Globe Life Inc. (NYSE:GL) Q4 2024 Earnings Call Transcript

Globe Life Inc. (NYSE:GL) Q4 2024 Earnings Call Transcript February 6, 2025

Operator: Welcome to the Globe Life fourth quarter 2024 earnings release conference call. My name is Alan, and I’ll be your coordinator for today’s event. Please note this call is being recorded. And for the duration, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero, and you’ll be connected to an operator. I will now turn you over to your host, Stephen Mota, senior director of investor relations, to begin today’s conference. Thank you.

Stephen Mota: Thank you. 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, 2023 10-Ks, and subsequent Form 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. I will now turn the call over to Frank.

Frank Svoboda: Thank you, Stephen, and good morning, everyone. In the fourth quarter, net income was $255 million, or $3.01 per share, compared to $275 million, or $2.88 per share, a year ago. Net operating income for the quarter was $266 million or $3.14 per share, an increase of 12% from a year ago. On a GAAP reported basis, return on equity through December 31st is 21.7%, and book value per share is $62.50. Excluding accumulated other comprehensive income or AOCI, return on equity is 15.1%, and book value per share as of December 31st is $86.40, up 13% from a year ago. In our life insurance operations, premium revenue for the fourth quarter increased 4% from the year-ago quarter to $823 million. Life underwriting margin was $336 million, up 10% from a year ago, primarily driven by premium growth and lower overall policy obligations.

In 2025, we expect life premium revenue to grow at the midpoint of our guidance range of 4.5% to 5%, compared to 4% growth for 2024. As a percentage of premium, we anticipate life underwriting margin to be between 40% and 42%. In health insurance, premium revenue grew 7% to $358 million, while health underwriting margin declined 6% to $91 million, due primarily to higher claim costs at United American resulting from higher utilization. In 2025, we expect health premium revenue to grow in the range of 7.5% to 8.5%, compared to 6.5% growth for 2024. We also expect health underwriting margin as a percent of premium to be between 25% and 27%. We are pleased with the overall premium growth we saw in 2024, as the 4.7% growth in total premium income was well above the 3.4% growth rate in 2023.

This is especially encouraging as we come out of a high inflationary period that has put stress on the US consumer, especially those in the demographic we serve, and demonstrates the resiliency of our business. Due to the continued efforts of our sales and conservation teams, we anticipate this growth rate to accelerate and be even higher in 2025. Administrative expenses were $91 million for the quarter. The increase is primarily due to higher information technology costs related to maintaining IT software and services, employee costs, and legal expenses. While our expenses in the fourth quarter were higher than prior quarters, they were largely in line with our expectations. In 2025, we expect administrative expenses to be approximately 7.4% of premium.

Matt Darden: I will now turn the call over to Matt for his comments on the fourth quarter marketing operations. Thank you, Frank. At American Income Life, life premiums were up 7% over the year-ago quarter to $433 million. Life underwriting margin was up 9% to $199 million. In the fourth quarter of 2024, net life sales were $93 million, and this is up 22% from a year ago, primarily due to increased productivity and agent count growth. The average producing agent count for the fourth quarter was 11,926, up 7% from a year ago. This growth is due to the continued focus on recruiting and improved new agent retention. And I continue to be very pleased by the momentum at American Income. At Liberty National, our life premiums were up 5% over the year-ago quarter to $94 million, and the life underwriting margin was up 8% to $34 million.

Net life sales increased 1% to $26 million, while net health sales were $9 million, down 5% from the year-ago quarter. The average producing agent count for the fourth quarter was 3,743, up 11% from a year ago. And I’m excited to see the continued agent count growth at Liberty National. This is primarily driven by our recruiting activity and agency middle management growth. And I am confident that this growth in agent counts and agency middle management will drive strong sales growth in 2025. At Family Heritage, the health premiums increased 8% over the year-ago quarter to $111 million, and health underwriting margin increased 12% to $40 million. Net health sales were up 6% to $27 million, due primarily to an increase in agent count. The average producing agent count for the fourth quarter was 1,512, up 11% from a year ago.

And I continue to be pleased to see that agent count growth, which is driven by this agency’s efforts in recent quarters to emphasize recruiting and middle management development. Our direct-to-consumer division at Globe Life, life premiums were down 1% over the year-ago quarter, to $245 million, while life underwriting margin increased 20% to $71 million. Net life sales were $23 million, down 11% from the year-ago quarter. Now, as we’ve mentioned previously, the continued decline in sales is primarily due to lower customer inquiries as we have reduced our marketing spend on certain campaigns that did not meet our profit objectives as a result of higher distribution costs. Our focus in this area is having a positive impact on our overall margin as we will continue to focus on maximizing the underwriting margin dollars on new sales by managing the rising advertising and distribution costs associated with acquiring new business.

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. As we mentioned last quarter, we expect this division to generate over 750,000 leads during 2025, which will be provided to our three exclusive agencies. At United American General Agency, health premiums increased 9% over the year-ago quarter to $151 million, driven by strong prior year sales growth of 23%. Health underwriting margin was $5 million, down approximately $9 million from the year-ago quarter due to higher claim costs resulting primarily from higher utilization. For the full year 2025, we anticipate mid-single-digit growth in our underwriting margin due to strong sales and premium pricing actions.

