Q4 2024 Globe Life Inc Earnings Call
Welcome to the Globe life fourth quarter 2024 earnings release Conference call. My name is 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.
This can be done by pressing star one on your telephone keypad. If you require assistance at any time, Please press star zero and Youll be connected to an operator.
Steven Mora: I'll now hand, you over to your host Steven Mora.
Speaker Change: Senior director of Investor Relations to begin today's conference. Thank you.
Speaker Change: Thank you good morning, everyone, joining the call today, and thanks to better map Darden, our co chief Executive officers <unk>, Our Chief Financial Officer, Mike Majors, Our Chief strategy Officer, Brian Mitchell, Our General Counsel.
Speaker Change: All of our comments or answers to your questions may contain forward looking statements that are provided for general guidance purposes only.
Speaker Change: Please refer to our earnings release 2023, a 10-K and any subsequent forms 10-Q on file with the SEC.
Speaker Change: Some of our comments May also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures I will now turn the call over to Frank.
Frank: Thank you Steven and good morning, everyone.
Speaker Change: In the fourth quarter, net income was $255 million or $3 <unk> per share compared to $275 million or $2 88 per share a year ago.
Speaker Change: Net operating income for the quarter was $266 million or $3 14 per share an increase of 12% from a year ago.
Speaker Change: On a GAAP reported basis return on equity through December 31 is 21, 7% and book value per share is $62 50 pets.
Speaker Change: Excluding accumulated other comprehensive income or <unk> return on equity is 15, 1% and book value per share as of December 31 is $86 45 up 13% from a year ago.
Speaker Change: In our life insurance operations premium revenue for the fourth quarter increased 4% from the year ago quarter to $823 million light.
Speaker Change: Life underwriting margin was $336 million.
Speaker Change: Up 10% from a year ago, primarily driven by premium growth and lower overall policy obligations.
Speaker Change: In 2025, we expect life premium revenue to grow at the midpoint of our guidance in the range of four 5% to 5% compared to 4% growth for 2024.
Speaker Change: As a percentage of premium we anticipate life underwriting margin to be between 40% and 42%.
Speaker Change: At 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 and.
Speaker Change: 2025, we expect health premium revenue to grow in the range of seven five to eight 5% compared to six 5% growth for 2024.
Speaker Change: We also expect health underwriting margin as a percent of premium to be between 25% and 27%.
Speaker Change: We are pleased with the overall premium growth we saw in 2024 as the four 7% growth in total premium income was well above the three 4% growth rate in 2023.
Speaker Change: This is especially encouraging as we come out of the high inflationary periods that has put a stress on the U S consumer, especially those in the demographic, we serve and demonstrates the resiliency of our business.
Speaker Change: Due to the continued efforts of our sales and conservation teams, we anticipate this growth rate to accelerate and be even higher in 2025.
Speaker Change: Administrative expenses were $91 million for the quarter. The increase is primarily due to higher information technology costs related to maintaining IP software and services employee costs and legal expenses.
Speaker Change: While our expenses in the fourth quarter were higher than prior quarters. They were largely in line with our expectations.
Speaker Change: In 2025, we expect administrative expenses to be approximately seven 4% of premium.
Speaker Change: I will now turn the call over to Matt for his comments on the fourth quarter marketing operations. Thank you Frank.
Matt: At American income life life premiums were up 7% over the year ago quarter to $433 million and life underwriting margin was up 9% to $199 million.
Matt: In the fourth quarter of 2024 net life sales were $93 million and this is at 22% from a year ago, primarily due to increased productivity and Hs cap rate.
Matt: The average producing agent count for the fourth quarter was 11926 up 7% from a year ago.
Matt: This growth is due to the continued focus on recruiting and improved new agent retention.
Matt: I continue to be very pleased by the momentum at American income.
Matt: At Liberty National Life premiums were up 5% over the year ago quarter to $94 million.
Matt: And our life underwriting margin was up 8% to $34 million.
Matt: Net life sales increased 1% to $26 million, while net health sales were $9 million down 5% from the year ago quarter.
Matt: The average producing agent count for the fourth quarter was 3743.
Matt: At 11% from a year ago.
Matt: I'm excited to see the continued agent count growth at Liberty National which is primarily driven by our recruiting activity and agency middle management growth and I am confident that this growth in agent Count and agency Middle management will drive strong sales growth in 2025.
Matt: At family Heritage Health premiums increased 8% over the year ago quarter to $111 million and health underwriting margin increased 12% to $40 million.
Matt: Net health sales were up 6% to $27 million due primarily to an increase in agent count.
Matt: The average producing agent count for the fourth quarter was 1512 and this is up 11% from a year ago and I continue to be pleased to see the agent count growth, which is driven by this agency's efforts in recent quarters to emphasize recruiting and middle management development.
Matt: And 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.
Matt: Net life sales were $23 million down 11% from the year ago quarter.
Matt: Now as we've mentioned previously the continued decline in sales is primarily due to lower customer inquiries as we've reduced our marketing spend on certain campaigns that did not meet our profit objectives as a result of higher distribution cost.
Matt: 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 these 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 750000 leads during 2025, which will be provided to our three exclusive agencies.
Matt: At United American General Agency, Here's the health premiums increased 9% over the year ago quarter to $151 million driven by a strong prior year sales growth of 23%.
