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Globe Life (GL) Q3 Earnings Miss Estimates, Guidance Cut

Zacks Equity Research
·5-min read

Globe Life Inc.’s GL third-quarter 2020 net operating income of $1.75 per share missed the Zacks Consensus Estimate by 0.6%. Nevertheless, the bottom line improved 1.2% year over year primarily driven by higher revenues. However, the upside was partially offset by lower underwriting margins stemming from higher claims due to the COVID-19 pandemic and rising costs.

Behind the Headlines

Globe Life reported total premium revenues of $961.8 million, up 7% year over year. This upside was primarily driven by higher premiums from Life and Health insurance.

Net investment income increased 1% year over year to $231.4 million.

The company reported operating revenues of $1.2 billion, up 5.8% from the year-ago quarter. The improvement was driven by growth in Life and Health insurance premiums and higher net investment income. The top line also beat the Zacks Consensus Estimate by about 1%.

Excess investment income, a measure of profitability, decreased 8% year over year to $59.3 million.

Total insurance underwriting income dipped 1% year over year to $183.1 million. The decline is attributable to lower Life and Annuity underwriting income and higher administrative expenses.

Administrative expenses were up 4% year over year to $63 million.

Total benefits and expenses rose 7.8% year over year to $963.5 million, primarily due to increased policyholder benefits, higher amortization of deferred acquisition costs, commissions, premium taxes, non-deferred acquisition costs, and other operating and interest expenses.

Globe Life Inc. Price, Consensus and EPS Surprise

Globe Life Inc. Price, Consensus and EPS Surprise
Globe Life Inc. Price, Consensus and EPS Surprise

Globe Life Inc. price-consensus-eps-surprise-chart | Globe Life Inc. Quote

Segmental Results

Premium revenues at Life increased 7% year over year to $674 million, driven by higher premiums written by distribution channels like American Income, Direct to Consumer and Liberty National. American Income grew 9%, Direct to Consumer was up 8% and Liberty National increased 3%.

Life underwriting income fell 6% year over year to $170.7 million. Net sales of $128.1 million improved 21% on a year-over-year basis.

The company estimates about $56 million in COVID-related life claims for 2020.

Health insurance premium revenues rose 7% year over year to $287.8 million, primarily driven by higher premiums from United American, Family Heritage and American Income. Underwriting income of $72.9 million increased 20% year over year. Net health sales inched up 0.2% year over year to $44.8 million.

Annuity premiums dropped 66.7% year over year to $1 million. Underwriting margins declined 4.2% year over year to $2.3 million.

Financial Update

Adjusted shareholders’ equity as of Sep 30, 2020 increased 5.3% year over year to $5.6 billion.

Globe Life reported book value per share (excluding net unrealized gains on fixed maturities) of $52.39 as on Sep 30, 2020, up 10.1% year over year.

Operating return on equity (excluding net unrealized gains on fixed maturities) was 13.6% in the first nine months of 2020, reflecting a contraction of 110 basis points (bps) year over year.

Share Repurchase

Globe Life had temporarily halted its share repurchase program in the first quarter due to the COVID-19 induced market volatility. However, the company resumed the same in August of this year.

In the third quarter, Globe Life repurchased 1.4 million shares for a total cost of $118 million for an average share price of $81.79.

2020 View Slashed

Globe Life anticipates net operating income per share for this year between $6.84 and $7.00, compared with the previously expected range of $6.80 to $7.04. Notably, the Zacks Consensus Estimate of $6.88 per share for the same lies toward the lower end of the newly provided guidance.

2021 Guidance

The company forecast net operating income per share for the next year in the range of $7.30 to $7.80. The Zacks Consensus Estimate of $7.39 per share for the same lies toward the lower end of the newly provided guidance.

Zacks Rank

Global Life currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Q3 Releases

American Express Company AXP is slated to release results on Oct 23. The Zacks Consensus Estimate for earnings stands at $1.39 per share.

Euronet Worldwide, Inc. EEFT is scheduled to release earnings on Oct 28. The Zacks Consensus Estimate for the same stands at 52 cents per share.

Moody's Corporation MCO is slated to release earnings on Oct 29. The Zacks Consensus Estimate for the same stands at $2.19 per share.

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