Net health sales were $30 million, up 7% over the year ago. I’d like to discuss our projections. Based on the recent trends in our experience with our business, we expect the average producing agent count trends for the full year 2025 to be as follows: at American Income, some mid-single-digit growth; at Liberty National, low double-digit growth; and at Family Heritage, also low double-digit growth. We’d also like to reaffirm our life and health sales guidance we gave on our last earnings call. Net life sales for 2025 are expected to be as follows: American Income, high single-digit growth; Liberty National, low double-digit growth; our direct-to-consumer division, low to mid-single-digit growth. Now for health sales, we expect Liberty National, Family Heritage, and United American General Agency to all have low double-digit growth.

Now before I turn the call back over to Frank for investment operations, I’d like to make a few brief comments regarding the inquiries made by the SEC and the DOJ that we have previously discussed. These inquiries are still open, there have been no material developments, and neither agency has asserted any claims or made any allegations against Globe Life or AIL. And we’re not aware of any actions being contemplated by the SEC. And with respect to the EEOC matter, as of now, there have been no material developments to share outside of what was disclosed within our 10-Q as filed on November 6, 2024. And to the extent there’s further information to share on any of these items, we will update you accordingly. I’ll turn the call back now to Frank.

Frank Svoboda: Thanks, Matt. We’ll now turn to the investment operations. Excess investment income, which we define as net investment income less only required interest, was $38 million, up $3 million from the year-ago quarter. Investment income was $282 million, up 4% or $11 million from the year-ago quarter. The increase is largely due to the 3% growth in average invested assets over that period, and to a lesser degree, higher interest rates. Required interest is up 3.5% over the year-ago quarter, in line with the growth in average policy liability. For the full year 2025, we expect net investment income to be fairly flat and required interest to grow around 2.5%. The growth in both our average invested assets and our average policy liabilities is lower than historical levels due primarily to the reinsurance of approximately $460 million of our in-force annuity reserves that we noted on our last call.

This agreement was effective November 1st. In addition, the impact of higher subsidiary dividends to the parent in 2025 will also contribute to lower average invested asset growth. As such, we anticipate excess investment income to be flat to down 15%. Now regarding our investment yield. In the fourth quarter, we invested $378 million in investment-grade fixed maturities, primarily in the industrial and financial sectors. These investments were at an average yield of 5.83%, at an average rating of A minus, and an average life of 35 years. We also invested approximately $52 million in commercial mortgage loans and limited partnerships with debt-like characteristics, and an average expected cash return of approximately 8.5%. None of our direct investments in commercial mortgage loans involve office property.

These non-fixed maturity investments are expected to produce additional cash yield over our fixed maturity investments, still being in line with our conservative investment philosophy. For the entire fixed maturity portfolio, the fourth quarter yield was 5.27%, up four basis points from the fourth quarter of 2023, and up two basis points from the third quarter. As of December 31st, the portfolio yield was 5.25%. Including the cash yield from our commercial mortgage loans and limited partnerships, the fourth quarter earned yield was 5.41%. Now regarding the investment portfolio. Invested assets are $21.2 billion, including $18.8 billion of fixed maturities at amortized cost. Of the fixed maturities, $18.3 billion are investment grade with an average rating of A minus.

Overall, the total fixed maturity portfolio is rated A minus, same as a year ago. Our fixed maturity investment portfolio has a net unrealized loss position of approximately $1.7 billion due to the current market rates being higher than the book yield on our holdings. As we have historically noted, we are not concerned by the unrealized loss position, as it’s mostly interest rate driven and currently relates entirely to bonds with maturities that extend beyond ten years. We have the intent and, more importantly, the ability to hold our investments to maturity. Bonds rated BBB comprised 46% of the fixed maturity portfolio, compared to 48% from the year-ago quarter. This percentage is at its lowest level since 2007. As we have discussed on prior calls, we believe the BBB securities we acquired generally provide the best risk-adjusted capital-adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets.

While the percent of our invested assets comprised of BBB bonds might be a little higher than some of our peers, remember that we have little or no exposure to other higher-risk assets such as derivatives, equities, residential mortgages, CLOs, and other asset-backed securities. The loan investment grade bonds remain at historical lows at $525 million compared to $530 million a year ago. The percentage of below investment grade bonds to total fixed maturities is just 2.8%. At the midpoint of our guidance, for the full year 2025, we expect to invest approximately $900 million to $1.1 billion in fixed maturities at an average yield of 5.5% to 5.7%, and approximately $300 million to $500 million in commercial mortgage loans and limited partnership investments, with debt-like characteristics, and an average expected cash return of 7% to 9%.

Now I will turn the call over to Tom for his comments on capital and liquidity.

Tom Kalmbach: Thanks, Frank. Let me spend a few minutes discussing our share repurchase program, available liquidity, and capital position. The parent began the year with liquid assets of approximately $48 million and ended the year with approximately $90 million. In the fourth quarter, the company repurchased approximately 338,000 of Globe Life Inc. common stock for a total cost of approximately $36 million at an average share price of $105.37. This was slightly higher than we had anticipated in the quarter. For the full year, we purchased 10 million shares for a total cost of $946 million at an average share price of $93.76. Including shareholder dividend payments of $85 million, the company returned slightly more than $1 billion to shareholders during 2024.

