The paragraph is from the Globe Life fourth quarter 2024 earnings release conference call. Stephen Mota, the senior director of investor relations, introduces key company executives, including co-CEOs Frank Svoboda and Matt Darden. Frank Svoboda reports that in the fourth quarter, Globe Life had a net income of $255 million, equating to $3.01 per share, compared to $275 million, or $2.88 per share, a year earlier. The net operating income was $266 million, or $3.14 per share, reflecting a 12% increase from the previous year. On a GAAP basis, the return on equity up to December 31st was 21.7% with a book value per share of $62.50. Excluding accumulated other comprehensive income (AOCI), the return on equity was 15.1% with a book value per share of $86.40, which is a 13% increase from the previous year.

In the fourth quarter, life insurance premium revenue increased by 4% to $823 million, and the life underwriting margin rose 10% to $336 million, driven by premium growth and lower policy obligations. The company expects life premium revenue to grow between 4.5% and 5% in 2025, with the underwriting margin between 40% and 42%. Health insurance premium revenue rose 7% to $358 million, but the underwriting margin fell 6% to $91 million due to higher claim costs. Health premium revenue is expected to grow between 7.5% and 8.5% in 2025, with the underwriting margin between 25% and 27%. Overall premium income growth was 4.7% in 2024, surpassing 3.4% in 2023, reflecting business resilience despite inflation. Administrative expenses for the quarter were $91 million, mainly due to IT, employee, and legal costs, and are projected to be 7.4% of premiums in 2025. The company anticipates accelerated growth in 2025.

In the fourth quarter of 2024, American Income Life experienced a 7% increase in life premiums and a 9% rise in life underwriting margin, with net life sales reaching $93 million due to improved productivity and agent growth. The average agent count grew by 7%. Liberty National saw a 5% increase in life premiums and an 8% rise in life underwriting margin, with net life sales up 1% and net health sales down 5%. The agent count increased by 11%. Family Heritage reported an 8% increase in health premiums and a 12% rise in health underwriting margin, with net health sales up 6%, driven by an 11% growth in agent count. Globe Life's direct-to-consumer division saw a 1% decrease in life premiums, while life underwriting margin increased 20%, but net life sales fell 11%. Agent recruitment and retention efforts have driven growth across these divisions.

The paragraph outlines the company's strategy of reducing marketing spend on less profitable campaigns to focus on improving underwriting margins by managing rising advertising and distribution costs. Despite a decline in direct-to-consumer sales, the division is expected to generate over 750,000 leads in 2025 to support agency business. United American General Agency saw a 9% increase in health premiums but a decrease in health underwriting margins due to higher claims. For 2025, the company anticipates mid-single-digit growth in underwriting margin and an increase in net health sales. It also projects agent growth across its divisions, with mid-single-digit growth at American Income and low double-digit growth at Liberty National and Family Heritage, while reaffirming its life and health sales guidance.

The paragraph discusses projected sales growth and ongoing legal inquiries for Globe Life's various divisions. In 2025, American Income is expected to see high single-digit growth in net life sales, Liberty National low double-digit growth, and their direct-to-consumer division low to mid-single-digit growth. For health sales, Liberty National, Family Heritage, and United American General Agency are anticipated to achieve low double-digit growth. The SEC and DOJ inquiries remain open with no claims made against Globe Life or AIL, and there's no expectation of action by the SEC. Additionally, there are no updates on the EEOC matter beyond the November 6, 2024, 10-Q filing. On investment operations, excess investment income increased by $3 million to $38 million, and investment income grew by $11 million to $282 million, attributed to a rise in invested assets and higher interest rates. For 2025, net investment income is expected to remain stable, while required interest may increase by 2.5%.

The paragraph discusses the company's investment performance and strategy. Due to reinsurance and higher subsidiary dividends, the growth of average invested assets and policy liabilities is lower than historical levels, with expected flat to down 15% excess investment income. In the fourth quarter, the company invested $378 million in investment-grade fixed maturities with an average yield of 5.83% and $52 million in commercial mortgage loans and limited partnerships yielding around 8.5%. Their portfolio includes $21.2 billion in invested assets, mainly in fixed maturities worth $18.8 billion at an A minus rating. The fourth quarter's fixed maturity yield was 5.27%, and the overall earned yield with additional investments was 5.41%.

