.1 billion. Total net sales increased 9% to $518 million, when compared with
the same period in 2020. Total first-year collected premium (defined in the
following section) was $435 million for the 2021 period, compared with $405
million for the 2020 period.

Life insurance premium income increased 9% to $2.2 billion over the prior year
total of $2.0 billion. Life net sales rose 11% to $392 million for the first
nine months of 2021. First-year collected life premium rose 16% to $318 million.
Life underwriting margins, as a percent of premium, declined to 22% in 2021 from
26% in the prior year. Underwriting margin declined to $477 million for the nine
months ended September 30, 2021, 7% below the same period in 2020. The decline
in the life underwriting margin is primarily due to an estimated $82 million of
COVID-19 net life claims incurred during the first nine months of 2021 versus
$40 million during the same period in 2020.

Health insurance premium income increased 4% to $889 million over the prior year
total of $851 million. Health net sales rose 4% to $125 million for the first
nine months of 2021. First-year collected health premium fell 11% to $118
million. Health underwriting margins, as a percent of premium, increased to 25%
in 2021 compared with 24% in 2020. Health underwriting margin increased to $224
million for the first nine months of 2021, 11% over the same period in 2020.

Excess investment income, the measure of profitability of our investment
segment, declined 2% during 2021 to $180 million from $183 million in the same
period in 2020. Excess investment income per common share, reflecting the impact
of our share repurchase program, increased 2% to $1.73 from $1.70 when compared
with the same period in 2020.

Insurance administrative expenses increased 7% in 2021 when compared with the
prior year period. These expenses were 6.6% as a percent of premium during the
first nine months of 2021 and 2020.

For the nine months ended September 30, 2021, the Company repurchased 3.2 million Globe Life Inc. shares at a total cost of $310 million for an average share price of $97.17.



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                                GLOBE LIFE INC.
                       Management's Discussion & Analysis

The discussions of our segments are presented in the manner we view our operations, as described in Note 10-Business Segments.


We use three statistical measures as indicators of premium growth and sales over
the near term: "annualized premium in force," "net sales," and "first-year
collected premium."
•Annualized premium in force is defined as the premium income that would be
received over the following twelve months at any given date on all active
policies if those policies remain in force throughout the twelve-month period.
Annualized premium in force is an indicator of potential growth in premium
revenue.
•Net sales, a statistical performance measure, is calculated as annualized
premium issued, net of cancellations in the first thirty days after issue,
except in the case of Direct to Consumer, where net sales is annualized premium
issued at the time the first full premium is paid after any introductory offer
period has expired. Management considers net sales to be a better indicator of
the rate of premium growth than annualized premium issued.
•First-year collected premium is defined as the premium collected during the
reporting period for all policies in their first policy year. First-year
collected premium takes lapses into account in the first year when lapses are
more likely to occur, and thus is a useful indicator of how much new premium is
expected to be added to premium income in the future.

See further discussion of the distribution channels below for Life and

  Health  .



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  Table of Contents
                                GLOBE LIFE INC.
                       Management's Discussion & Analysis
                                 LIFE INSURANCE

Life insurance is the Company's predominant segment. During 2021, life premium
represented 71% of total premium and life underwriting margin represented 67% of
the total. Additionally, investments supporting the reserves for life products
produce the majority of excess investment income attributable to the investment
segment.

The following table presents the summary of results of life insurance. Further discussion of the results by distribution channel is included below.

                                 Life Insurance
                               Summary of Results
                         (Dollar amounts in thousands)
                                                                Nine Months Ended September 30,
                                                        2021                                          2020                                 Change
                                            Amount               % of Premium             Amount            % of Premium            Amount             %
Premium and policy charges           $       2,165,213                100             $ 1,994,473                100             $ 170,740              9

Policy obligations                           1,532,298                 71               1,340,746                 67               191,552             14
Required interest on reserves                 (547,715)               (25)               (520,207)               (26)              (27,508)             5
Net policy obligations                         984,583                 46                 820,539                 41               164,044             20
Commissions, premium taxes, and
non-deferred acquisition expenses              174,130                  8                 159,369                  8                14,761              9
Amortization of acquisition costs              529,105                 24                 503,360                 25                25,745              5
Total expense                                1,687,818                 78               1,483,268                 74               204,550             14
Insurance underwriting margin        $         477,395                 22             $   511,205                 26             $ (33,810)            (7)



The lower life insurance underwriting margins for the nine months ended
September 30, 2021 are primarily attributed to the increase in COVID-19 net life
claims in the current year. The Company incurred $82 million for the nine months
ended September 30, 2021, compared with $40 million at the same time in the
prior year.