In addition to the liquid assets held by the parent, the parent company will generate excess cash flows during 2025. The parent company’s excess cash flow, as we define it, results primarily from dividends received by the parent from its subsidiaries, less interest paid on debt. Although our statutory results are not final, we anticipate the parent company’s excess cash flow for the full year 2025 will be approximately $785 million to $835 million. Excess cash flows are anticipated to be higher in 2025 than in 2024, primarily as a result of higher statutory earnings in 2024 than in 2023, as well as the impact of previously discussed reinsurance transactions completed in 2024. Statutory income in 2024 is anticipated to be higher than statutory income in 2023, primarily from favorable investment results, statutory reserve changes, improved mortality results, and lower realized losses.

At the midpoint of our guidance, anticipated excess cash flows are expected to be used to distribute approximately $85 million to shareholders in the form of dividend payments, and reduce commercial paper to more historical levels, with the remainder expected to be used for share repurchases in the range of $600 million to $650 million, absent an alternative use of higher return to our shareholders. We anticipate liquid assets at the parent of around $60 million at the end of the year. We still believe share repurchases provide the best return or yield to our shareholders. Thus, we anticipate share repurchases will continue to be the primary use of the parent’s excess cash flows after the payment of shareholder dividends. With regards to capital levels at our insurance subsidiaries, our goal is to maintain our capital levels necessary to support our current ratings.

Globe Life targets a consolidated company action level RBC in the range of 300% to 320%. Since our statutory financial statements are not yet final, our consolidated RBC ratio is not yet known. However, we anticipate the final 2024 RBC ratio will be within our targeted range. Now with regards to policy obligations for the current quarter, as we discussed on prior calls, life and health assumption changes were made in the third quarter. No assumption changes were made in the fourth quarter. The supplemental financial information available on our website provides an exhibit that details the quarterly remeasurement gain or loss by distribution channel. For the fourth quarter, life obligations continue to be favorable when compared to our assumptions of mortality and persistency, resulting in lower policy obligations and a $19 million remeasurement gain related to experience fluctuations.

For the full year, encompassing both assumption changes and experience-related fluctuations, the remeasurement gain from the life segment resulted in $107 million of lower life policy obligations and for the health segment, $3 million of higher health policy obligations. In recent quarters, mortality trends in the life segment have been favorable relative to our long-term assumptions. If mortality continues to develop favorably over the next couple of quarters, life obligations will be favorable relative to our long-term assumptions, resulting in life remeasurement gains. Conversely, if mortality experience is higher than our long-term assumptions, we will experience life remeasurement losses. Recent mortality and lapse experience will inform future updates to long-term assumptions, which we intend to make in the third quarter of 2025.

For the health segment, we anticipate health obligations for our Medicare supplements and group retiree health products will continue to be elevated given recent claim trends outpacing premium rate increases. Finally, with respect to our earnings guidance for 2025, for the full year 2025, we estimate net operating earnings per diluted share will be in the range of $13.45 to $14.05, representing 11% growth at the midpoint of our range. The $13.75 midpoint is higher than our previous guidance due to the favorable mortality experience we’ve seen in recent quarters, and the anticipation that these favorable mortality trends will continue into 2025, resulting in improved life underwriting margins. Those are my comments. I will now turn the call back to Matt.

Matt Darden: Thank you, Tom. Those are our comments, and we will now open the call up for questions.

Operator: Thank you. If you would like to ask a question or make a contribution on today’s call, please press star one on your telephone keypad. To withdraw your question, please press star two. You will be advised when to ask your question. We will take our first question from Jimmy Bhullar, JPMorgan. Your line is open. Please go ahead.

Jimmy Bhullar: Hey. Good morning. So first, just a question on your results. I thought overall, most of the business metrics were good, but one of the negatives was just a little bit of an increase in first-year lapses in the direct channel and also in Liberty. And so hoping if you could discuss what’s really causing that and do you expect that trend to continue to get worse as you get through 2026 or 2025?

Frank Svoboda: Can we take that?

Q&A Session

Matt Darden: Yeah. And, Jimmy, I think a couple of things. I think we were pleased overall with that lapse experience has stabilized, and AIL actually lapse rates went down a little bit. Overall, from Liberty, they went down a little bit from sequential quarters. So I think there’s some good news there that the higher lapse rates that we had seen had stabilized a bit. On DTC, you know, we are seeing a little bit higher lapse rates than we had historically. And some of that is mix of business that quite a bit of our new business is coming from the Internet channel versus our more of our mail and insert media channels. So those digital channels do experience a little bit higher rates. I think that’s part at least part of the story there.

Yeah. One thing, Jimmy, I would just add to that. Really, if you go back and look at American Income and especially kind of their average first-year lapse rates, especially pre-pandemic, you know, we’re right in line with, you know, where that it always fluctuates, of course, on a quarterly basis. And really, it’s not really that measurably higher than even the long-term average since, you know, for the last, you know, ten, fifteen years.