The company's fixed maturity investment portfolio has a net unrealized loss of approximately $1.7 billion due to higher current market rates. However, they are not worried, as these losses are interest rate-driven and relate to long-term bonds, which they intend and are able to hold to maturity. BBB-rated bonds form a significant part of the portfolio, offering strong risk-adjusted returns. The company has minimal exposure to higher-risk assets like derivatives and equities. Below investment-grade bonds are only 2.8% of total fixed maturities. For 2025, they plan to invest $900 million to $1.1 billion in fixed maturities with a yield of 5.5% to 5.7%, and $300 million to $500 million in other investments with a return of 7% to 9%. Tom Kalmbach will discuss share repurchases, liquidity, and capital.

The parent company began the year with $48 million in liquid assets and ended with $90 million. In the fourth quarter, it repurchased 338,000 shares of Globe Life Inc. for $36 million, at an average price of $105.37 per share. For the entire year, 10 million shares were bought for $946 million at an average price of $93.76, and $85 million was distributed as dividends, returning over $1 billion to shareholders in 2024. The company expects its 2025 excess cash flow to be $785 million to $835 million, driven by higher statutory earnings and recent reinsurance deals. This cash flow will fund $85 million in dividends, reduce commercial paper, and finance $600 to $650 million in share repurchases, unless better shareholder returns are found.

The parent company expects to have around $60 million in liquid assets by year-end, with plans to primarily use excess cash for share repurchases after paying dividends. It aims to maintain capital levels at its insurance subsidiaries to support current ratings, targeting a consolidated RBC ratio of 300% to 320%. No assumption changes were made in Q4 for life and health policies, but life obligations remained favorable, leading to a $19 million remeasurement gain. For the full year, there was a $107 million reduction in life policy obligations and a $3 million increase in health policy obligations. Favorable mortality trends may further reduce life obligations and result in future remeasurement gains.

The paragraph discusses the company's financial outlook and recent experiences related to mortality and health obligations. If mortality rates exceed long-term assumptions, life remeasurement losses may occur, and adjustments to these assumptions are planned for the third quarter of 2025. The company expects continued high health obligations for Medicare supplements and group retiree health products due to claim trends outpacing premium rate increases. For 2025, the company forecasts net operating earnings per diluted share in the range of $13.45 to $14.05, reflecting 11% growth at the midpoint, primarily due to favorable recent mortality trends which are expected to continue. After these comments, the call is opened for questions, and Jimmy Bhullar from JPMorgan asks about an increase in first-year lapses in certain channels, seeking to understand the cause and whether this trend might persist into 2025 or 2026.

The paragraph discusses the stabilization of lapse rates in certain channels, with a slight decrease noted for American Income Life (AIL) and Liberty. However, it highlights higher lapse rates in direct-to-consumer (DTC) channels, attributed to increased new business from the Internet as opposed to traditional mail and insert media channels. The paragraph also touches on how average first-year lapse rates for American Income before the pandemic align with long-term averages. Additionally, it addresses ongoing regulatory investigations by the Department of Labor (DOL) and the Securities and Exchange Commission (SEC), with a focus on how to achieve resolution and finality. It is suggested that the absence of new information over time is positive, and there is an intent to discuss the outcomes once finalized.

The paragraph discusses a conversation focusing on trends in the health business, particularly Medicare Advantage (MA) and Medicare Supplement (Med Sup) plans. Jimmy Bhullar notes previous optimism about increased volumes in Med Sup due to reimbursement rate changes but suggests that the trend may now reverse. Matt Darden expresses interest in watching these developments, highlighting that some in the new administration support MA plans, though certain consumers and providers may prefer Med Sup due to dissatisfaction with MA plans. The discussion moves to a question from Jake Matthan about excess cash flow guidance for 2025 and the impact of reinsurance accounting changes. Tom Kalmbach starts to respond.