The following table presents Globe Life's life insurance premium by distribution
channel.

                                 Life Insurance
                        Premium by Distribution Channel
                         (Dollar amounts in thousands)
                                                                 Nine Months Ended September 30,                                            Increase
                                                         2021                                         2020                                 (Decrease)
                                              Amount                % of Total             Amount             % of Total            Amount               %
American Income                        $       1,039,047                48             $   930,444                47             $  108,603               12
Direct to Consumer                               734,046                34                 682,978                34                 51,068                7
Liberty National                                 232,118                11                 220,009                11                 12,109                6
Other                                            160,002                 7                 161,042                 8                 (1,040)              (1)
Total                                  $       2,165,213               100             $ 1,994,473               100             $  170,740                9


Annualized life premium in force was $2.91 billion at September 30, 2021, an increase of 7% over $2.72 billion a year earlier.

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                                Globe Life Inc.
                       Management's Discussion & Analysis

An analysis of life net sales, an indicator of new business production, by distribution channel is presented below.

                                 Life Insurance
                       Net Sales by Distribution Channel
                         (Dollar amounts in thousands)
                                                            Nine Months Ended September 30,                                        Increase
                                                      2021                                    2020                                (Decrease)
                                          Amount             % of Total            Amount            % of Total             Amount               %
American Income                        $  216,505                55             $ 182,091                52             $    34,414               19
Direct to Consumer                        115,041                29               126,196                36                 (11,155)              (9)
Liberty National                           52,357                14                36,866                10                  15,491               42
Other                                       8,361                 2                 7,688                 2                     673                9
Total                                  $  392,264               100             $ 352,841               100             $    39,423               11




First-year collected life premium by distribution channel is presented in the
table below.

                                 Life Insurance
              First-Year Collected Premium by Distribution Channel
                         (Dollar amounts in thousands)
                                                            Nine Months Ended September 30,                                        Increase
                                                      2021                                    2020                                (Decrease)
                                          Amount             % of Total            Amount            % of Total             Amount               %
American Income                        $  186,143                59             $ 157,178                57             $    28,965               18
Direct to Consumer                         87,135                27                76,193                28                  10,942               14
Liberty National                           36,984                12                31,953                12                   5,031               16
Other                                       7,262                 2                 7,817                 3                    (555)              (7)
Total                                  $  317,524               100             $ 273,141               100             $    44,383               16


A discussion of life operations by distribution channel follows.


The American Income Life Division markets to members of labor unions and
continues to diversify its lead sources by building relationships with other
affinity groups, utilizing third-party internet vendor leads, and obtaining
referrals to facilitate sustainable growth. This division is Globe Life's
largest contributor to life premium of any distribution channel at 48% of the
Company's September 30, 2021 total. Net sales increased 19% to $217 million
during the first nine months of 2021 compared with $182 million in 2020 for the
same period. The underwriting margin, as a percent of premium, was 31% for the
nine months ended September 30, 2021, down from 32% in the year-ago period. The
lower underwriting margin was primarily due to higher policy obligations as a
result of the pandemic including higher policy obligations due to lower policy
lapses.

This division incurred $19 million in COVID-19 net life claims, representing
approximately 2% of premium, for the nine months ended September 30, 2021
compared with $11 million in COVID-19 net life claims during the year-ago
period. The underwriting margin as a percent of premium, at the mid-point of our
full year 2021 guidance, is expected to slightly decrease from prior year as
result of higher policy obligations due to the pandemic.

This division is anticipating an increase in net sales for the full year 2021 as compared with 2020. Sales growth in our exclusive agencies is generally dependent on growth in the size of the agency force.




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                                Globe Life Inc.
                       Management's Discussion & Analysis

Below is the average producing agent count at the end of the period for the
American Income Life Division. The average producing agent count is based on the
actual count at the end of each week during the year. While the average
producing agent count for the nine months ended September 30, 2021 is up
substantially from the same period in the prior year, we believe this growth
will moderate going forward. Over the past quarter, the agency saw lower new
agent recruiting as many new work opportunities became available in this current
economy. With the attractiveness of selling products virtually, we believe we
will see an increase in agent counts even as COVID-19 moderates.