Matt: Health underwriting margin was $5 million down approximately $9 million from a year ago quarter due to higher claim costs, resulting primarily from higher utilization for.
Matt: For the full year 2025, we anticipate mid single digit growth in our underwriting margin due to strong sales and premium pricing actions.
Matt: Net health sales were $30 million up 7% over the year ago quarter.
Matt: Now I'd like to discuss our projections and based on the recent trends and our experience with our business. We expect the average producing agent count trends for the full year 2025 to be as follows.
Matt: At American income Smid single mid single digit growth at Liberty National low double digit growth and at family Heritage also low double digit growth.
Matt: We'd also like to reaffirm our life and health sales guidance, we gave on our last earnings call and as a reminder, this was not where net net life sales for two seconds.
Matt: Net life sales for 2025 are expected to be as follows American income high single digit growth.
Matt: Pretty national low double digit growth in our direct to consumer division low to mid single digit growth.
Matt: Now for health sales, we expect Liberty National family Heritage and United American General Agency to all have low double digit growth.
Matt: 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 Doj and we have previously discussed.
Matt: While these inquiries are still open there have been no material developments and neither agency has asserted any claims are made any allegations against globe life. Her a L and we're not aware of any actions being contemplated by the FCC or the Doj.
Matt: And with respect to the ESC 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 six 2024 and to the extent there's further information to share on any of these items, we will update you accordingly.
Speaker Change: I will turn the call back now to frame.
Speaker Change: Matt We will now turn to the investment operations.
Speaker Change: Excess investment income, which we define as net investment income less all the required interest was $38 million up $3 million from the year ago quarter.
Speaker Change: Net investment income was $282 million up.
Speaker Change: Up 4% for $11 million from the year ago quarter.
Speaker Change: The increase was largely due to the 3% growth in average invested assets over that period and to a lesser degree higher interest rates.
Speaker Change: Required interest is up three 5% over the year ago quarter in line with the growth in average policy liabilities.
Speaker Change: For the full year 2025, we expect net investment income to be fairly flat and require interest to grow around two 5%.
Speaker Change: 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.
Speaker Change: This agreement was effective November one.
Speaker Change: 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%.
Speaker Change: Now regarding our investment yield.
Speaker Change: 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 583% at an average rating of a minus and an average life of 35 years.
Speaker Change: We also invested approximately $52 million in commercial mortgage loans and limited partnerships with that like characteristics and an average expected cash return of approximately eight 5%.
Speaker Change: None of our direct investments and commercial mortgage loans at both office properties.
Speaker Change: These non fixed maturity investments are expected to produce additional cash yield over our fixed maturity investments, while still being aligned with our conservative investment philosophy.
Speaker Change: For the entire fixed maturity portfolio, the fourth quarter yield was 527% up four basis points from the fourth quarter of 2023 and up two basis points from the third quarter.
Speaker Change: As of December 31.
Speaker Change: Our portfolio yield was five 5%.
Speaker Change: Including the cash yield from our commercial mortgage loans are limited partnerships. The fourth quarter earned yield was 544, 1%.
Speaker Change: Now regarding the investment portfolio.
Speaker Change: Invested assets were $21 $2 billion, including $18 8 billion of fixed maturities at amortized cost.
Speaker Change: 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.
Speaker Change: 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 Kirk Charlie relates entirely to.
Speaker Change: Bonds with maturities that extends beyond 10 years.
Speaker Change: We have the attempt and more importantly, the ability to hold our investments to maturity.
Speaker Change: Bonds rated triple B comprised 46% of the fixed maturity portfolio compared to 48% from the year ago quarter.
Speaker Change: This percentage is at its lowest level since 2007 as.
Speaker Change: As we have discussed on prior calls we believe the Triple based securities. We acquire 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.
Speaker Change: While the percent of our invested assets comprised of triple b 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 clo's and other asset backed securities.
Speaker Change: Below 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 two 8%.
Speaker Change: At the midpoint of our guidance for the full year 2025, we expect to invest approximately $900 million to $1 $1 billion and fixed maturities at an average yield of five 5% to five 7%.
Speaker Change: The price my $300 million to $500 million and commercial mortgage loans and limited partnership investments with debt like characteristics and an average expected cash return of 7% to 9%.
Tom: Now I'll turn the call over to Tom for his comments on capital and liquidity.
Tom: Thanks, Brian.
Tom: Let me spend a few minutes discussing our share repurchase program available liquidity and capital position.
Tom: The parent began the year with liquid assets of approximately $48 million and ended the year with approximately $90 million.
Tom: In the fourth quarter.
Tom: <unk> repurchased approximately 338000 shares of Globe Life, Inc. Common stock for a total cost of approximately $36 million at an average share price of $105 37.
Tom: 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.
Tom: Including shareholder dividend payments of $85 million, the company returned slightly more than $1 billion to shareholders during 2024.
Tom: In addition to the liquid assets held by the parent the parent company will generate excess cash flows during 2025.
Tom: The parent company's excess cash flow as we define it results primarily from dividends received by the parent from its subsidiaries less the interest paid on debt.
Tom: Although our statutory results are not final we anticipate the parent company's excess cash flow for the full year of 2025.
Tom: Approximately 785 million to $835 million.
Tom: Excess cash flows are anticipated to be higher than 25, then in 'twenty four.
