The operator welcomes participants to Globe Life Inc's Fourth Quarter 2023 Earnings Release call and introduces the speakers. The call will be recorded and participants will have the opportunity to ask questions at the end. Frank Svoboda, Co-CEO, reports that net income and net operating income have increased compared to the previous year. Return on equity and book value per share have also increased. In the life insurance operations, premium revenue has increased by 4%.

In the fourth quarter of 2023, the company saw an increase in both life premium revenue and life underwriting margin, driven by strong growth in their American Income and Liberty National divisions. They expect this trend to continue in 2024, with a projected growth in premium revenue and underwriting margin. Health insurance premium also grew, and the company expects this to continue in 2024 with a corresponding increase in underwriting margin. Administrative expenses were down due to a decline in pension and employee-related costs, but are expected to increase in 2024 due to investments in technology. At American Income Life, there was a 7% increase in life premiums and a 5% increase in underwriting margin. Sales were up 9% due to growth in agent count, which has been steadily increasing each quarter and is expected to continue in 2024.

The third paragraph discusses the strong growth in agent count and sales at Liberty National and Family Heritage, thanks to various initiatives and new technology. For Liberty National, life premiums were up 8% and net life sales grew 12%, while Family Heritage saw an 8% increase in health premiums and 12% growth in net health sales. The average producing agent count for both companies also increased. In the Direct to Consumer division at Globe Life, life premiums remained flat but life underwriting margin decreased by 2% due to increased acquisition costs.

Net life sales for the company were down 16% compared to the previous year due to a decrease in customer inquiries. The company is focusing on maximizing profits by managing advertising and distribution costs. The Direct to Consumer channel supports the agency business by generating brand impressions and sales leads. Health premiums were flat compared to the previous year, but net health sales increased by 40% due to strong activity in individual and group Medicare Supplement businesses. The company expects to see high single-digit growth in average producing agent count for American Income Life, low double-digit growth for Liberty National and Family Heritage, and low to mid-single-digit growth for United American General Agency in the full year of 2024. Net life sales are expected to see low double-digit growth at American Income Life and Liberty National, and relatively flat growth in Direct to Consumer. Net health sales are expected to see low double-digit growth at Liberty National and Family Heritage, and low to mid-single-digit growth at United American General Agency.

The online publication posted articles about a pending litigation against American Income Life and one of its state general agents. The company engaged in an impartial investigation and took appropriate action. They do not believe the litigation will significantly impact their overall results. The company takes allegations of harassment and unethical behavior seriously and has processes in place to address them. They provide training and a Code of Business Conduct and Ethics for their agents. The company strives to act with the highest level of ethics and integrity.

The company's excess investment income increased by $5 million in the fourth quarter, primarily due to growth in invested assets and higher interest rates. Net investment income is expected to grow between 5% and 6% for the full year, with excess investment income growing by 10% to 12%. The company invested in industrial and financial sectors at an average yield of 6.61% and also invested in commercial mortgage loans with an expected cash return of 8%. The overall fixed maturity portfolio yield was 5.23% in the fourth quarter, and the portfolio yield as of December 31 was also 5.23%.

The company has invested $20.7 billion in assets, with $18.9 billion in fixed maturities. The majority of the fixed maturity portfolio is investment-grade with an average rating of A-. The portfolio has a net unrealized loss of $1 billion due to higher market rates, but the company is not concerned and intends to hold the investments to maturity. The portfolio has a low exposure to below investment-grade bonds and other high-risk assets. The company expects to invest $1.1 billion in fixed maturities and $440 million in other investments in the next year.

The company is pleased with the higher interest rates, which have positively impacted their operating income. They have also repurchased shares of their common stock and returned a total of $164 million to shareholders in 2023. The Parent company is expected to generate excess cash flows in 2024, which will be used for dividends and share repurchases. This is due to anticipated higher statutory earnings in 2023, primarily due to favorable life claims.

In 2024, the Parent company anticipates having $470 million to $510 million of liquid assets available, of which $85 million to $90 million will be distributed to shareholders as dividends. Share repurchases will continue to be the primary use of excess cash flows. The remaining cash will support targeted capital levels and the share repurchase program. The company aims to maintain a consolidated RBC ratio of 300% to 320%. The 2023 consolidated RBC ratio is not yet known.