                         At September 30,                   Change
                      2021                2020        Amount           %
American Income     10,118               8,437       1,681            20



American Income Life continues to focus on growing and strengthening the agency
force, specifically through emphasis on agency middle-management growth and
additional agency office openings. In addition to offering financial incentives
and training opportunities, the agency has made considerable investments in
information technology, including launching a customer relationship management
(CRM) tool for the agency force. This tool is designed to drive productivity in
lead distribution, conservation of business, manager dash boards and new agent
recruiting. Additionally, this division has invested in and successfully
implemented technology that allows the agency force to engage in virtual
recruiting, training and sales activity. Over the past year and through the
pandemic, the agents have shifted to primarily a virtual experience with the
customers and have generated 80-85% of its sales through virtual presentations.
We find this flexibility to be enticing for new recruits as well as a driver of
sustainability for our agency force.

The Direct to Consumer Division (DTC) offers adult and juvenile life insurance
through a variety of marketing approaches, including direct mail, insert media,
and electronic media. In recent years, electronic media production has grown
rapidly as management has aggressively increased marketing activities related to
internet and mobile technology as well as focused on driving traffic to our
inbound call center. The different approaches support and complement one another
in the division's efforts to reach the consumer. The DTC's long-term growth has
been fueled by constant innovation and name recognition. We continually
introduce new initiatives in this division in an attempt to increase response
rates.

While the juvenile market is an important source of sales, it also is a vehicle
to reach the parents and grandparents of juvenile policyholders, who are more
likely to respond favorably to a DTC solicitation for life coverage on
themselves in comparison to the general adult population. Also, both juvenile
policyholders and their parents are low acquisition-cost targets for sales of
additional coverage over time.

DTC net sales declined 9% to $115 million for the nine months ended September
30, 2021 compared with $126 million for the same period in the prior year,
primarily due to the record high net life sales in the prior year at the onset
of the pandemic. While we expect continued strong sales due to the heightened
awareness as to the benefits of life insurance, we anticipate sales levels over
the remainder of 2021 will be lower than the same period in 2020. The lower
sales for the nine months ended September 30, 2021 compared with the same period
in 2020 are reflective of record high sales during 2020 due to unprecedented
demand and lower response rates in 2021. Despite the lower sales in 2021
compared with 2020, we still expect our full year sales to be approximately 19%
over 2019 levels. We expect favorable persistency to continue over the remainder
of this year, leading to higher premiums.

DTC incurred $42 million of COVID-19 net life claims, representing approximately
6% of premium, for the nine months ended September 30, 2021 compared with $22
million for the same period in 2020. DTC's underwriting margin, as a percent of
premium, was 8% for the nine months ended September 30, 2021, which was lower
than the 15% result during the same period in 2020 primarily due to higher
COVID-19 net life claims in the current period. Additionally, this division will
see a decrease in underwriting margin as a percent of premium for the full year
2021 due to higher policy obligations incurred as a result of higher persistency
and higher non-COVID-19 net life claims.




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                                Globe Life Inc.
                       Management's Discussion & Analysis

The Liberty National Division markets individual life insurance to middle-income
household and worksite customers. Recent investments in new sales technologies
as well as recent growth in middle management within the agency are expected to
help continue this growth. The underwriting margin as a percent of premium was
18% for the nine months ended September 30, 2021, down from 24% during the same
period a year ago. The decrease is primarily attributable to higher policy
obligations during the nine months ended September 30, 2021 as a result of the
COVID-19 pandemic compared with the same period a year ago. This division
incurred $18 million of COVID-19 net life claims, representing approximately 8%
of premium, for the nine months ended September 30, 2021 compared with $6
million for the same period in 2020. With the division's ability to return to
face-to-face customer interaction and the option of virtual sales, the Company
is projecting total net life sales to increase for the full year 2021 as
compared to the prior year. However, due to increased policy obligations
expected to be incurred associated with the pandemic, we anticipate the
underwriting margin, as a percent of premium, to be lower for the full year 2021
as compared to 2020.