The paragraph discusses financial updates from a company, highlighting reinsurance transactions from the previous year valued at about $100 million and an approved extraordinary dividend providing additional liquidity in 2025. Statutory earnings have increased due to valuation manual changes, resulting in an estimated full-year benefit of around $150 million, compared to the previous estimate of $120 million. Jake Matthan asks about the life margin's improved outlook, and Frank Svoboda attributes it to better-than-expected mortality experience and claim development in Q3 and Q2, leading to significant remeasurement gains in Q4. The operator then opens the floor for a question from Elyse Greenspan of Wells Fargo.

The paragraph discusses the company's approach to share buybacks and potential mergers and acquisitions (M&A). Tom Kalmbach explains that the company resumed share repurchases at the beginning of the year, plans to follow historical practices, making repurchases generally consistent throughout the year, although not necessarily evenly spread. Frank Svoboda adds that this approach allows flexibility in managing cash flows, enabling the company to pursue M&A opportunities if they offer benefits to shareholders. They remain open to M&A, especially those expanding offerings to middle-income policyholders. Elyse Greenspan then asks about health utilization trends for 2025, but Frank Svoboda's response is not included.

The paragraph discusses the high health utilization rates in 2024 and a slight increase in 2025, which has led to adjustments in health underwriting margins. Premium increases filed for 2025 are not expected to match the high utilization rates immediately. An operator introduces Wilma Burdis from Raymond James, who questions Tom Kalmbach about expected organic cash flow, excluding reinsurance and valuation manual updates, estimating it at $550-$600 million. Kalmbach agrees with the estimate but mentions that 2024 statutory earnings have not been finalized and that investment income will likely remain flat, affecting potential upside. He indicates further updates will be provided next quarter and notes the in-force business will transition to new business.

The paragraph discusses the company's expectations for future recruitment and sales growth. Matt Darden mentions that recruitment and hiring efforts are strong, with anticipated growth in agent count and sales continuing into 2025. Despite a slight tempering of historical high growth rates, like 15-20% per quarter, the company expects a positive environment moving forward. Moreover, there is an improvement in the premium per policy in new business sales. Middle-income consumers are in a better financial position, which is positively impacting sales and recruitment efforts.

The paragraph highlights the company's resilience in a challenging macroeconomic environment, noting that even during periods of high inflation (8%-9%), they were able to grow their recruiting and sales. The company attributes this resilience to the large number of uninsured or underinsured people in the market, offering small, basic, easy-to-understand insurance policies with affordable premiums ($30-$60 per month) designed for middle-income Americans. The in-force policy base remains stable despite economic fluctuations, with only minor changes in lapse rates. John Barnidge from Piper Sandler asks about agent trends and growth for the year, acknowledging the impact of holidays on recruitment, which sometimes affects the start of Q1. Matt Darden confirms this pattern.

The paragraph discusses the seasonality in recruiting and retaining agents, noting that strong agent count growth typically occurs in Q2 and Q3, and emphasizes assessing performance on a year-over-year basis. The correlation between agent count growth and sales growth is highlighted, with American Income experiencing an 8% growth in both over three years, and similar trends seen in Liberty and Family Heritage. The long-term goal is a 10% agent count growth and matching sales growth, driving expectations for premium earnings. Additionally, there is a mention of efforts to establish a Bermuda platform, with plans to provide updates midyear, and the progress is currently on track. The paragraph ends with a transition to a question from Wesley Carmichael regarding stock and capital management.

The paragraph discusses the company's current approach to its stock, which is trading at a significant discount relative to historical trends. Frank Svoboda notes that the management team sees opportunities in the valuation of their shares and is considering stock buybacks as a strategy. They are evaluating opportunities to release additional capital and manage cash flow, potentially with front-end loading of share purchases throughout the year. Wesley Carmichael seeks clarification on a legal accrual mentioned in the company's release amounting to $12.5 million.