The expected 2023 RBC ratio is slightly above the targeted range without additional capital contributions. The company has included historical operating summaries for 2023 and 2022 in the supplemental financial information. No assumption changes were made in the fourth quarter of 2023. The remeasurement gain for the fourth quarter was $13 million for life policy obligations and $4 million for health policy obligations, due to favorable claims experience. The full year remeasurement gain was $29 million for life policy obligations and $12 million for health policy obligations. The company expects continued favorable remeasurement gains in 2024 based on recent experience and mortality trends. The third quarter 2024 update to endemic mortality assumptions will be informed by first half 2024 trends, with the assumption currently being a return to slightly above pre-pandemic mortality levels over the next few years.

The speaker, Tom, discusses recent trends that may indicate a quicker recovery than previously assumed and gives an estimate for net operating earnings per share for 2024. They also mention their policy for reflecting actual experience in remeasurement gains and unlocking assumptions in the third quarter. Additionally, they mention the health business and how some insurers are raising prices due to an uptick in claims.

The speaker, Frank Svoboda, has seen an increase in claims for both individual and group med sup plans in 2023, but it subsided later in the year. These trends have been factored into rate projections for 2024. Tom Kalmbach adds that there may be a potential sales boost for med sup plans due to disenrollments from med advantage plans. They aim to stay competitive in the market and ride out short-term fluctuations. The Tri-Agency rule primarily targets short duration health plans, which the company does not offer.

The Tri-Agency rule has received a lot of attention from various groups, and the company is waiting to see what will happen in April. They don't expect it to have a major impact on their marketing efforts. They have about $70 million in commercial real estate loans maturing in 2024, with a majority having low LTVs and optional extensions. The company does not provide information on their sensitivity to interest rates in their outlook.

The speaker discusses the expected stability of the benchmark for 2024 and the projected decrease in spreads. They also address the discrepancy between the increase in average producing agents and the relatively small increase in sales, attributing it to the recent acceleration in agent count growth.

The company's more experienced agents are expected to continue their productivity into 2024, with a slight lag. When looking at agent count and sales growth over a longer period of time, they are closely related. The company remains optimistic about 2024 for American Income. In terms of mortality, there was a significant increase in the first half of the year due to the pandemic, but it has since returned to pre-pandemic levels in the third and fourth quarter. The company will continue to monitor claims development in the first and second quarter to ensure sustainability.

The excess mortality rate has dropped faster than expected, leading to a broad improvement in mortality across all distributions and issue years. The company is pleased with the progress and plans to continue recruiting while also focusing on retention and training to increase productivity.

The speaker is pleased with the agent retention trends at American Income, which are higher than pre-pandemic levels. They also mention that the RBC ratio will be slightly above the midpoint and they aim to keep 50-60 million in liquid assets at the parent company. The 2024 EPS outlook has been increased due to continued remeasurement gains in the Life segments and potential assumption changes.

In paragraph 18, Matt Darden discusses the high sales guides in the Health segment, which are driven by agent count growth and the implementation of a CRM system. There are no market forces that suggest a change in this trend, and they anticipate good recruiting growth in 2024. The strong Q4 sales in both individual and group med supp are attributed to market forces, and they may see additional tailwinds depending on pricing changes. The higher guide also includes some life mortality coming through, which will continue in the first and second quarter, with a potential assumption update in the third quarter.

The speaker discusses the expected mortality rates and COVID deaths in the first quarter of the year. They also mention remeasurement gains in the first and second quarter, with a lighter gain in the fourth quarter. The questioner asks about the 38% margin guide for life and the speaker explains that it is at the midpoint of expectations and that there was a 38% margin in the fourth quarter of 2022. They also mention deferred profitability and the potential for improved underlying experience.

In 2023, the company had higher expenses due to amortization of renewal commissions, but this was offset by favorable remeasurement gains. The company expects to see margin improvement in 2024 due to better mortality and continued amortization of renewal commissions. The remeasurement gains from 2023 will be spread out over a long period of time and will not have a significant impact on future earnings.

The speaker explains that the spread of benefits over time affects the obligation ratio and the percentage of premium set aside. They also discuss the company's dividend and share repo guidance for 2024 and the need to improve their cash flow conversion ratio. They are looking into ways to manage this and aim for a 60% conversion rate.

The speaker discusses the company's plans to improve their cash flow conversion in the future, but acknowledges that there are currently some challenges, such as defaults and capital losses, that are affecting their cash flow conversion. They hope to overcome these challenges and improve their cash flow conversion in the future. The call concludes with the speaker thanking the participants for joining and stating that they will discuss progress next quarter.

This summary was generated with AI and may contain some inaccuracies.