Below is the average producing agent count at the end of the period for Liberty
National Division. As the division gains momentum in the virtual sales
environment, the agency should see an increase in recruiting of new agents and
an increase in the average producing agent count.
                           At September 30,                Change
                        2021               2020       Amount         %
Liberty National      2,713               2,531       182            7



The Liberty National Division average producing agent count increased 7% over
the prior year comparable period. We continue to execute our long-term plan to
grow this agency through expansion from small-town markets in the Southeast to
more densely populated areas with larger pools of potential agent recruits and
customers. Continued geographic expansion of this agency's presence into more
heavily populated, less-penetrated areas will help create long-term agency
growth. Additionally, the agency continues to help improve the ability of agents
to develop new worksite marketing business. Systems that have been put in place,
including the addition of a customer relationship management (CRM) platform and
enhanced analytical capabilities, have helped the agents develop additional
worksite marketing opportunities as well as improve the productivity of agents
selling in the individual life market. Sales were hindered in the first half of
2020 due to difficulties in agents transitioning to a virtual work environment
after the onset of the COVID-19 lockdown, as well as mandatory shut-downs of
non-essential small businesses which hindered the ability of the division's
agents to prospect at the worksite.

The Other Agencies distribution channels primarily include non-exclusive independent agencies. The Other Agencies contributed $160 million of life premium income, or 7% of Globe Life's total premium income in the nine months ended September 30, 2021, and contributed 2% of net sales for the period.

                                HEALTH INSURANCE

Health insurance sold by the Company primarily includes Medicare Supplement insurance, accident coverage, and other limited-benefit supplemental health products including cancer, critical illness, heart, and intensive care coverage.


Health premium accounted for 29% of our total premium in the first nine months
of 2021, while the health underwriting margin accounted for 32% of total
underwriting margin. Health underwriting margin increased 11% to $224 million
primarily due to lower policy obligations. The Company continues to emphasize
life insurance sales relative to health due to life's superior long-term
profitability and its greater contribution to excess investment income.


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                                Globe Life Inc.
                       Management's Discussion & Analysis

The following table presents underwriting margin data for health insurance.


                                Health Insurance
                               Summary of Results
                         (Dollar amounts in thousands)
                                                              Nine Months Ended September 30,
                                                        2021                                    2020                               Change
                                                                  % of                                   % of
                                             Amount              Premium             Amount             Premium            Amount              %
Premium                                   $  888,902               100            $ 850,877               100            $ 38,025               4

Policy obligations                           564,589                64              546,444                64              18,145               3
Required interest on reserves                (76,288)               (9)             (69,131)               (8)             (7,157)             10
Net policy obligations                       488,301                55              477,313                56              10,988               2
Commissions, premium taxes, and
non-deferred acquisition expenses             70,602                 8               70,304                 8                 298               -
Amortization of acquisition costs            106,380                12              102,695                12               3,685               4
Total expense                                665,283                75              650,312                76              14,971               2
Insurance underwriting margin             $  223,619                25            $ 200,565                24            $ 23,054              11



Globe Life markets supplemental health insurance products through a number of
distribution channels. The following table is an analysis of our health premium
by distribution channel.

                                Health Insurance
                        Premium by Distribution Channel
                         (Dollar amounts in thousands)
                                                         Nine Months Ended September 30,                                        Increase
                                                   2021                                    2020                                (Decrease)
                                       Amount             % of Total            Amount            % of Total             Amount               %
United American                     $  351,544                39             $ 337,269                39             $    14,275                4
Family Heritage                        255,272                29               235,195                28                  20,077                9
Liberty National                       140,874                16               142,230                17                  (1,356)              (1)
American Income                         85,210                10                78,310                 9                   6,900                9
Direct to Consumer                      56,002                 6                57,873                 7                  (1,871)              (3)
Total                               $  888,902               100             $ 850,877               100             $    38,025                4



Premium related to limited-benefit plans comprise $467 million, or 53%, of the
total health premiums, for 2021 compared with $437 million in the same period in
the prior year. Premium from Medicare Supplement products comprises the
remaining $422 million, or 47% for 2021 compared with $414 million, or 49% in
the same period in the prior year.

Annualized health premium in force was $1.27 billion at September 30, 2021, an increase of 8% over $1.17 billion a year earlier.

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Table of Contents

                                Globe Life Inc.
                       Management's Discussion & Analysis

Presented below is a table of health net sales by distribution channel.


