Globe Life Inc. 2026 Q3 Earnings Call

Good morning, everyone. Joining the call today are Frank Svoboda and Matt Darden, our Co-Chief Executive Officers, Tom Kalmbach, our Chief Financial Officer, Mike Majors, our Chief Strategy Officer, and Brian Mitchell, our General Counsel. Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our earnings release 2025 10-K, any subsequent forms 10-Q on file with the SEC. Some of our comments may also contain non-GAAP measures. Please see our earnings release and website for a discussion of these terms and reconciliations to GAAP measures. I will now turn the call over to Frank.

Thank you, Steven, and good morning, everyone. In the third quarter, net income was $361 million, or $4.62 per share, a decrease of 2% over $4.73 per share a year ago. Net operating income for the quarter was $379 million, or $4.84 per share, an increase of 1% over $4.81 per share a year ago. As a reminder, both net income and net operating income are impacted in the third quarter of each year by the annual updating of our assumptions utilized in establishing our policy obligations. As was the case in 2025, we recorded a remeasurement gain related to assumption updates this quarter, reflecting our positive outlook for future policy obligations as our actual claims experience continues to be favorable as compared to those long-term assumptions.

In addition, underwriting results this quarter at United American General Agency division were adversely impacted by a process change at CMS, the government agency that administers Medicare Supplement claims, and high-severity claims at Evry, the developing group health business that is included in United American's results. Matt and Tom will talk more about these items in their comments. On a GAAP reported basis, return on equity through September 30th is 19.7%, and book value per share is $85.35, up 23% from a year ago. Excluding accumulated other comprehensive income, or AOCI, return on equity is 15.9%, and book value per share as of September 30th is $103.62, up 11% from a year ago. Now in our insurance operations. Total premium revenue in the third quarter grew 7% over the year ago quarter. For the full year, we expect total premium revenue growth to be around 6.5%.

Life premium revenue for the third quarter increased 2% from the year ago quarter to $865 million. For the full year, we expect life premium revenue to grow between 2.5% and 2.75%, driven by strong premium growth in our American Income and Liberty National divisions. Life underwriting margin was $458 million, down 5% from a year ago, primarily due to fluctuations in the assumption updates related to LDTI. Excluding the impact of the assumption updates, life underwriting margin would have increased by approximately 3%. We anticipate life underwriting margin as a percent of premium to be between 44% and 45% for the full year 2026. In health insurance, premium revenue grew 16% to $447 million, and health underwriting margin was up 7% to $116 million.

For the full year, we expect health premium revenue to grow around 15% and underwriting margin to grow in the range of 4% to 4.5%. The strong premium growth is due to premium rate increases on our Medicare Supplement business, as well as strong sales in both our United American and Family Heritage divisions. We anticipate health underwriting margin as a percent of premium to be in the range of 22% to 24% for the full year. Administrative expenses were $95 million for the quarter, an increase of 6% over the third quarter of 2025. As a percent of premium, administrative expenses were 7.3%. For the full year, we expect administrative expenses to stay at approximately 7.3% of premium, consistent with 2025.

As we mentioned on the last call, we believe that expanding AI use across the company will allow us, over time, to grow our expenses at a rate lower than our revenue growth, given the high transaction volumes inherent in our business. As such, we expect this ratio to be the same or slightly lower in 2027 and intend to reduce it over time. Finally, we are very pleased that we have received reciprocal jurisdiction approvals from our regulators, allowing us to continue with our business plan to transform how we support our growth and to provide added financial flexibility and strength as a parent by providing an additional source of dividend income. Tom will provide more of an update in his comments. I will now turn the call over to Matt for his comments on the third quarter marketing operations.