Jimmy Bhullar: Okay. And then on the regulatory investigation, especially on the DOL and the SEC. From the outside, then how does one get finality to this? Because typically, those agencies don’t tend to put out releases when they’re done investigating something unless there’s a fine or something else. But what’s your view on how somebody would get obviously, the passage of time without any new news is a positive. But other than that, how does one get how do how should we see some finality or resolution to this? From the outside.

Matt Darden: Yeah. Thanks, Jimmy. Our intent is to be able to just discuss the conclusion of those inquiries when they happen. Of course, we’re working through those processes as we speak. But you’re right. Generally, the agencies themselves don’t issue something, but our intent would be able to communicate when those inquiries have been concluded at the time that that happens.

Jimmy Bhullar: And then if I just ask one more, on the health business, there was some optimism last year that with the reimbursement rate changes on Med Advantage Plan, maybe there would be more volumes flowing toward med subs. It seems like now the trend could actually end up reversing and the med sup market might shrink a little bit, but what are your thoughts on that given the changes in the administration?

Matt Darden: Yeah. That one’s an interesting one that we want to watch. You know, there’s been some in the new administration that have voiced some optimism around MA plans. But I do believe also there’s a segment of consumers and frankly providers that may be disenfranchised with the structure of Medicare Advantage Plans. And I think that would still could be a benefit to the Medicare supplement market because people still do like choice and, again, there’s certain providers that have not been happy with reimbursements on the MA side. So it’s one of those that we’re watching and seeing. I don’t think it’s too early to conclude one way or another how that market’s going to shake out with the new administration.

Operator: Thank you. We will take our next question from Jake Matthan, B Capital Markets. Your line is open. Please go ahead.

Jake Matthan: Hi. Good morning. Just a first question on your excess cash flow guidance and the higher guidance you gave for 2025. Were you able to quantify the different elements of that across the reinsurance accounting changes, and maybe the favorable underlying results that you mentioned? Trying to get at what how much of the increase was more maybe one-time in nature and how much you would expect to kind of persist into your out-of-year run rate?

Tom Kalmbach: Yeah. So thanks for the question. Yeah. One of the increases is the reinsurance transactions that we did last year. And I indicated on the call that those were worth about $100 million. So we actually did file for an extraordinary dividend and got approval at the end of the year. So that’s providing some additional excess liquidity to the parent in 2025, and that’s reflected in those numbers as well, which incorporates the impact of those reinsurance numbers. The other kind of run rate is statutory earnings are a bit higher because of some valuation manual changes, and there’s a little bit of a catch-up there. And the full-year benefit of that was probably closer to $150 million versus the $120 million that I had estimated last quarter. And that probably cuts in half as we kind of look at it as we go further out into 2025 and beyond.

Jake Matthan: A question on the life margin and the higher guidance there. I guess that’s from experience that flowed through kind of the remeasurement gain. Like I said, I know you had your assumption last quarter. Is there something in particular that’s driving the improved outlook now versus what you had for me out of that ratio?

Frank Svoboda: Yeah. It’s we really saw I think what we saw in the fourth quarter was just some really good mortality experience and especially development on the claims that were incurred in Q3 and Q2. So as, you know, even though you kind of were looking at some of the favorable experience that we were seeing early in the year and that that at least was an input into how we thought about the assumptions. Really, in the fourth quarter, we just we saw some very good experience taking place. And so we continue to have, you know, a pretty sizable remeasurement gain in Q4 just since that was so much better than that long-term assumption that we had in place.

Operator: Thank you. We will take our next question from Elyse Greenspan, Wells Fargo. Your line is open. Please go ahead.

Elyse Greenspan: Hi. Thanks. Good morning. My first question is on buybacks. Should we just think about, you know, that kind of, you know, being evenly spread the guide throughout the four quarters of the year? And then, you know, right, you guys, you know, prior to some of the DOJ, you know, investigations, right, now there was, you know, some deal you guys were considering. Do you, you know, consider, you know, M&A, I guess, kind of returning to the equation in 2025? Embedded within your capital outlook.

Tom Kalmbach: I’ll start with that. Is, you know, we did begin share repurchases again at the beginning of the year. And Yes. Stopped that as we entered into a blackout period, but we would we our plan is to continue kind of our historical practices around share repurchases. Which is, you know, ratable throughout the year. And so it might not be evenly ratable, but, generally, consistent throughout the year.

Frank Svoboda: And then and one of the reasons we do do that is that it it does allow us kind of really manage those cash flows. So if we do see an M&A opportunity, you know, that that we think is really beneficial for the shareholders, then we can, you know, pivot and use some of those cash flows for that. I mean, we will continue to be open to M&A opportunities. You know, and continue as as we’ve talked about on prior calls. You know, really looking for something that helps us to expand our offerings, if you will, in the know, to serve middle-income policyholders, you know, with basic protection products that come with some type of distribution. So we will continue to be, you know, looking for those opportunities and open to those opportunities if they arise.

Elyse Greenspan: Thanks. And then my second question, you know, health utilization, you know, did trend up in the second half of last year. Can you just provide some, you know, kind of color on your thoughts for 2025 there as well?