In this paragraph, Tom Kalmbach from Globe Life discusses the company's litigation expenses and their approach to managing commercial paper. He notes an increase in litigation claims and legal expenses over recent quarters, partly due to short sellers, but refrains from detailing ongoing legal matters. Regarding commercial paper, the company aims to reduce its balance to a more typical level in the low $300 million range, down from $415 million at year-end, using excess cash flows while considering cash availability and flow needs to manage liquidity risk.

The paragraph discusses American Income's transition to virtual sales and recruiting, which began during the pandemic and has proven beneficial, leading the company to continue with this model. The virtual approach has attracted individuals who may not have been interested in traditional face-to-face sales, offering them flexibility and autonomy. This method has given them a competitive advantage as other companies enforce return-to-office mandates. As a result, American Income has experienced significant agent count growth from early 2023 through 2024. Looking ahead, there is curiosity about the potential impact of this virtual approach on future recruitment and sales, particularly by 2026.

The paragraph discusses the benefits of a virtual environment for sales, highlighting the increased efficiency for agents working across state lines and the growing consumer acceptance of virtual interactions. It notes that this shift is likely a permanent change, benefiting companies like American Income, which has seen a consistent 9% growth in agent count and sales over five years. The paragraph also touches on the life underwriting margin, which improved from 38% in 2023 to 41%, with expectations of reaching 40% to 42% by 2025. The improvement is attributed largely to direct-to-consumer sales.

In this paragraph, Frank Svoboda discusses the favorable developments in the direct-to-consumer insurance segment, noting that it covers a broader portion of the U.S. population but generally experiences higher mortality rates. He highlights the decline in excess deaths following COVID-19 and mentions that their paid claims in 2024 have been stable or slightly decreased compared to 2023, while premiums rose by 4%. The recent quarters have shown a favorable trend with low claims and some causes of death below pre-pandemic levels. Looking ahead to 2025, there is uncertainty about whether the current favorable mortality rates will continue, but there is hope that it will persist.

The paragraph is part of a discussion about the prospects of sales growth and strategic financial moves. Matt Darden expresses cautious optimism about achieving low to mid-single-digit sales growth in the direct-to-consumer market, suggesting they've reached a stable point and anticipate gradual growth despite being sensitive to pricing and competition. Andrew Kligerman and Suneet Kamath of Jefferies ask follow-up questions, with Kamath addressing the timing of potential reinsurance transactions. He inquires whether such transactions might be delayed until the company establishes its Bermuda subsidiary and overall strategy or if they might occur before that.

The paragraph discusses the company's focus on its Bermuda subsidiary, emphasizing that significant benefits from it are expected to materialize by 2027 after meeting certain financial and jurisdictional requirements. Although open to other reinsurance opportunities, the priority remains on developing Bermuda. The conversation touches on the timing of benefits and whether remeasurement gains are factored into plans for 2026, depending on mortality trends and future assumptions.

In the paragraph, a discussion is taking place regarding financial strategies and future plans. Tom Kalmbach clarifies that any updates to their assumptions will be made in the third quarter of 2025, not 2026 as initially misstated. The conversation then shifts to a discussion about opportunities in Bermuda, which are seen as a long-term, sustainable strategy for ongoing free cash flow benefits rather than a one-time gain. This approach is part of a broader capital management strategy aimed at enhancing shareholder returns without the need for third-party capital or sidecar vehicles. The conversation ends with a mention of a pending question about the health business, although specifics are not given.

The paragraph discusses the timing and process of repricing and rate evaluations. Tom Kalmbach explains that the company typically conducts its rate filings in the early third quarter, making it an annual rather than continuous process. Much of the utilization impacting rates has been factored in for 2023 and early 2024, with some additional increases anticipated for the latter part of 2024 and into 2025. These will influence rate filings effective in 2026, around the end of the first quarter. The outlook for 2026 depends on utilization trends. If they stabilize, margins may improve and return to normal, but further increases in utilization could create challenges.

In the paragraph, Thomas Gallagher discusses the hope of improvements and catching up by 2026, indicating a positive outlook. Wilma Burdis from Raymond James states that her question was already addressed. The operator notes there are no further questions and hands over for closing remarks. Matt Darden thanks everyone for joining and mentions that they will provide updates in the next quarter. The call then concludes.

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