Tom: Primarily as a result, as resulting from higher statutory earnings at 24 that in 2023.
Tom: As well as the impact of previously discussed reinsurance transactions completed in 2024.
Tom: 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 the anticipated excess cash flows are expected to be used to distribute approximately $85 million to shareholders in the form of dividend payments.
Tom: And reduced 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 absence, an alternative use with a higher return to our shareholders.
Tom: 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.
Tom: With regards to capital levels at our insurance subsidiaries. Our goal is to maintain our capital levels necessary to support our current ratings globalized targets, a consolidated company action level RBC in the range of 300% to 320%.
Tom: Since our statutory financial statements are not yet final our consolidated RBC ratio was not yet known however, we anticipate the final 2020 for RBC ratio will be within our targeted range.
Tom: Yes.
Tom: Now with regards to policy obligations for the current quarter.
Tom: 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.
Tom: The supplemental financial information available on our website provides an exhibit that details the quarterly re measurement gain or loss by distribution channel.
Tom: For the fourth quarter life obligations continued 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.
Tom: The re measurement gain from our life segment resulted in a $107 million of lower life policy obligations and for the house segment $3 million.
Tom: Of higher health policy obligations.
Tom: In recent quarters mortality trends in the life segment has been favorable relative to our long term assumptions.
Tom: 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.
Tom: Conversely, if mortality experience was higher than our long term assumptions.
Tom: Assumptions, we will experience flight remeasurement losses reached.
Tom: Recent mortality lapse experience will inform future updates to long term assumptions.
Tom: Which we intend to make in the third quarter of 2025.
Tom: For the health segment, we anticipate health pulse health obligations for our Medicare supplement and group retiree health products will continue to be elevated given recent claim trends outpacing premium rate increases.
Tom: 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.
Tom: To $14 five.
Tom: Representing 11% growth at the midpoint of our range.
Tom: 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.
Matt: Those are my comments I will now turn the call back to Matt. Thank.
Thank you Tom those are our comments and we will now open the call up for questions.
Matt: Yes.
Matt: Thank you.
Speaker Change: If you'd like to ask a question I'll make a contribution in todays call.
Speaker Change: One on your telephone keypad to withdraw your question. Please press star two you'll be at wise went to ask your question.
Speaker Change: Okay.
We will take our first question from Jimmy <unk> Jpmorgan. Your line is open. Please go ahead.
Jimmy: Hey, good morning.
Speaker Change: So first just a question on your results I thought overall most of the business metrics are good but one of the negatives was just a little bit of an increase in first year lapses.
Speaker Change: The direct channel and also in Liberty and.
Speaker Change: Hoping if you could discuss whats really causing that.
Speaker Change: And you expect that trend to continue to get worse as you get through 2020 or 25.
Speaker Change: And we think that yes, yes.
Speaker Change: Jamie I think a couple of things I think we were pleased overall with that.
Speaker Change: Thats lapse experience says has stabilized.
Speaker Change: Yeah, I'll actually lapse rates went down a little bit.
Speaker Change: Overall from Liberty. They went went down a little bit from sequential quarters. So I think there is some good news there that that you know the higher lapse rates that we had seen it stabilized a bit on DTC, we are seeing a little bit higher lapse rates that we have historically and some of that is mix of business that quite a bit of our new business is coming from the Internet channel versus.
Speaker Change: As our more of our mail and insert media channels. So those digital channels that you experienced a little bit higher lapse rates I think that's part of at least part of the story there.
Speaker Change: Yes, one thing Jimmy I would just add to that it really if you'd go back and look at American income and especially kind of their average.
Jimmy: First year lapse rates, especially pre pandemic.
Jimmy: We're right in line with where Thats always fluctuate of course on a quarterly basis.
Jimmy: And really it's not.
Jimmy: Really that measurably higher than even the the long term average.
Jimmy: Over the last 10 15 years.
Okay, and then on the <unk>.
Jimmy: The regulatory investigations, especially on the D O L and.
Jimmy: The SEC from the outside and how does one get finality to this because typically those agencies don't then do put out releases when Theyre dundon, Mr getting something.
Jimmy: There is a fine or something else.
Jimmy: What's your view on how somebody would get the obviously the passage of time without any new news as a positive but other than that how does one get for now.
Jimmy: Should we see some finality.
Jimmy: Or a resolution to this.
Speaker Change: Yes, thanks, Jimmy our intent is to be able to disclose the conclusion of those inquiries when they happen of course, we are working through those processes.
Speaker Change: As we speak but you are right generally the agencies themselves don't issue something that our intent would be able to communicate windows inquiries have been concluded at the time that that happens.
Speaker Change: And then if I just ask one more.
Speaker Change: On the health of the business there was some optimism last year that.
Speaker Change: But the reimbursement rate changes on med advantage, Glenn maybe there would be more.
Speaker Change: Volumes flowing towards med sup at.
Speaker Change: It seems like now that Randy could actually end up reversing in med sup messed up the market might shrink a little bit but what are your thoughts on that given the change in the administration.
Speaker Change: Yes that one is an interesting one that we want to watch.
Speaker Change: There's been some in the new administration the voice.
Speaker Change: Some optimism around M&A plans.
Speaker Change: I believe also there is a segment of consumers and frankly providers it may be disenfranchised with those.
Speaker Change: So 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 are certain providers that have not been happy with reimbursements on the EMA MAA.
