Globe Life (GL) Up 1.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Globe Life (GL). Shares have added about 1.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Globe Life due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Globe Life Beats on Q2 Earnings, Revises Guidance

Globe Life’s second-quarter 2020 net operating income of $1.65 per share beat the Zacks Consensus Estimate by 4.4%. However, the bottom line declined 1.2% year over year attributable to the impact of the pandemic.

Behind the Headlines

Globe Life reported total premium revenues of $953.7 million, up 6% year over year. This upside was primarily driven by higher premiums from Life, Health and Annuity insurance. Net investment income increased 2% year over year to $231.6 million.

The company’s operating revenues of $1.2 billion grew 5.3% from the year-ago quarter. The top-line improvement was driven by growth in Life, Health and Annuity insurance premiums ads well as higher net investment income. Moreover, the top line beat the Zacks Consensus Estimate by 2.3%.

Excess investment income, a measure of profitability, decreased 5% year over year to $61.1 million.Total insurance underwriting income dropped 6% year over year to $167 million. The decline is attributable to lower Life and Annuity underwriting income as well as higher administrative expenses.

Administrative expenses were up 3.6% year over year to $62 million.
Total benefits and expenses rose 7.4% year over year to $968.6 million, primarily due to increased policyholder benefits, higher amortization of deferred acquisition costs, commissions, premium taxes, and non-deferred acquisition costs and other operating expense as well as interest expense.

Segmental Update

Premium revenues at Life increased 6% year over year to $670.8 million, driven by higher premiums written by distribution channels like American Income Agency, Global Life Direct Response and Liberty National Exclusive (LNL) Agency. American Income Agency grew 7%, Global Life Direct Response was up 8% and LNL Agency increased 3%. Life underwriting income dropped 8% year over year to $161.7 million. Net sales of $114.1 million were 2% higher on a year-over-year basis.

Health insurance premium revenues rose 6% year over year to $282.9 million, largely driven by higher premiums from United American and Family Heritage. Underwriting income of $64.2 million increased 7% year over year. Net health sales dropped 23% year over year to $33.9 million.

Financial Update

Adjusted shareholders’ equity as of Jun 30, 2020 increased 6.2% year over year to $5.5 billion.

Globe Life reported book value per share (excluding net unrealized gains on fixed maturities) of $51.21 as on Jun 30, 2020, up 10.3% year over year. Operating return on equity (excluding net unrealized gains on fixed maturities) was 13.6% in the first half of 2020, reflecting a contraction of 100 basis points year over year.

Share Repurchase Update

Globe Life did not repurchase shares in the second quarter in the wake of the pandemic. However, it expects to resume the same in the second half of the year.

2020 Guidance Tightened

Globe Life projects net operating income per share to be in the range of $6.80 to $7.04, tightened from $6.65 to $7.15 expected earlier.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Globe Life has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Globe Life has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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