Globe Life posts another strong quarter as legal, regulatory woes mount
Main takeaway: In another quarter repeating a familiar narrative for Globe Life, the insurer posted strong earnings amid a flurry of disturbing allegations.
Co-CEOs Frank Svoboda and J. Matt Darden met with Wall Street analysts today to discuss the insurer’s Q3 performance. Globe Life and its subsidiaries face various inquiries from the Equal Employment Opportunity Commission, the Securities and Exchange Commission, and the Department of Labor, along with various civil lawsuits.
Darden didn’t bother waiting for the inevitable questions: “There have been no material developments, and while these inquiries are still open, we have responded to the requests received to date, neither [the SEC or DOL] has asserted any claims or made any allegations against Globe Life or [subsidiary American Income Life].”
At least three short-sellers and other research firms have issued reports accusing brokers at subsidiary American Income Life of widespread sexual harassment and insurance fraud, including writing policies for dead and fictitious people, and an alleged kickback scheme that netted millions for senior executives.
Last week, the insurer revealed that it is being extorted by a hacker who stole customers’ sensitive data.
In a regulatory filing Thursday with the Securities and Exchange Commission, Globe Life said it “recently received communications” from an unknown entity seeking to extort money from the company in exchange for not disclosing data stolen from its systems.
The extortion threat is apparently related to a June data breach self-reported by the insurer. In an ensuing SEC filing, Globe Life said it “initiated a review of potential vulnerabilities related to access permissions and user identity management for a Company web portal that likely resulted in unauthorized access to certain consumer and policyholder information.”
Darden provided no new information on the data breach or the ensuing extortion threat.
“We are working with federal law enforcement in an active investigation. As you can understand, out of respect for this process, we will not be getting into specifics and have nothing further to add,” he said. “While these investigations are ongoing, there has been no material impact on the company’s systems and business operations.”
Globe Life officials hoped to put the controversies behind them with a second-quarter audit that cleared the company of wrongdoing.
By the books, the McKinney, Texas-based Globe Life said it had profit of $3.44 per share during the third quarter. Earnings, adjusted for investment costs, were $3.49 per share.
The results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $3.05 per share.
Strong agent count cited
Additional takeaways: Globe Life relies on a strong agent count as an indicator of financial health, Darden said.
At American Income, life premiums were up 7% over the year-ago quarter to $428 million and life underwriting margin was up 22% to $221 million. Net life sales were $97 million up 19% from a year ago, “primarily due to the strong growth in agent count,” Darden said.
The average producing agent count for the third quarter was 12,031, up 10% from a year ago.
“This growth is due to the ongoing recruiting efforts, as well as improvement in new agent retention,” Darden explained. “This agency continues to generate positive momentum.”
At Liberty National, life premiums were up 6% over the year-ago quarter to $94 million and life underwriting margin was up 63% to $45 million. Net life sales increased 1% to $24 million and net health sales were $8 million, down 6% from the year-ago quarter. The average producing agent count for the third quarter was 3,794, up 14% from Q3 2023.
“Liberty National continues to generate strong agent count growth, which is driven by our investments in technology and the growth in middle management,” Darden said. “Despite the flat sales for the quarter, I am very pleased and optimistic with the trends at Liberty.”
At Family Heritage, health premiums increased 8% over the year-ago quarter to $108 million and the underwriting margin declined 4% to $34 million. Net health sales were up 16% to $29 million due to an increase in agent count and agent productivity, Darden said. The average producing agent count for the third quarter was 1,429, up 8% from a year ago.
Direct-to-consumer life sales were down 1% to $246 million, while life underwriting margin increased 40% to $88 million. Net life sales were $24 million, down 9% from the year ago quarter.
“The value of our direct-to-consumer business is not only those sales directly attributable to this channel, but the significant support that is provided to our agency business through brand impressions and sales leads,” Darden explained. “During 2025 we anticipate we will generate over 750,000 leads, which will be provided to our three exclusive agencies from the direct-to-consumer division.”
Future outlook
Thomas P. Kalmbach is chief financial officer for Globe Life. During Q3, the insurer executed two external reinsurance transactions, he said. The first amended an existing financial reinsurance agreement, and the second will reinsure approximately $460 million of in-force annuity reserves, which is expected to take effect on Nov. 1.
“We continue to evaluate the opportunity to manage capital under an economic framework available in Bermuda, and we expect to conclude this work in 2025,” Kalmbach added.
Financial overview
Total revenue: $1.46 billion ($1.38 billion in Q3 2023)
Net income: $303 million ($257 million in Q3 2023)
Earnings per share: $3.49 ($2.71 in Q3 2023)
Share repurchases: 5.8 million shares at a cost of $580 million
Stock price movement: Shares were up about 1% at midday Thursday
Segment performance
Life insurance: Life insurance accounted for 81% of the company’s insurance underwriting margin for the quarter and 70% of total premium revenue. Net sales of life insurance increased 10% for the quarter.
Darden: “At the midpoint of our 2025 guidance, we expect sales growth for the full year of 2025 to be as follows: For life sales, we expect American Income for high-single-digit growth, Liberty National, low-double-digit growth and direct-to-consumer, low-to-mid-single-digit growth.”
Health insurance: Health insurance accounted for 18% of the company’s insurance underwriting margin for the quarter and 30% of total premium revenue. Net health sales increased 8%.
Darden projected “low-double-digit growth” for health sales across all subsidiaries.
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