Speaker Change: <unk> side. So it's one of those that we're watching and seeing I don't think its too early to conclude one way or another how that market is going to shake out with the new administration.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Jake Bartlett.
Speaker Change: <unk> <unk> capital markets. Your line is open. Please go ahead.
Jake Bartlett: Alright, good morning.
Speaker Change: First question on your excess cash flow guidance and the higher guidance you gave for 2025.
Speaker Change: Quantify the different elements of that across the.
Speaker Change: The reinsurance accounting changes and maybe the favorable underlying results that you mentioned just trying to get out what how much of the increase was more may be onetime in nature and how much you would expect and persistent to your outer year run rate.
Speaker Change: Yes.
Speaker Change: So thanks for the question yes.
Speaker Change: One of the increases is the reinsurance transactions that we did last year and.
Speaker Change: As I indicated on the call that those were worth about $100 million. So.
Speaker Change: 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.
Speaker Change: The other kind of a run rate of statutory earnings are a bit higher because of some valuation manual changes and theres a little bit of a catch up there.
Speaker Change: Full year benefit of that was probably closer to $150 million versus the $120 million that I had estimated last quarter and that probably cut in half as we kind of look at it as we go as we go further out into 'twenty the benefit that we might see from that from a normal run rate in 2025.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: On the margin.
Speaker Change: Margin.
Speaker Change: The higher guidance there.
Speaker Change: Okay.
Speaker Change: Some experience.
Speaker Change: Through kind of the re measurement gains.
Speaker Change: I guess I know you had your assumption of last quarter.
Speaker Change: Particularly what's driving that improved outlook now versus.
Speaker Change: What you had coming out of that review.
Speaker Change: Yes.
Speaker Change: We always saw I think what was.
Speaker Change: We saw the fourth quarter was just some really good mortality experience that especially development on the claims that were incurred in.
Speaker Change: Yes.
Speaker Change: Occurred in Q3 and Q2 so as.
Speaker Change: Even though you kind of were looking at some of the.
Speaker Change: Favorable experience that we were seeing early in the year that at least was an input into how we thought about the.
Speaker Change: The assumptions really in the fourth quarter, we just we saw some <unk>.
Speaker Change: Very good experience, taking place and so we continue to have.
Speaker Change: Pretty sizable remeasurement gain.
Speaker Change: Q4.
Just since there was so much better that that long term assumption that we had in place.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: 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 buyback should we just think about on that kind of.
Elyse Greenspan: Being evenly spread.
Elyse Greenspan: The guide throughout the four quarters of the year and then I know right you guys. Prior to some of the Doj investigations right. Now there was some deal you guys were considering do you consider M&A I guess kind of returning to the equation in 2025 embedded within your capital outlook.
Elyse Greenspan: Yes, I'll start with that as well.
Elyse Greenspan: We did begin.
Elyse Greenspan: Share repurchase again at the beginning of the year.
Elyse Greenspan: Yes stop that as we entered into a blackout period, but we would we're our plan is to continue kind of our historical practices around share repurchases, which is ratable throughout the year and and so it might not be evenly ratable, but generally consistent throughout the year.
Elyse Greenspan: And then one of the reasons, we do do that is that it does allow us to kind of really manage those cash flows. So if we do see an M&A opportunity.
Elyse Greenspan: But we think it's really beneficial for the shareholders then we can.
Elyse Greenspan: Pivot and use of those cash flows for that I mean, we will continue to be open to M&A opportunities.
Elyse Greenspan: Continuous as we've talked about our prior calls.
Elyse Greenspan: Really looking for something that helps us to expand our.
Elyse Greenspan: Our offerings, if you will in the <unk> to serve middle income.
Elyse Greenspan: Policyholders.
Elyse Greenspan: With basic protection products that come with some type of distribution so.
Elyse Greenspan: We will continue to be.
Elyse Greenspan: Looking for those opportunities and open to those opportunities if they arise.
Speaker Change: Thanks, and then my second question, you know helped utilization trend up in the second half of last year can you just provide some color on your thoughts for 2025, there as well.
Speaker Change: Yeah, I would definitely help utilization was high during the course of 2024 and actually we saw it got a little bit higher in 2025, it's kind of one of the reasons why we've adjusted our range for <unk>.
Speaker Change: Health underwriting margin overall, it's just that we continue to believe that utilization will continue to run a little bit high.
Speaker Change: And outpace the rate increases.
Speaker Change: We've actually filed and gotten approved for.
Speaker Change: Premium increases in 2025.
Speaker Change: So overtime.
Speaker Change: Over time, I think we will catch up with that but I think in 2025, we do expect to see higher utilization.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Moody's.
Speaker Change: Moody's Raymond James Your line is open. Please go ahead.
Speaker Change: Hey, good morning, if I took up the reinsurance and the valuation manual updates I'm estimating organic cash flow of around I think is around $550 million to $600 million.
Speaker Change: Is that a good base and then the 75 million I guess half of $150 million do you expect to continue in 'twenty six.
Speaker Change: Over what timeframe will that persist.
Speaker Change: Yes.
Speaker Change: Thanks, well I think your your basis is good we.
Speaker Change: We haven't really finalized 2020 for statutory earnings.
Speaker Change: And so next quarter I can 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.