Thank you, Frank. Now we'll discuss the trends at each of our distributions, and we'll start with our exclusive agencies. At American Income Life, the life premiums were up 4% over the year ago quarter to $470 million, and the life underwriting margin was up 3% to $268 million. Net life sales were $97 million, flat compared to the year ago quarter as increased productivity offset a 7% decline in agent count from a year ago. The average producing agent count for the third quarter was 11,331, which was essentially flat compared to the second quarter of this year. On our last call, we discussed some compensation adjustments that were implemented at the beginning of the second quarter. These adjustments have helped improve agent productivity and stabilize agent count as the agent count has been relatively flat over the past couple of quarters.

Agent compensation design is inherently a complex, dynamic process, as it involves human behavior, and sometimes the behavioral changes do not occur as quickly as we would like. We are rolling out further structural compensation changes later this year to help drive growth in sales, recruiting, and retention. For the full year 2027, we expect mid to high single-digit sales growth, and I am confident that we will increase sales growth for this division as the fundamental conditions necessary for agency growth remain in place. If anything, the current economic environment enhances our value proposition to individuals looking for a better opportunity. The ability to be your own boss, set your own schedule, and create financial security. At Liberty National, the life premiums were up 4% over the year ago quarter to $102 million, while the life underwriting margin was down 27% to $51 million.

The decline was due primarily to fluctuations in LDTI assumption updates as the annual assumption update declined from $35 million in the year ago quarter to only $14 million this quarter. Absent a large decline in assumption update, Liberty's life underwriting margin would have been up 5%, and net life sales were $27 million, up 7% from a year ago quarter, due primarily to agent count growth. Net health sales were $7 million, down 13% from the year ago quarter. As we mentioned last quarter, we have implemented changes to the sales presentation to place additional emphasis on health sales. We expect this to help drive significant growth in health sales going forward.

The average producing agent count for the third quarter was 4,187, up 9% from a year ago, and I continue to be pleased with the agent count growth, and I am confident that this will drive strong sales growth going forward. At Family Heritage, health premiums increased 8% over the year ago quarter to $129 million, and the health underwriting margin increased 12% to $57 million. Net health sales were up 5% to $35 million, and it is primarily driven by increased productivity. The average producing agent count for the third quarter was 1,565, up 1% from a year ago, and agency middle management counts rose for the third quarter in a row, and we are continuing to see improvement in agent retention. These results reinforce our optimism regarding the long-term growth potential at Family Heritage.

In our direct to consumer division, the life premiums were down 1% over the year ago quarter to $243 million, and the life underwriting margin declined 1% to $113 million. Net life sales were $24 million, down 12% from the year ago quarter. As we discussed during the last call, our direct to consumer channel is in a transition period due to a shift in digital advertising, including traditional paid search volume. AI-powered search and consumer behavior are impacting digital marketing for all goods and services, including life insurance. This shift has impacted our recent sales results generated by our digital channels. However, during the second half of the third quarter, we are seeing some encouraging improvement in our inquiry rates, supported by several initiatives, including AI-enabled advertising.

We continue our efforts to adapt to this change and position digital content to be authoritative, visible, and easily interpreted by AI assistants. I am confident that DTC will successfully make this transition as we continue to meet the consumer where they want to be met. In addition, as we have discussed before, the value of this division extends well beyond DTC sales, and this is due to the support it provides to our agencies. We still anticipate that we will meet agency demands by generating approximately 1 million leads this year. Now on to United American General Agency, where here the health premiums increased 29% over the year-ago quarter to $219 million. Overall, I am pleased with the routine operations at United American.

While the health underwriting margin was negative $6 million compared to a margin of $16 million from the year-ago quarter, this loss was driven by the items Frank mentioned earlier. The processing delay at CMS resulted in nearly $7 million of excess Medicare Supplement claims paid during the current quarter but were related to prior periods. In addition, we experienced an unusually high number of high-severity claims at Evry. For the quarter, Evry realized an underwriting loss of nearly $16 million. As a reminder, Evry is included in a United American division as they market group health insurance through brokers. Evry has begun to generate strong sales activity, but as a startup, they do not yet have the scale to meet our target margins. Excluding these two items, United American's health underwriting margin would have been a positive $16 million, or approximately 7% of premium.