                                Health Insurance
                       Net Sales by Distribution Channel
                         (Dollar amounts in thousands)
                                                              Nine Months Ended September 30,                                        Increase
                                                        2021                                    2020                                (Decrease)
                                            Amount             % of Total            Amount            % of Total             Amount               %
United American                          $   36,876                30             $  39,335                33             $    (2,459)             (6)
Family Heritage                              54,111                43                49,314                41                   4,797              10
Liberty National                             18,943                15                15,820                13                   3,123              20
American Income                              13,777                11                14,580                12                    (803)             (6)
Direct to Consumer                            1,707                 1                 1,608                 1                      99               6
Total                                    $  125,414               100             $ 120,657               100             $     4,757               4



Health net sales related to limited-benefit plans comprise $87 million, or 70%,
of the total health net sales, for 2021, compared with $80 million in the same
period in the prior year. Medicare Supplement sales make up the remaining $38
million, or 30% for 2021, compared with $41 million, or 34% in the same period
in the prior year.

The following table presents health insurance first-year collected premium by distribution channel.

                                Health Insurance
              First-Year Collected Premium by Distribution Channel
                         (Dollar amounts in thousands)
                                                              Nine Months Ended September 30,                                        Increase
                                                        2021                                    2020                                (Decrease)
                                            Amount             % of Total            Amount            % of Total            Amount               %
United American                          $   43,038                37             $  59,948                45             $  (16,910)             (28)
Family Heritage                              42,835                36                40,425                31                  2,410                6
Liberty National                             15,049                13                15,399                12                   (350)              (2)
American Income                              14,220                12                13,859                10                    361                3
Direct to Consumer                            2,376                 2                 2,256                 2                    120                5
Total                                    $  117,518               100             $ 131,887               100             $  (14,369)             (11)



First-year collected premium related to limited-benefit plans comprises $73
million, or 62%, of total first-year collected premium, for 2021 compared with
$70 million in the same period in the prior year. First-year collected premium
from Medicare Supplement policies makes up the remaining $45 million, or 38% for
2021, compared with $62 million, or 47% in the same period in the prior year.

A discussion of health operations by distribution channel follows.
The United American Division consists of non-exclusive independent agencies who
may also sell for other companies. The United American Division was Globe Life's
largest health agency in terms of health premium income.
This division is also Globe Life's largest producer of Medicare Supplement
insurance. The United American Division represents 82% of all Medicare
Supplement premium and 96% of Medicare Supplement net sales. For the nine months
ended September 30, 2021, Medicare Supplement premium in this agency rose 4% to
$344 million in 2021 over the prior period total of $330 million. Medicare
Supplement net sales declined 7% to $37 million in 2021 from the prior year
period, primarily as a result of a decrease in individual sales. Underwriting
margin as a percent of premium was 15% for the nine months ended September 30,
2021, up from 14% in 2020.

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Table of Contents

                                Globe Life Inc.
                       Management's Discussion & Analysis

As discussed in   Note 1-Significant Accounting Policies  , the Company acquired
Beazley Benefits, now rebranded as Globe Life Benefits, on August 1, 2021. This
distribution channel will enhance the Company's presence in the worksite market
by offering group supplemental health insurance solutions to employer groups
through brokers. While the acquisition had an immaterial impact on year to date
results, we are optimistic about Globe Life Benefits' ability to contribute
additional health premium and profits in the future. Operating results for Globe
Life Benefits will be included as part of United American Division results.
The Family Heritage Division primarily markets limited-benefit supplemental
health insurance in non-urban areas. Most of its policies include a cash-back
feature, such as a return of premium, where any excess of premiums over claims
paid is returned to the policyholder at the end of a specified period stated
within the insurance policy. Underwriting margin as a percent of premium was 27%
for the nine months ended September 30, 2021, up from 26% in the year-ago period
primarily due to favorable claims experience.
The division experienced a 10% increase in net health sales as compared with the
nine-month period a year ago, primarily due to an increase in agent productivity
and training. The division will continue to launch incentive programs to help
drive an increase in productivity and the number of producing agents.

Below is the average producing agent count at the end of the period for the Family Heritage Division. While the agency has seen a decrease in agent count as compared with 2020, we anticipate that as COVID-19 and the job economy stabilize, agent recruitment opportunities should increase.