Speaker Change: Investment income is expected to be fairly flat. So I think that's going to.
Speaker Change: Sure.
Speaker Change: Limit some of that upside so we can if.
Speaker Change: We can give you an update next quarter on that as well once we finalize our statutory earnings.
Speaker Change: I think you are in the ballpark.
Speaker Change: The way.
Speaker Change: And then on the.
Speaker Change: The valuation manual changes, yes, I think we saw in 24 that was really kind of an impact to the.
Speaker Change: So the enforce business and so as the enforced business.
Speaker Change: <unk>.
Speaker Change: Gus.
Speaker Change: That subsides from the existing in force business. Some of it will be made up by new business that comes on so.
Speaker Change: Although I don't have a crystal ball there I think that's a.
Speaker Change: That $70 million that that is the mid point or half of that is will decline a little bit over time, but I think a lot of that is sustainable.
Speaker Change: Additional statutory earnings.
Speaker Change: Thank you Amit could you talk a little bit about what the recruiting and sales environment right now from a macro perspective.
Speaker Change: Middle income consumers.
Speaker Change: Modestly better financial condition does that have any impact on sales or recruitment and then can you talk a little bit about what you're seeing.
Speaker Change: Yes.
Speaker Change: Yes. Thanks.
Speaker Change: We're still seeing some strong growth in our recruiting efforts and hiring efforts.
Speaker Change: So we anticipate that to continue forward into 2025, and so thats reflective in the growth numbers that we're anticipating on our agent count side, and then of course that translates into our sales growth.
Speaker Change: One of the things, we just wanted to acknowledge.
As an example for American income.
Speaker Change: Coming off of four prior to Q4, we're coming off of four quarters of double digit growth and in some cases very high.
Speaker Change: 20% growth if I go back.
Speaker Change: Four quarters ago.
Speaker Change: No.
Speaker Change: 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 our momentum across all three agencies coming out of the end of it.
Speaker Change: 24.
Speaker Change: 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.
Speaker Change: We seem to be pretty resilient from that is I go back to when we were experiencing 8%, 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.
Be very resilient and I think that just gets back to this marketplace continues to have a significant amount of opportunity with a significant number of people that are.
Speaker Change: Under insured or uninsured in this marketplace and we have a good opportunity to continue to.
Speaker Change: Develop sales.
Speaker Change: In that area and as we've discussed before the benefit I think of our policies is small.
Speaker Change: Their basic protection, they're easy to understand their design for Middle income America, and the premiums are small on a relative basis per month, depending on the channel there.
Speaker Change: 30 Bucks to 60 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 as we talk about that.
Speaker Change: Our lapse rates that we discussed.
Speaker Change: Move around a little bit, but it's in a pretty narrow band.
Speaker Change: As different economic cycles come and go.
Speaker Change: We will take our next question from John Barnidge Piper Sandler. Your line is open. Please go ahead.
Speaker Change: Sure.
Speaker Change: Thank you for the opportunity.
Speaker Change: My first question's on agent trends and I. Appreciate that you gave the guidance for agent growth for the year, but.
Speaker Change: And I understand there's some seasonality in the fourth quarter with the holiday peak that occurs but how have first year agents trended in January.
Speaker Change: Essentially first quarter, so far across those channels.
Speaker Change: Yes, John Youre right as it's not unusual around the holidays and so the the latter half of Q4, and frankly, sometimes that bleeds over into the very first part of Q1, we do have a little bit of seasonality on the recruiting in agent written.
Speaker Change: <unk> side and so our guys are really reflective of the entire year and generally we see a pickup in.
Speaker Change: And particularly in Q2 within Q3, and a strong agent count growth and so really as we've discussed before we like and we talked about it quarter over quarter, but really like looking at it on a year over year basis.
Speaker Change: What I'm very pleased about is that we.
Speaker Change: We have very high.
Speaker Change: Yes.
Speaker Change: Correlation between producing agent count in our sales.
Speaker Change: For example, if you look at a three year CAGR for American income we have.
Speaker Change: At about 8% agent count growth and we haven't that an 8% sales growth over that timeframe and similar statistics.
Speaker Change: Walk through Liberty and family Heritage, So our long term.
Speaker Change: Potential is really focused on around.
Speaker Change: Around that 10% agent count growth and trying to achieve a similar number for sales growth it really drives our expectation for.
Speaker Change: Our premium earnings that ultimately are in our results for the year. So I'd say to answer your question.
Speaker Change: The fourth quarter activity is kind of what I would expect to be normal from a little bit of seasonality in <unk>.
Speaker Change: I think we're starting off strong for this year of around what we would expect and how that builds over time.
Speaker Change: Yes.
Speaker Change: And then on my follow up question.
Speaker Change: I know youre doing some effort to get our Bermuda platform.
Speaker Change: Any update you can provide or give any markers on the way station, we should watch out for thank you.
Speaker Change: Yes. Thanks.
Speaker Change: Got it.
Speaker Change: I think we're on track with our analysis, we have communicated that we update you kind of mid year as far as what our plans are there and we're on track to do that so we feel pretty good with where we are.
Speaker Change: Yes.
Speaker Change: Yes.
We will take our next question from Wes Carmichael Autonomous Research. Your line is open. Please go ahead.
Speaker Change: Hey, Thank you good morning.
