Globe Life Inc (GL)

• Strong and sustainable agent count growth, particularly at American Income and Liberty National, driven by middle management expansion, is expected to support robust future sales growth. -
• Favorable claims experience is improving life margins, and if trends continue, the company could see additional remeasurement gains, boosting profitability. - -
• Potential tailwinds for Medicare Supplement sales due to disruptions in Medicare Advantage plans, which could benefit Globe Life's Medicare Supplement business. -

• Potential decrease in future remeasurement gains due to updated assumptions: After resetting its assumptions based on long-term trends rather than recent favorable mortality experience, the company may not expect the same level of favorable remeasurement gains in the future, which could impact profitability. - , - , -
• Sustainability of agent count growth is uncertain: Questions have been raised about whether the significant growth in agent count, which has been boosting sales, is sustainable over the next few years without continuous additions to middle management. This could affect future sales momentum. -
• Exposure to higher claims costs in health insurance products: The company is experiencing higher claim costs due to increased utilization in its health premiums segment. Additionally, industry-wide increases in claims levels for senior health products may impact margins in its Medicare Supplement business. - , - , -

1. Share Buybacks Guidance
   Q: What's the buyback assumption in 2025 EPS guidance?
   A: Management anticipates $575 million to $625 million in excess cash flow for 2025, which they plan to use for share buybacks absent other uses. No further buybacks are planned for 2024 beyond the $20 million already completed. -

2. Assumption Unlocking and Future Remeasurement Gains
   Q: Does assumption unlocking eliminate future remeasurement gains?
   A: The assumption unlocking resets long-term mortality, morbidity, and lapse assumptions. While this updates expectations, if favorable near-term mortality trends continue, the company could still see additional favorable remeasurement gains. The guidance range anticipates variations due to these factors. - -

3. Sustainability of Agent Count Growth
   Q: Is agent count growth sustainable over next few years?
   A: Growth in middle management is key to sustaining agent growth. Recent quarters showed double-digit agent count growth at American Income and Liberty, supported by strong middle management growth. Management expects this momentum to continue into 2025, translating into robust sales growth. -

4. Health Margins and Medicare Supplement Repricing
   Q: Can you reprice Medicare Supplement to improve margins?
   A: The company annually reviews medical trends and files for rate increases with regulators. They have successfully obtained approvals and expect rate increases to take effect in 2025. Though there's sometimes a lag, they anticipate appropriate adjustments to address margin pressures. -

5. EEOC Investigation on Agent Classification
   Q: Any updates on EEOC issue regarding agent classification?
   A: No significant updates. EEOC findings are not binding. The company has a history of court rulings affirming that American Income agents are independent contractors. Related private litigation claims have been dismissed with prejudice. -

6. Impact of GLP-1 Drugs on Mortality Assumptions
   Q: Are GLP-1 drugs factored into mortality assumptions?
   A: The company is not currently incorporating potential mortality improvements from GLP-1 drugs into assumptions. They are monitoring the situation but will wait until impacts are evident in their insured population due to access and affordability considerations. -

7. Bermuda Platform and Capital Benefits
   Q: Does 2025 guidance include benefits from Bermuda platform?
   A: The guidance does not include any potential benefits from Bermuda. The company is still evaluating this option, expecting to conclude in 2025. Any benefits would accrue over time after achieving reciprocal jurisdiction status. -

8. Life Margins and Claims Experience
   Q: Are improved life margins due to declining claims?
   A: The company is seeing improved claims experience with continued favorable trends in life insurance claims. They are pleased with current levels and hope this continues in future quarters. -

9. Higher Lapses in AIL and Direct Response
   Q: What's causing higher lapses in AIL and Direct Response?
   A: Lapse rates fluctuate quarterly. Current higher lapses are consistent with rates seen during times of economic stress. The company attributes this to general economic conditions but remains pleased with the business's resilience. -

Annual guidance for FY 2024:

• Operating earnings per diluted share: $12.20 to $12.40 - (raised from $11.80 to $12.10 - )
• Premium revenue growth (life): 4.5% to 5% - (no change from prior guidance - )
• Premium revenue growth (health): 7.5% to 8.5% - (raised from 6.5% to 7% - )
• Underwriting margins as a percent of premium (life): 39% to 42% - (no prior guidance)
• Underwriting margins as a percent of premium (health): 26% to 28% - (no prior guidance)
• Yield impacting net investment income: 8% to 9% - (raised from 7% to 8% - )
• Average yield on fixed maturity portfolio: 5.25% - (no prior guidance)

Annual guidance for FY 2025:

• Net operating earnings per diluted share: $13.20 to $13.90 - (no prior guidance)
• Net investment income: Flat to low single-digit growth - (no prior guidance)
• Required interest: 3% to 3.5% growth - (no prior guidance)
• Parent excess cash flows: $575 to $625 million - (no prior guidance)
• Sales growth (life): High single-digit to low double-digit growth - (no prior guidance)
• Sales growth (health): Low double-digit growth - (no prior guidance)
• Average yield on fixed maturity portfolio: 5.24% - (no prior guidance)
• Yield impacting net investment income: 7% to 8% - (no prior guidance)