                                 At September 30,                 Change
                              2021               2020       Amount          %
Family Heritage Division    1,219               1,282       (63)           (5)



The Liberty National Division represented 16% of all Globe Life health premium
income for the nine-month period ended September 30, 2021. The Liberty National
Division markets limited-benefit supplemental health products consisting
primarily of critical illness insurance. Much of this health business is now
generated through worksite marketing targeting small businesses of 10 to 100
employees. Health premium at Liberty National Division was $141 million for the
nine months ended September 30, 2021, down from $142 million in the year ago
period. We anticipate an increase in net health sales in 2021 at this division
as the Company has been more able to interact face-to-face with customers than
in 2020.

Other distribution. While some of the Company's other distribution channels
market health products, their main emphasis is on life insurance. On a combined
basis, they accounted for 16% of health premium in 2021 and 16% in 2020. The
American Income Life Division primarily markets accident plans. The Direct to
Consumer Division primarily markets Medicare Supplements to employer or
union-sponsored groups. The Direct to Consumer Division net health sales were $2
million for the nine months ended September 30, 2021 and 2020.

                                   ANNUITIES

Annuities represent an insignificant part of our business. We do not currently market stand-alone fixed or deferred annuity products, favoring instead protection-oriented life and supplemental health insurance products.

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  Table of Contents
                                Globe Life Inc.
                       Management's Discussion & Analysis

                                  INVESTMENTS

We manage our capital resources including investments, debt, and cash flow
through the investment segment. Excess investment income represents the profit
margin attributable to investment operations and is the measure that we use to
evaluate the performance of the investment segment as described in Note
10-Business Segments. It is defined as net investment income less both the
required interest on net insurance policy liabilities and the interest cost
associated with capital funding or "financing costs."

Management also views excess investment income per diluted common share as an
important and useful measure to evaluate the performance of the investment
segment. It is defined as excess investment income divided by the total diluted
weighted average shares outstanding, representing the contribution by the
investment segment to the consolidated earnings per share of the Company. Since
implementing our share repurchase program in 1986, we have used $8.5 billion of
excess cash flow at the Parent Company to repurchase Globe Life Inc. common
shares after determining that the repurchases provided a greater risk adjusted
after-tax return than other investment alternatives. If we had not used this
excess cash to repurchase shares, but had instead invested it in
interest-bearing assets, we would have earned more investment income and had
more shares outstanding. As excess investment income per diluted common share
incorporates all capital resources, we view excess investment income per diluted
share as a useful measure to evaluate the investment segment.

Excess Investment Income. The following table summarizes Globe Life's investment income, excess investment income, and excess investment income per diluted common share.

                      Analysis of Excess Investment Income
           (Dollar amounts in thousands, except for per share data)

                                                             Nine Months Ended
                                                               September 30,                              Change
                                                        2021                  2020                Amount              %
Net investment income                              $    713,103$    691,991$  21,112                3
Interest on net insurance policy liabilities:
Interest on reserves                                   (654,058)             (620,473)           (33,585)               5
Interest on deferred acquisition costs                  184,525               176,977              7,548                4
Net required interest                                  (469,533)             (443,496)           (26,037)               6
Financing costs                                         (63,833)              (65,295)             1,462               (2)
Excess investment income                           $    179,737$    183,200$  (3,463)              (2)

Excess investment income per diluted share $ 1.73 $

      1.70          $    0.03                2

Mean invested assets (at amortized cost)           $ 18,846,801$ 17,855,428$ 991,373                6
Average net insurance policy liabilities(1)          10,897,593            10,395,811            501,782                5
Average debt and preferred securities (at
amortized cost)                                       2,060,672             1,841,942            218,730               12


(1)Net of deferred acquisition costs, excluding the associated unrealized gains
and losses thereon.
Excess investment income declined $3 million, or 2%, compared with the year-ago
period. Excess investment income per diluted common share was $1.73 for the nine
months ended September 30, 2021 an increase of 2% over the prior year period .
Excess investment income per diluted common share generally increases at a
faster pace than excess investment income because the number of diluted shares
outstanding generally decreases from year to year as a result of our share
repurchase program.