Had a broader question on the stock and capital management, but obviously the stock came under some intense pressure last year and use the 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 stocks still trading at a pretty significant price earnings multiple discount relative to historical trends. So just.
Speaker Change: Curious, how youre thinking about taking any other reinsurance more significant action.
Speaker Change: Or are you feeling a little bit more business as usual now or are you waiting on maybe some of these investigations to conclude.
Speaker Change: Yeah.
Speaker Change: Thanks, Wes as we really do look at it we really do think that theres still some opportunities clearly.
Speaker Change: And the valuations of our of our shares.
Speaker Change: I do think we will.
Speaker Change: We continue to look really hard at where are there pockets of opportunity for us too.
Speaker Change: Manage that capital are there opportunities for us to release some additional capital.
Speaker Change: Over the course of the year.
Speaker Change: So we are continuing to look at some of those opportunities.
Speaker Change: And.
Speaker Change: We still we do think that the stock is a goodbye so we will.
Speaker Change: Taking a look at that I'd say that and I think.
Speaker Change: As we mentioned earlier from a timing perspective, largely want to be thinking about or share purchases coming off over the course of the year and there may be a little bit of.
Speaker Change: Front end.
Speaker Change: Loading on that just a little bit but for the most part it helps us to manage cash flows over the over the course of the year.
Speaker Change: 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.
Speaker Change: Current share price.
Speaker Change: Got it thanks that's helpful.
Speaker Change: Just had two kind of housekeeping follow ups I think in the in the release there was some legal accrual of about $12 5 million below the line, that's a little bit chunkier than its run can you just talk about the nature of what youre booking there.
Speaker Change: My follow up was just on commercial paper can you give us a sense on how much are you allocating excess cash flows this year for that.
Speaker Change: Yes.
Speaker Change: As you know globe life and its subsidiaries are subject to litigation from time to time.
Speaker Change: And it's common in insurance and Thats, a covenant in the insurance industry in general we've seen an update and uptick in litigation claims and expenses over the past several quarters as well as legal expenses stemming from claims made by recent short sellers.
Speaker Change: One item for legal proceedings. This quarter includes an estimate of costs associated with settlements of certain litigation claims not related to the Doj FCC or EOC matters as well as certain other legal expenses that we incurred.
Speaker Change: As we are sure you can appreciate our policy is to refrain from commenting on pending our ongoing legal matters involving the company or any of its subsidiaries. So we're unable to provide any more detail at this time.
Wes: And then and then Wes.
Speaker Change: I think with respect to the commercial paper right now we're kind of we're looking at trying to break that down in that part of those more normal levels somewhere in the low three hundreds.
Speaker Change: We ended the year around $4 15, so kind of pointing to around that $100 million or so.
Speaker Change: Use of that to get it back and really it will kind of look at that over the course of the year.
Speaker Change: I look at cash availability and cash flow needs as well.
Speaker Change: But.
Speaker Change: We kind of manage that to help again manage our overall.
Speaker Change: Liquidity risk.
Speaker Change: And how do we just think of having cash available for operations. So we'd like to try to get that back into a little bit more of a normal strength normal range. If we are able to.
Speaker Change: Thank you.
We will take our next question from Andrew Cleveland TD Securities. Your line is open. Please go ahead.
Andrew Cleveland: Hey, good morning so.
Andrew Cleveland: My first question is around your.
Andrew Cleveland: <unk> shifted American income to virtual.
Andrew Cleveland: Clearly 2024 was really strong in terms of recruiting and sales.
Andrew Cleveland: And now you said it would moderate a bit this year, but it's still very good right you said.
Speaker Change: Average age.
Speaker Change: Agent count at AI would be mid single digit and then you said.
Speaker Change: Life sales would be up.
Speaker Change: At American income high single digit and some of that I think you mentioned was a reflection of higher policy limits.
Speaker Change: But I'm kind of curious like maybe moving out to 'twenty six or even longer term.
Speaker Change: What kind of impact is.
Speaker Change: Virtual approach versus office.
Speaker Change: Yeah.
Speaker Change: On your recruiting sales I mean is this something.
She has to pick up in 2026 again, how are you thinking about what the longer term it sounds like something better it's happening.
Andrew Cleveland: Yes, Thanks, Andrew.
Andrew Cleveland: We started the virtual sales of virtual recruiting during the height of the pandemic.
Andrew Cleveland: All of that was associated with that.
Andrew Cleveland: We have found such a benefit to it is that we've kept that model going forward.
Andrew Cleveland: And really we're seeing a lot of good activity associated with that on the agent recruiting side. What we see is is that I think we are attracting additional individuals that may not have been interested in a sales opportunity that was a face to face in a customer's home across the kitchen table as they would.
Andrew Cleveland: Say as now.
Andrew Cleveland: Those sales can be done from the comfort.
Andrew Cleveland: They're home or wherever they may be located.
Andrew Cleveland: And you can see what's happening with Corp.
Andrew Cleveland: Corporate America with a return back to the office and you see more and more companies announcing.
Andrew Cleveland: Back to the office mandates in 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.
Andrew Cleveland: That has definitely benefited our recruiting efforts over the last.
Ed: Many quarters as Ed mentioned I go back to the.
Ed: Starting in early 2023, we've had 2015%, 13% et cetera agent count rose throughout the end of 'twenty three 'twenty four.
Ed: And I think.