Frank Svoboda: Yeah. I mean, definitely health utilization was high during the course of 2024, and actually, we saw it get a little bit higher in 2025. Kind of one of the reasons why we’ve adjusted our range for health underwriting margin overall is just that we continue to believe that utilization will continue to run a little bit high. And outpace the rate increases that we’ve actually filed and gotten approved for premium increases in 2025. So, you know, over time, I think we’ll catch up with that. But I think in 2025, we do expect to see utilization.

Operator: Thank you. We will take our next question from Wilma Burdis, Raymond James. Your line is open. Please go ahead.

Wilma Burdis: Good morning. So if I took out the reinsurance and the valuation manual updates, I’m estimating organic expected cash flow of around I think it’s around $550 to $600 million. Is that a good base? And then the $75 million or I guess half of $150 million that you expect to continue in 2026, over what time frame will that persist?

Tom Kalmbach: Yeah. Thanks, Wilma. I think your base is good. I don’t haven’t really finalized 2024 statutory earnings. And so, you know, next quarter, I’ll I could give you a better update on kind of where we think that run rate is. I think one of the things we want to factor in is that investment income is expected to be, you know, fairly flat. So I think that’s going to limit some of that upside. So we’re going to give you an update next quarter on that as well once we finalize statutory earnings. But I think you’re in the ballpark anyway. And then on valuation manual changes. You know, I think we saw in 2024 that was really kind of an impact to the in-force business. And so as the in-force business subsides from the existing in-force business, it will be made up by new business that comes on.

So I think although I don’t have a crystal ball there, I think that $70 million that is the midpoint or half of that is going to decline a little bit over time, but I think a lot of that is sustainable additional statutory earnings.

Wilma Burdis: Okay. Thank you. And then could you talk a little bit about what the recruiting and sales environment is like right now from a macro perspective? Middle-income consumers seem to be in a honestly better financial condition. Does that have any impact on sales and or recruitment? And then can you talk a little bit about what you’re seeing before coming up?

Matt Darden: Yeah. Thanks, Wilma. I think, you know, we’re still seeing some strong growth in our recruiting efforts and hiring efforts. And so we anticipate that to continue forward into 2025. And so that’s reflective in the growth numbers that we’re anticipating on our agent count side. And then, of course, that translates into our sales growth. One of the things we just wanted to acknowledge for as an example for American Income, we’re coming off of four prior to Q4, we’re coming off of four quarters of double-digit growth and in some cases very high. You know, up to 20% growth if I go back four quarters ago. And so we’re tempering that a little bit of just maintaining 15% and 20% agent count growth quarter over quarter is a little bit higher than our historical norms.

But, again, I still think we’re going to have a good environment for 2025 if I look at just our momentum across all three agencies coming out of the end of 2024. Then on the sales side, we continue to see growth there. We actually as we look at the new business that we’re selling, we’re having improvements in just the premium on a per policy basis. And so as we’ve discussed before, the macroeconomic environment we seem to be pretty resilient from that is, you know, I go back to when we were experiencing 8% and 9% inflation rates, we were still able to grow both on the recruiting agent count side as well as on the sales side. And so we continue to see our customer base, you know, be very resilient. And I think that just gets back to this marketplace continues to have a significant amount of opportunity with the significant number of people that are underinsured or uninsured in this marketplace and we have a good opportunity to continue to develop sales in that area.

And, you know, as we’ve discussed before, the benefit I think of our policies is the small, you know, their basic protection. They’re easy to understand. They’re designed for middle-income America, and the premiums are small on a relative basis per month, you know, depending on the channel they’re they’re thirty bucks to sixty bucks a month in premium. And so it’s not really price prohibitive to take out those kind of policies for our customers. And I think that gets into the resiliency of our in-force space we talk about. You know, there are lapse rates that we discussed. They move around a little bit, but that’s in a pretty narrow band. As different economic cycles kind of go.

Operator: We will take our next question from John Barnidge, Piper Sandler. Your line is open. Please go ahead.

John Barnidge: Hi. Thank you for the opportunity. My first question is on agent trends, and I appreciate that you gave the guidance for agent growth for the year. But and I understand there’s some seasonality in the fourth quarter with the holidays. We that occurs. But how have first-year agents trended in January essentially, first quarter so far across those channels?

Matt Darden: Yeah. John, you’re right. It’s not unusual around the holidays. So the latter half of Q4 and, you know, frankly, sometimes that leads over into the very first part of Q1. We do have a little bit of seasonality on the recruiting and agent retention side. And so our guides are really reflective of the entire year. And, generally, we see a pickup in particularly in Q2 and within Q3 of strong agent count growth. And so really, we’ve discussed before, we like we talk about it quarter over quarter, but really, like, looking at it on a year-over-year basis. And, you know, what I’m very pleased about is that, you know, we have very high, you know, correlation between producing agent count and our sales. So for example, if you look at a three-year CAGR for American Income, have about an 8% agent count growth and we have about an 8% sales growth over that time frame and similar statistics if you walk through Liberty and Family Heritage.

So our long-term potential is really focused on around that 10% agent count growth and trying to achieve a similar number for sales growth that really drives our expectation for our premium earnings that ultimately are in our results for the year. So I’d say to answer your question, I don’t the fourth quarter activity is kind of what I would expect to be normal from a little bit of seasonality and I think we’re starting off strong for this year around what we would expect and how that builds over time.