Net investment income for the nine months ended September 30, 2021 was $713
million or 3% greater than the year-ago period. Mean invested assets increased
6% during the first nine months of 2021 over the same period last year. The
effective annual yield rate earned on the fixed maturity portfolio was 5.23% in
the first nine months of 2021, compared with 5.35% a year earlier. Growth in net
investment income has been negatively impacted in recent years by the low
interest rate environment during which time we have invested new money at yields
lower than our

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Table of Contents

                                Globe Life Inc.
                       Management's Discussion & Analysis

average portfolio yield. In addition, we have reinvested the proceeds from bonds
that matured, were called, or were otherwise disposed of at yield rates less
than what we earned on these bonds before their maturity or disposition. We
currently expect that the average annual turnover rate of fixed maturity assets
will be less than 2% over the next five years and will not have a material
negative impact on net investment income. To help mitigate the decline of the
portfolio yield over the past few years, the Company has decreased the portion
of the investment portfolio allocated to fixed maturity investments by investing
in limited partnerships with debt like characteristics that diversify risk and
enhance risk adjusted capital adjusted returns on the portfolio. The earned
yield on the investment funds for the nine months ended September 30, 2021 was
5.31%. See additional information in   Note 4-Investments  .

Should the current low interest rate environment continue, the growth of the
Company's net investment income will continue to be negatively impacted
primarily due to the investment of new money and proceeds from dispositions at
rates less than the average portfolio yield rate. While net investment income
would grow, it would continue to grow at rates less than the growth in mean
invested assets. For the full year 2021, we currently anticipate the average new
money yield on our fixed maturity acquisitions to be approximately 30 basis
points lower than the rate applicable to our 2020 acquisitions.

Should interest rates, especially long-term rates, rise, Globe Life's net
investment income would benefit due to higher interest rates on new investments.
While such a rise in interest rates could adversely affect the fair value of the
fixed maturities portfolio, we could withstand an increase in interest rates of
approximately 145 to 150 basis points before the net unrealized gains on our
fixed maturity portfolio as of September 30, 2021 would be eliminated. Should
interest rates increase further, we would not be concerned with potential
interest rate driven unrealized losses in our fixed maturity portfolio because
we do not intend to sell, nor is it likely that management will be required to
sell, the fixed maturities prior to their anticipated recovery.

Required interest on net insurance policy liabilities reduces net investment
income, as it is the amount of net investment income considered by management
necessary to "fund" required interest on net insurance policy liabilities, which
is the net of the benefit reserve liability and the deferred acquisition cost
asset. As such, it is removed from the investment segment and applied to the
insurance segments to offset the effect of the required interest from the
insurance segments. As discussed in Note 10-Business Segments, management
regards this as a more meaningful analysis of the investment and insurance
segments. Required interest is based on the actuarial interest assumptions used
in discounting the benefit reserve liability and the amortization of deferred
acquisition costs for our insurance policies in force.

The great majority of our life and health insurance policies are fixed interest
rate protection policies, not investment products, and are accounted for under
current GAAP accounting guidance for long-duration insurance products which
mandate that interest rate assumptions for a particular block of business be
"locked in" for the life of that block of business. Each calendar year, we set
the discount rate to be used to calculate the benefit reserve liability and the
amortization of the deferred acquisition cost asset for all insurance policies
issued that year. That rate is based on the new money yields that we expect to
earn on cash flow received in the future from policies of that issue year, and
cannot be changed. The discount rate used for policies issued in the current
year has no impact on the in force policies issued in prior years as the rates
of all prior issue years are also locked in. As such, the overall discount rate
for the entire in force block of 5.7% is a weighted average of the discount
rates being used from all issue years. Changes in the overall weighted-average
discount rate over time are caused by changes in the mix of the reserves and the
deferred acquisition cost asset by issue year on the entire block of in force
business. Business issued in the current year has very little impact on the
overall weighted-average discount rate due to the size of our in force business.

Since actuarial discount rates are locked in for life on essentially all of our
business, benefit reserves and deferred acquisition costs are not affected by
interest rate fluctuations unless a loss recognition event occurs. Due to the
strength of our underwriting margins, we do not expect an extended low interest
rate environment will cause a loss recognition event.

In comparison to the year-ago period, required interest on net insurance policy
liabilities increased $26 million, or 6%, to $470 million, compared with the 5%
growth in average net interest-bearing insurance policy liabilities.


                                       51

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