Ed: That will that will 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 <unk>.
Ed: <unk>, we're their license so we've seen our agents have an uptick in licensing and.
Ed: In multiple states to 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.
Ed: We are.
Ed: The benefit of the consumer has changed the consumer now is much more used to having virtual interactions you know you have virtual interaction Suez.
Speaker Change: Your Doctor from <unk> perspective, and Theres, a variety of other interactions and so.
Ed: Have the consumer much more willing I think now.
Ed: As compared to prior to 2020 being willing to.
Ed: They have sales interactions through a virtual.
Ed: 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.
Ed: We think that will continue to be a benefit I am very pleased with American income if I look at as an example, their five year CAGR from.
Ed: Agent count growth perspective, it's over 9% and that lines up very well with approximately 9%.
Ed: Sales growth over that same time frame, so they're very much in lockstep over a longer term.
Ed: Perspective, and so like we've talked about before we get quarter to quarter fluctuations a little bit but that long term growth. We believe is definitely sustainable.
Ed: Very helpful.
Ed: And just shifting over to the life underwriting margin, which came in at 41%.
Ed: And youre guiding in 25% to 40% to 42, I mean, that's pretty pretty nice just given land in 'twenty three.
Ed: About 38% and as I kind of.
Ed: Went through the supplement it looks like.
Ed: Out of the benefit this year came from.
Ed: Direct to consumer was that is.
Ed: Is that the right observation, how do you kind of corrected for something in direct to consumer and do you think this 41% is very sustained over 40% to 42.
Ed: Stable beyond 2025.
Andrew Cleveland: Yeah, Andrew I think you are right in the observation that we.
Speaker Change: We really are seeing.
Speaker Change: And you have some favorable developments on direct to consumer, especially.
Speaker Change: It's been yes.
Speaker Change: And that tends to be the segment or the distribution of its a little bit more of insurers a wider swath of the U S population.
Speaker Change: It does of course have tend to have higher mortality in general than each of the other distributions have so as theirs.
Speaker Change: Coming out of the Covid, we are seeing a lot of excess deaths and.
Speaker Change: That's what we're seeing in the U S population as a whole.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: And so as we've been seeing here over the last couple of years, especially 2024.
Speaker Change: Paid claims in 2024.
Speaker Change: I have been basically flat if not dropped a little bit from 2023, while at the same time premium increased in 2024 by 4%.
Speaker Change: So we're really seeing that kind of.
Speaker Change: Really favorable experience and especially in the last couple of quarters here of this year Q.
Speaker Change: Q3, and Q4, we just saw a really good experience.
Speaker Change: And low levels of claims and added certain causes of death.
Speaker Change: Actually saying that at below some of those pre pandemic levels.
Speaker Change: And so.
Speaker Change: We'll see how.
Speaker Change: I think with respect to 2025, it really depends on what we continue to see that continuing level of favorable mortality persist or is it a fluctuation, but we just happen to maybe be seeing here over the last few quarters.
Speaker Change: That's within the range kind of takes into account whether or not if we continue to see some of that favorable mortality or not.
Speaker Change: And we're of course hopeful that we will and then we will be.
Speaker Change: And go from there and again beyond 2025.
Speaker Change: There's a lot of things to kind of work their way out here and we'll kind of see we've talked for the last couple of years of where there was there 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 that's always possible, but it's really too early to tell.
Speaker Change: And again, we're maybe maybe we are seeing a little bit of that but again, we're kind of.
Speaker Change: Still waiting to see how that kind of pans out here over the next several quarters and then it will get a better sense of whether we think that will persist or not.
Speaker Change: I mean, just just a quick follow up on that just more specifically to direct to consumer it sounds like youre, gaining a little confidence.
Speaker Change: You guided to low to mid single digit sales growth.
Speaker Change: Is that the right way to think about it.
Speaker Change: Yes, we're really looking at we think leave 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.
Speaker Change: That is one of our areas that is a little bit more price sensitive it's a passive sale.
Speaker Change: That has a little bit more sensitivity to competition in economics, so to speak so, but we do think and that's why we guided to that what.
Speaker Change: 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.
Speaker Change: Thanks, so much.
Speaker Change: We will take our next question from Sunil Kumar Jefferies. Your line is open. Please go ahead.
Sunil Kumar: Great. Thank you I know you hit on this earlier, but I just wanted to follow up on potential reinsurance transactions.
Sunil Kumar: Should we assume that maybe things are on hold a little bit until you get your Bermuda subsidiary sort of that whole strategy setup or could you be contemplating doing something even before that happens.
Sunil Kumar: We I think we'll consider other opportunities, but I think really our focus is quite a bit on that.
Yes.
Completing our analysis on the on the Bermuda subsidiary in making some final decisions there, but we're open to some other reinsurance opportunities if it makes sense to us so.
Sunil Kumar: But I think that's fair that our priority is on the Bermuda, Yes, that's right.
Sunil Kumar: One thing I would add is 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 four they are actually to get some measurable benefits.
Sunil Kumar: From that type of transaction so.
Sunil Kumar: We're always open to thinking about is there something kind of.
Sunil Kumar: In the interim it helps us to kind of we can do some of that bridges, the gap and gives us some benefits a little bit earlier.
Sunil Kumar: Okay that makes sense. So maybe Bermuda is more of a 'twenty six kind of story than a 25 story.