John Barnidge: And then on my follow-up question, I know you’re doing some efforts to get a Bermuda platform up. Any update you can provide or any markers on the weigh station we should watch out for? Thank you.

Tom Kalmbach: Yeah. Thanks. The oh, I think we’re on track with our analysis. You know, we had communicated that we update you kind of midyear as far as what our plans are there, and we’re on track to do that. So we’re still pretty good with where we are.

Operator: We will take our next question from Wes Carmichael, Autonomous Research. Your line is open. Please go ahead.

Wesley Carmichael: Hey. Thank you. Good morning. I had a broader question on stock and capital management. But obviously, the stock came under some intense pressure last year and you as a management team took some pretty significant actions and bought back a lot of stock. And I understand your guidance for 2025, but as you sit here today, the stock’s still trading at a pretty significant price earnings multiple discount relative to historical trends. So just curious how you’re thinking about taking any other reinsurance, more significant action, or are you feeling a little bit more business as usual now, or are you waiting on maybe some of these investigations to get closed?

Frank Svoboda: Yeah. Thanks, Wes. As we really do look at it, we really do think that there’s still some opportunities. Clearly, you know, in the valuations of our shares. I do think we will, you know, continue to look really hard at where are there pockets of opportunity for us to, you know, manage that capital? Are there opportunities for us to release some additional capital, you know, over the course of the year? So we are continuing to look at some of those opportunities. And, you know, we still we do think that the stock is a good buy, so we will, you know, be taking a look at that. Now I’d say that, and I think as as as we mentioned earlier, from a timing perspective, largely want to be thinking about, you know, our share purchases coming over the course of the year, and there may be a little bit of, you know, front-end loading on that just a little bit, but for the most part, it helps us to manage cash flows over the course of the year.

But again, I think we’ll continue to look at opportunities and try to be a little bit aggressive with respect to freeing up some additional cash or additional capital in order to take advantage of, you know, current share price.

Wesley Carmichael: I think that’s helpful. And I just had two kind of housekeeping follow-ups. I think in the release, there was some legal accrual of about $12.5 million below the line. That’s a little bit chunkier than it than it’s run. Can you just talk about the nature of what you’re booking there? And my follow-up was just on commercial paper. Can you give us a sense on how much you’re allocating excess cash flows this year for that?

Tom Kalmbach: Yeah. So as you know, Globe Life and its subsidiaries are subject to litigation from time to time. And it’s common in the insurance industry in general. We’ve seen an uptick in litigation claims and expenses over the past several quarters. Well as legal expenses stemming from claims made by recent short sellers. The line item for legal proceedings this quarter includes an estimate of costs associated with settlements of certain litigation claims not related to the DOJ, SEC, or EEOC matters, as well as certain other legal expenses that we incurred. As we are sure you can appreciate, our policy is to refrain from commenting on pending or ongoing legal matters involving the company or any of its subsidiaries, so we’re unable to provide any more detail at this time.

And then with respect to the commercial paper, right now, we’re kind of, you know, we’re looking at trying to bring that down into by the more normal level. Somewhere in the low three hundreds. I think we ended the year around $415 million. So, you know, kind of pointing to around that $100 million or so of, you know, use of that to get it back. And really, we’ll kind of look at that over the course of the year and, you know, look at cash availability and cash flow needs as well. But, you know, we kind of manage that to help again with manage our overall liquidity risk and how we just think of having cash available for our operation. So we’d like to try to get that back into a little bit more of a normal range if we are able to.

Operator: Thank you. We will take our next question from Andrew Kligerman, TD Securities. Your line is open. Please go ahead.

Andrew Kligerman: Hey. Good morning. So my first question is around your shift at American Income to virtual. Clearly, 2024 was really strong in terms of recruiting and sales. And now you said it would moderate a bit this year, but it’s still very good. Right? You said average agent count at AI would be mid-single digit. And then you said life sales would be up at American Income high single digits. And some of that, I think, you mentioned was a reflection of higher policy limits. But I’m kind of curious, like, maybe moving out to 2026 or even longer term, you know, what kind of an impact is the virtual approach versus, you know, in-office having on your recruiting, on your sales. I mean, is this something, you know, where we could see a good pickup in 2026 again?

Matt Darden: Yeah. Thanks, Andrew. You know, we started the virtual sales and virtual recruiting during the height of the pandemic and all that was associated with that. We found such a benefit to it is that we’ve kept that model going forward. And, really, we’re seeing a lot of good activity associated with that. On the agent recruiting side, what we see is that, I think, we’re attracting additional individuals that may not have been interested in a sales opportunity that was face-to-face in a customer’s home. Across the kitchen table, as they would say, is now those sales can be done from the comfort of their home or wherever they may be located. And you can see what’s happening with corporate America with the return back to the office, and you see more and more companies announcing back-to-the-office mandates and the like.

And that’s providing additional tailwind to our opportunity as individuals are looking for flexibility and autonomy and the ability to do that. And so that has definitely benefited our recruiting efforts over the last, you know, many quarters. As I’ve mentioned, you know, I go back to starting in early 2023, you know, we’ve had 20%, 15%, 13%, etc., agent count growth throughout the end of 2023 through 2024. And I think, you know, that’ll continue to be a benefit to us, that virtual environment. And then the same thing happens on the sales side is that the ability for our agents to work leads throughout the area where they’re licensed. So we’ve seen our agents have an uptick in licensing in multiple states. Be able to work leads across state lines.

And so it’s just much more efficient from that perspective if I look at our agent activity. As well as, you know, we’re on the benefit of the consumer has changed. The consumer now is much more used to having virtual interactions, you know, you have virtual interactions with your doctor from a telemed perspective, and there’s a variety of other interactions. And so you have the consumer much more willing, I think, now as compared to prior to 2020 being willing to have sales interactions through a virtual experience as well. So we don’t really see that abating anytime soon. I think that’s just kind of a new normal as we go forward. And so we think that will continue to be a benefit. You know, I’m very pleased with American Income. If I look at as an example, their five-year CAGR from an agent count growth perspective, it’s over 9%.

And that lines up very well with approximately 9% sales growth over that same time frame. So they’re very much in lockstep over a longer-term perspective. And so like we’ve talked about before, we get quarter-to-quarter fluctuations a little bit, but that long-term growth, I believe, is definitely sustainable.

Andrew Kligerman: Very helpful. And then just shifting over to the life underwriting margin, which came in at 41%. And you’re guiding in 2025 to 40% to 42%. That’s pretty nice just given last, you know, in 2023, it was about 38%. And as I kind of went through the supplement, it looks like a lot of the benefit this year came from direct to consumer. Was that is that the right observation? Have you kind of corrected for something indirect to consumer? And do you think that 41% is very sustained or 40% to 42% is sustainable beyond 2025?

Frank Svoboda: Yeah. Andrew, I think you are right in the observation that we really are seeing, you know, some favorable developments on direct to consumer, especially. It’s been, you know, and that tends to be the segment or the distribution, you know, that’s a little bit more of a ensures a wider swath of the US population. And does, of course, have tends to have higher mortality in general than, you know, each of the other distributions have. So as there’s, you know, coming out of the COVID, you know, we’re seeing a lot of excess deaths and that’s what we’re seeing in the US population as a whole. And so it’s as we’ve been seeing here over the last couple of years, especially 2024, I mean, our paid claims in 2024, you know, have been basically flat, if not dropped a little bit from 2023, while at the same time, you know, premium increased in 2024, you know, by 4%.

So we’re really seeing that kind of really favorable experience, and especially in the last couple of quarters here of this year. Q3 and Q4, we just saw a really good experience. And low levels of claims. And in certain causes of death, actually, you know, seeing that it had below some of those pre-pandemic levels. And so we’ll see how I think with respect to 2025, it really depends on will we continue to see that, you know, continuing level of favorable mortality persist? Or is it a fluctuation, you know, that we’ve just happened to maybe be seeing here over the last few quarters? That’s within the range kind of takes into account, you know, whether or not it’s it we continue to see some of that favorable mortality or not. And, we’re, of course, hopeful that it’s that we will and then, you know, we’ll be and go from there.

And, again, beyond 2025, you know, there’s a lot of things to kind of work their way out here, and we’ll kind of see, you know, we’ve talked for the last couple of years of where there’s where there’s some pull forward of deaths from COVID, and would that result in some better mortality? And of course, at the time, it was like, well, it’s always possible but it’s really too early to tell. And again, maybe we are seeing a little bit of that, but again, we’re kind of still waiting to see how that kind of pans out here over the next several quarters, and then we’ll get a sense of whether we think that’ll persist or not.

Andrew Kligerman: I mean, just a quick follow-up on that. Just more specifically to direct to consumer, sounds like you’re gaining a little confidence because you guided to low to mid-single-digit sales growth. Is that the right way to think about it?

Matt Darden: Yeah. We’re really looking at we think we’ve kind of bottomed out so to speak, a new level and been able to kind of maintain and grow a little bit from here. As we’ve talked about before, you know, that that is one of our areas that is a little bit more price sensitive. It’s a passive sale that has a little bit more sensitivity to competition and economic, so to speak. So but we do think and that’s why we got it to that what we did is we do think we’re kind of bottoming out here and being able to have a new level to grow from.

Andrew Kligerman: Thanks so much.

Operator: We will take our next question from Suneet Kamath, Jefferies. Your line is open. Please go ahead.

Suneet Kamath: Of course. Thank you. I know you hit on this earlier, but I just wanted to follow-up. On potential reinsurance transaction. Should we assume that maybe things are on hold a little bit until you get your Bermuda subsidiary or that whole strategy set up? Or could you be contemplating doing something even before that happens?

Tom Kalmbach: I think we’ll consider other opportunities, but I think, really, our focus quite a bit on that Bermuda, you know, completing our analysis on the Bermuda subsidiary and making some final decisions there. But we’ll be we’re open to some other reinsurance opportunities if they make sense to us. So but I think that’s it’s fair that our priority is on the Bermuda.

Frank Svoboda: Yeah. And that’s why one of the other I would add that I mean, there’s always some transition, but as Tom has talked about, Bermuda takes a little bit of time to get in place and for there actually to get some, you know, measurable benefits, you know, from that type of transaction. So we’re at least, you know, open to and thinking about, you know, is there something kind of in the interim that helped us to kind of we can do something that bridges the gap and gives us some benefits a little bit earlier.

Suneet Kamath: Okay. That makes sense. So maybe Bermuda is more of a 2026 kind of story than a 2025 story?

Tom Kalmbach: Yeah. I think it gives a little bit of benefit in 2026. I think the real benefit comes in 2027 once we have two full years of financials for Bermuda sub that we can get reciprocal jurisdiction, which is one of the requirements for doing that.

Frank Svoboda: Yeah. So we really kind of look at that as being a real, you know, we’re optimistic at this point in time, but as far as it being a, you know, a really good long-term solution, if you will, or opportunity for us.

Suneet Kamath: Got it. And then my second question just on underwriting and remeasurement. So are you factoring in remeasurement gains into your plan for 2026, or are we sort of on hold until we go through the unlocking assumption in the third quarter, and then we kind of see what happens there?

Tom Kalmbach: Yeah. Our range is intended to encompass whether we continue to see favorable mortality trends consistent with where we saw them late in 2024. Or they come back a little bit as well. So that’s really what’s intended in the range. And so I think there’s a little bit of wait and see. We’ve real you know, there’s no question we had a really good quarter in the fourth quarter. And we’d like to just see how that develops and the development of fourth quarter and then the results for first and second quarter will inform any assumption update that we make in the third quarter of 2025.

Suneet Kamath: Okay. And I think you said 2026, but I think you meant 2025.

Tom Kalmbach: I meant 2025. Alright. No. I mean, and that’s Tom answers work for 2025 of the others. Yep. That’s the 2023. Yeah. I’m sorry. Yeah.

Suneet Kamath: Okay. Thanks.

Operator: We will take our next question from Thomas Gallagher, Evercore. Your line is open. Please go ahead.

Thomas Gallagher: Hi. Just, for first question on Bermuda. When you mentioned it might be a really good long-term solution or opportunity beginning in 2027. I assume that means that you see this more as a sustainable kind of ongoing free cash flow benefit, not just like a one-time release. Is that a fair way to think about how you’re approaching it?

Tom Kalmbach: Yeah. Tom, that’s exactly how I’m thinking about it. Is that it becomes part of an overall capital management strategy and strategy to return cash to shareholders.

Frank Svoboda: It really goes, Tom, to just think about capital requirements around the liability side of our balance sheet. And the amount of managing that a little bit more efficiently, you know, through that jurisdiction.

Thomas Gallagher: And would it would you be looking to fund it all yourself, or are you contemplating third-party Sidecar Capital Vehicles?

Tom Kalmbach: Not really considering the third-party sidecar capital vehicles. We think it’s really just really an opportunity for us to do it ourselves that we don’t think we need third-party capital to be able to make that an effective vehicle.

Thomas Gallagher: Gotcha. And then just one question on final question on the health business. How do we think about the timing of repricing? It sounds like what you’ve put in place for repricing is somewhat below trend, and that’s why your margin guide is coming down. But how do I think about the timing of when the periods of repricing occur, is it most of it annual? Is it staggered throughout the year? And should we assume margins start low earlier part of 2025 and gradually get better over the year, and what how do you think that also would play out in 2026?

Tom Kalmbach: Yeah. So the way that we go through rate filings and rate evaluation is we generally will make those determinations in the early third quarter and file those with the regulatory agencies. It’s really the annual process rather than, you know, a continuous process throughout the year. And, you know, we did see quite a bit of the utilization come through in the earlier part of 2024 and the later part of 2023. So a lot of the utilization was reflected in our rate filings that we made with states. It was really kind of the tail end of 2024 that we saw some incremental increases in utilization that didn’t get factored in. So that would get factored in as well as the experience in early 2025 into our rate filings for that we make in 2025, which would then become effective in 2026. And those generally become effective, you know, right around the end of the first quarter, beginning of the second quarter is when those rates become effective.

Thomas Gallagher: Gotcha. And do you think based on the trend they’re seeing, you’ll be you would expect some level of improvement at the 2026 or is stable a better assumption for now?

Tom Kalmbach: Yeah. Yeah. It’s hard to say because it really depends on what happens to utilization. But, you know, I think the plan would be to kind of catch up with that into 2026 and things would be more back to more normal. Now if utilization continues to increase above, you know, what our rate climbs were, we’d see a little bit of a drag there. And if they came back better, we’d see a little bit a positive there as well. So it’s kind of how we’re thinking about it right now. At least that is our hope is that it would, you know, we would catch up, if you will, by 2026.

Thomas Gallagher: Okay. Thanks.

Operator: We will take our next question from Wilma Burdis, Raymond James. Your line is open. Please go ahead.

Wilma Burdis: Somebody covered my question. Thank you.

Operator: There are no further questions on the line. So I will now hand you back to your host for closing or additional remarks.

Matt Darden: Alright. Thank you for joining us this morning. Those are our comments. We will talk to you again next quarter.

Operator: Thank you for joining today’s call. You may now disconnect.