Sunil Kumar: Yes, I think it gives a little bit of benefit in 'twenty six I think the real benefit comes in 2007.
Sunil Kumar: Once we have two full years of financials for Bermuda sub debt that we can.
Sunil Kumar: <unk> typical jurisdiction, which which is one of the requirements for doing that yes, we really kind of look at that as being a real.
Sunil Kumar: We are optimistic at this point in time as far as it being a really good long term.
Sunil Kumar: Solution, if you will or opportunity for us.
Sunil Kumar: Got it and then my second question is just on.
Sunil Kumar: Underwriting and Remeasurement so.
Sunil Kumar: Are you factoring in Remeasurement gains into your plan for 2026 or are we sort of hold on hold until we go through the.
Sunil Kumar: Okay.
Sunil Kumar: The unlocking assumption in the third quarter, and then we kind of see what happens there are ranges as intended to encompass.
Sunil Kumar: Encompass whether we continue to.
Sunil Kumar: <unk> 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 and the range and so.
Sunil Kumar: I think theres, a little bit of wait and see.
Sunil Kumar: There's no question, we had a really good quarter in the fourth quarter and we'd like to just see how that develops in the development of fourth quarter and then the results for first and second quarter, we will inform.
Sunil Kumar: Any assumption update that we make in the third quarter of 2023, and I think you said 2026, but I think you meant 25 and 25%.
Speaker Change: Tom answers were for 2025 of the ICL as.
Sunil Kumar: As a 20th yet sorry, yes.
Speaker Change: Okay. Thanks.
Sunil Kumar: Alright.
Speaker Change: We will take our next question from Tom Gallagher of Evercore. Your line is open. Please go ahead.
Sunil Kumar: Yes.
Speaker Change: Hi, Jeff.
Speaker Change: First question on Bermuda, when you mentioned.
Speaker Change: It might be a really good long term solution or opportunity.
Speaker Change: Beginning in 2027, I assume that means.
Speaker Change: That you see this more as a sustainable kind of ongoing pre cash flow benefit not just like a one time release is that is that a fair way to think about how your how you're approaching it yes, Tom that's exactly how I am thinking about it is that.
Speaker Change: It becomes part of an overall.
Speaker Change: Capital management strategy in strategy two <unk> to.
Speaker Change: To return cash to shareholders.
Speaker Change: It really goes Tom too.
Speaker Change: Just thinking about capital requirements around the liability side of our balance sheet.
Speaker Change: And the amount of managing that a little bit more efficiently.
Speaker Change: Through that jurisdiction.
Speaker Change: And would it would you be looking to fund it all yourself or are you contemplating.
Speaker Change: Third third party sidecar capital vehicles.
Speaker Change: Yes, not really considering the third party side checked our capital vehicles.
Speaker Change: It's really just really.
Speaker Change: 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.
Speaker Change: Vehicle.
Speaker Change: Gotcha and then just one question on the final question on the health business.
Speaker Change: How do we how do we think about the timing of re pricing 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 we think about the timing of when when the periods of repricing occur.
Speaker Change: <unk> is it is it most of it annual is it staggered throughout the year and should we assume margins start low earlier part of.
Speaker Change: <unk> 25, and gradually get better over the year and how do you think that also would play out in the 'twenty six.
Speaker Change: Yes.
Speaker Change: So the way that we go through.
Speaker Change: Rate filings or rate evaluation as we generally.
Speaker Change: We will make those determinations in the early third quarter and file those with the regulatory agencies, it's really the annual process rather than a continuous process throughout the year.
Speaker Change: And we did see quite a bit of the utilization.
Speaker Change: Come through in the earlier part of 2024 and in the later part of 'twenty three so a lot of the utilization was reflected in our in our rating our rate filings that we've made with states.
Speaker Change: It was really kind of the tail end of 'twenty for that that we saw some incremental increases in utilization that didn't get factored in.
Speaker Change: So that would get factored in as well as the experience in early 2025 into our rate filings that we make in 2025, which would then become effective in 2026 and those generally become effective right around the end of the.
Speaker Change: First quarter beginning of the second quarter is when those rates become effective.
Speaker Change: Yes.
Speaker Change: Got you and do you think based on the trend you're seeing you're you'll be you would expect some level of improvement into 'twenty, six or whereas stable or better assumption for now.
Speaker Change: Yes, it's hard to say because it really depends on what happens to utilization but.
Speaker Change: I think I think our plan would be to kind of catch up with that into 'twenty, six and things would be more back to more normal now.
Speaker Change: Utilization continue to increase above.
Speaker Change: What are clients, where we'd see a little bit of a drag there and if that came back better we'd see a little bit of a positive there as well so.
That's kind of how we're thinking about it right now at least that is that is our hope is that it would.
Speaker Change: We would catch up if you will by 2026.
Speaker Change: Okay. Thanks.
Speaker Change: Yeah.
Speaker Change: We will take our next question from Bill them up with Raymond James Your line is open. Please go ahead.
Speaker Change: Somebody covered my question. Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: There are no further question on the line. So I'll now hand, you back to your host for closing or additional remarks.
Speaker Change: Alright. Thank you for joining us. This morning, those are our comments and we will talk to you again next quarter.
Speaker Change: Thank you for joining today's call you may now disconnect.
Speaker Change: Hum.
Speaker Change: