Globe Life Q1 2025 Earnings Report

Globe Life EPS Results

• Actual EPS: $3.07
• Consensus EPS: $3.24
• Beat/Miss: Missed by -$0.17
• One Year Ago EPS: $2.78

Globe Life Revenue Results

• Actual Revenue: $1.48 billion
• Expected Revenue: $1.49 billion
• Beat/Miss: Missed by -$6.20 million
• YoY Revenue Growth: +4.50%

Globe Life Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 12:00PM ET

Globe Life (NYSE:GL), through its subsidiaries, provides various life and supplemental health insurance products, and annuities to lower middle- and middle-income families in the United States. The company operates in four segments: Life Insurance, Supplemental Health Insurance, Annuities, and Investments. It offers whole, term, and other life insurance products; Medicare supplement and supplemental health insurance products, such as accident, cancer, critical illness, heart, and intensive care plans; and single-premium and flexible-premium deferred annuities. The company sells its products through its direct to consumer division, exclusive agencies, and independent agents. The company was formerly known as Torchmark Corporation and changed its name to Globe Life Inc. in August 2019. Globe Life Inc. was founded in 1900 and is headquartered in McKinney, Texas.

Globe Life Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 the company reported $255 million net income ($3.01/share) and $259 million net operating income ($3.07/share), up 10% year-over-year, with return on equity of 19% and book value per share up 11% to $87.92 (ex-AOCI).
• Life insurance premium revenue rose 3% to $830 million, with underwriting margin up 9% to $337 million; full-year life premium growth of ~4% and underwriting margin of 42–44% of premiums were reaffirmed.
• Health insurance revenue increased 8% to $370 million but underwriting margin fell 10% to $85 million due to higher claims at United American, with full-year health premium growth of 7.5–8.5% and margins guided at 24–26% of premiums.
• Agency channels showed broad growth: American Income Life premiums +6% and agents +3%, Liberty National agents +8%, and Family Heritage agents +9%, while direct-to-consumer margins rose 10% despite a 12% sales decline as marketing spend was optimized.
• The parent repurchased 1.5 million shares for $177 million in Q1 (total shareholder returns of $197 million) and expects $600–650 million in share repurchases for 2025, targeting a consolidated RBC ratio of 300–320% and maintaining liquidity of $50–60 million.

Presentation

[Operator]

Welcome to the Globe Life first quarter two thousand twenty five earnings release conference call. My name is Alan, and I'll be your coordinator for today's event. Please note this call is being recorded. And for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end.

[Operator]

This can be done by pressing star one on your telephone keypad. If you require assistance at any time, I will now hand you over to your host, Steven Mota, Senior Director of Investor Relations, to begin today's conference. Thank you.

[Stephen Mota, Senior Director - IR at Globe Life]

Thank you. Good morning, everyone. Joining the call today are Frank Subota and Matt Darden, our Co Chief Executive Officers Tom Kombach, our Chief Financial Officer Mike Majors, our Chief Strategy Officer and Brian Mitchell, our General Counsel. Some of our comments or answers to your questions may contain forward looking statements that are provided for general guidance purposes only. Accordingly, please refer to our earnings release and twenty twenty four ten ks on file with the SEC.

[Stephen Mota, Senior Director - IR at Globe Life]

Some of our comments may also contain non GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures. I will now turn the call over to Frank.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Thank you, Stephen, and good morning, everyone. In the first quarter, net income was $255,000,000 or $3.01 per share compared to $254,000,000 or $2.67 per share a year ago. Net operating income for the quarter was $259,000,000 or $3.07 per share, an increase of 10% from a year ago and slightly higher than our internal projections. On a GAAP reported basis, return on equity through March 31 is 19%, and book value per share is $64.5 Excluding accumulated other comprehensive income or AOCI, return on equity is 14.1% and book value per share as of March 31 is $87.92, up 11% from a year ago. In our life insurance operations, premium revenue for the first quarter increased 3% from the year ago quarter to $830,000,000 Life underwriting margin was $337,000,000 up 9% from a year ago, driven by premium growth and lower overall policy obligations.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

For the year, we expect life premium revenue to grow around 4%. As a percent of premium, we anticipate life underwriting margin to be between 4244%. In health insurance, premium revenue grew 8% to $370,000,000, while health underwriting margin was down 10% to $85,000,000 due primarily to higher claim costs at United American resulting from higher utilization. For the year, we expect health premium revenue to grow in the range of 7.5 percent to 8.5% and anticipate health underwriting margin as a percent of premium to be between 2426%. Administrative expenses were $88,000,000 for the quarter.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

The increase over the year ago quarter is primarily due to higher information technology, employee and legal costs. For the year, we expect administrative expenses to be approximately 7.4% of premium. I will now turn the call over to Matt for his comments on the first quarter marketing operations.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Thank you, Frank. At American Income Life, life premiums were up six percent over the year ago quarter to $438,000,000, and the life underwriting margin was up 5% to $196,000,000. In the February, net life sales were $99,000,000, up 1% from a year ago. And as a reminder, we had a difficult comparable this quarter as American Income had a 17% increase in life sales in the year ago quarter. The average producing agent count for the first quarter was 11,510, up 3% from a year ago.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

The average agent count declined from the fourth quarter, but I would attribute this to the tremendous agency growth produced over the last couple of years. From the fourth quarter of twenty twenty two to the fourth quarter of twenty twenty four, average agent count grew 29%. And it is typical for our agencies to see some contraction after periods of significant recruiting success. We are pleased to see productivity has increased as more agents are submitting weekly, and I'm confident we will see continued growth in this agency going forward. Now at Liberty National, here the life premiums grew 6% over the year ago quarter to $96,000,000, and life underwriting margin was up 3% to $32,000,000 Net life sales increased 4% to $22,000,000 while net health sales were 7,000,000 down 5% from the year ago quarter.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

The average producing agent count for the first quarter was 3,688, and this is up 8% from a year ago. I continue to be excited by the agent count growth at Liberty National, which is primarily driven by recruiting activity and growth in agency middle management, and is a good leading indicator for continued sales growth at this division. At Family Heritage, health premiums increased 9% over the year ago quarter to $112,000,000 and health underwriting margin increased 10% to $39,000,000 Net health sales were up 7% to $27,000,000 and this is due primarily to an increase in agent count. The average producing agent count for the first quarter was fourteen seventeen, up 9% from a year ago. And this is three consecutive quarters of strong agent count growth for this division and is driven by this agency's focus on recruiting and middle management development.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

In our direct to consumer division, the life premiums were down 1% over the year ago quarter to $246,000,000 while life underwriting margin increased 10% to $64,000,000 Net life sales were $25,000,000 down 12% from the year ago quarter. And as we have previously mentioned, the continued decline in sales is primarily due to lower customer inquiries as we have reduced marketing spend on certain campaigns that did not meet our profit objectives as a result of higher distribution costs. Our focus in this area is having a positive impact on our overall margin as we will continue to focus on maximizing the underwriting margin dollars on new sales by managing the rising advertising and distribution costs associated with acquiring new business. And the value of our direct to consumer business is not only those sales directly attributable to this channel, but the significant support that is provided to our agency business through brand impressions and sales leads. As we mentioned last year, we expect this division to generate over 750,000 leads during 02/2025, which will be provided to our exclusive agencies.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Now on to United American General Agency. Here the health premiums increased 13% over the year ago quarter to $160,000,000 driven by strong prior year sales growth. Health underwriting margin was $2,000,000 down approximately $10,000,000 from the year ago quarter due to higher claim costs resulting primarily from higher utilization. For the year, we anticipate mid single digit growth in underwriting margin due to strong sales and premium rate actions. And as a reminder, the majority of the premium rate increases for 2025 on individual Medicare Supplement business will take effect starting in the second quarter.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Net health sales were $28,000,000 and this is up $11,000,000 from the year ago quarter. Now I'd like to discuss projections. And based on recent trends we are seeing in our experience with our business, we expect the average producing agent count trends for the full year 2025 to be as follows. At American Income, mid single digit growth. At Liberty National, high single digit growth.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And at Family Heritage, low double digit growth. And we are reaffirming the life and health sales guidance we gave on the last earnings call. And as a reminder, net life sales for 2025 are expected to be as follows. American Income, high single digit growth. Liberty National, low double digit growth.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Direct to consumer, low to mid single digit growth. And for Health Sales, we expect Liberty National, Family Heritage and United American General Agency to all have low double digit growth. Now before I turn the call back over to Frank for investment operations, I want to note that with respect to the inquiries made by the SEC and the DOJ discussed on previous calls, there have been no material developments to disclose at this time. To the extent there is further information to share on any of these items, we will update you accordingly. I'll now turn the call back to Frank.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Thanks, Matt. Now turning to the investment operations. Excess investment income, which we define as net investment income less only required interest, was $36,000,000 down approximately $8,000,000 from the year ago quarter. Net investment income was $281,000,000 down 1% from the year ago quarter as compared to a 1.3% growth in invested assets. Required interest is up a little more than 2% over the year ago quarter, consistent with growth in average policy liabilities.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

The growth in average invested assets and average policy liabilities are lower than normal due to the impact of the annuity reinsurance transaction in the fourth quarter, which involved approximately $460,000,000 of annuity reserves being transferred to a third party along with supporting assets. Net investment income was also negatively impacted by lower short term interest rates. For the full year 2025, we expect net investment income to be fairly flat and required interest to grow around 2.5%, resulting in excess investment income to be down 7% to 15% for the year. With regard to investment yield, in the first quarter, we invested $245,000,000 in investment grade fixed maturities, primarily in the industrial and financial sectors. These investments were at an average yield of 6.4% at an average rating of A minus and an average life of forty three years.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

We also invested approximately $51,000,000 in commercial mortgage loans and limited partnerships with debt like characteristics and an average expected cash return of approximately 8.5%. None of our direct investments in commercial mortgage loans involve office properties. These nonfixed maturity investments are expected to produce additional cash yield over our fixed maturity investments while still being in line with our conservative investment philosophy. For the entire fixed maturity portfolio, the first quarter yield was 5.25%, up one basis point from the first quarter of twenty twenty four. As of March 31, the portfolio yield was 5.26%.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Including the investment income from our commercial mortgage loans and limited partnerships, the first quarter earned yield was 5.4%. Now regarding the investment portfolio. Invested assets are $21,400,000,000 including $19,000,000,000 of fixed maturities at amortized cost. Of the fixed maturities, dollars 18,500,000,000.0 are investment grade with an average rating of A-. Overall, the total fixed maturity portfolio is rated A-, same as a year ago.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Our fixed maturity investment portfolio has a net unrealized loss position of approximately $1,500,000,000 due to the current market rates being higher than the book yield on our holdings. As we have historically noted, we are not concerned by the unrealized loss position as it is mostly interest rate driven and currently relates to it relates entirely to bonds with maturities that extend beyond ten years. We have the intent and more importantly, the ability to hold our investments to maturity. Bonds rated BBB comprised 45% of the fixed maturity portfolio compared to 47% from the year ago quarter. This percentage is at its lowest level since 02/2007.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

As we have discussed on prior calls, we believe the BBB securities we acquired generally provide the best risk adjusted, capital adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rate or equity markets. While the percentage of our invested assets comprised of BBB bonds might be a little higher than some of our peers, remember that we have little or no exposure to other higher risk assets such as derivatives, equities, residential mortgages, CLOs, and other asset backed securities. Below investment grade bonds remain at historical lows at $5.00 $6,000,000 compared to $542,000,000 a year ago. The percentage of below investment grade bonds to total fixed maturities is just 2.7. Our below investment grade bonds as a percent of equity, excluding AOCI, are at their lowest level in over thirty years.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

While there are clearly uncertainties as to where The US economy is headed in the upcoming months, we are well positioned to withstand a significant economic downturn. Due to the long duration of our fixed policy liabilities, we invest in long dated assets. As such, a critical and foundational part of our investment philosophy is to invest in entities that can survive through multiple economic cycles. In addition, we have very strong underwriting profits and long dated liabilities, so we will not be forced to sell any of our bonds in order to pay claims. With respect to our anticipated investment acquisitions for the year, at the midpoint of our full year guidance, we assume investment of approximately $600,000,000 to $700,000,000 in fixed maturities at an average yield of 6% to 6.2% and approximately 300,000,000 to $500,000,000 in commercial mortgage loans and limited partnership investments with debt like characteristics at an average expected cash return of 7% to 9%.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Now I will turn the call over to Tom for his comments on capital and liquidity.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Let me spend a few minutes discussing our available liquidity, share repurchase program and capital position. The parent began the year and ended the quarter with liquid assets of approximately $90,000,000 We anticipate concluding the year with liquid assets at the higher end of our targeted range of $50,000,000 to $60,000,000 During the first quarter, the company repurchased approximately 1,500,000.0 shares of Globe Life common stock for a total cost of approximately $177,000,000 at an average share price of $121.7 Thus, including shareholder dividend payments of $20,000,000 for the quarter, the company returned approximately $197,000,000 to shareholders during the first quarter of twenty twenty five. The parent's liquid asset at the end of the quarter, along with the excess cash flows expected to be generated over the last three quarters of the year, will provide the parent with $375,000,000 to $725,000,000 to meet the 606 hundred and 5 to $725,000,000 to meet the needs of the parent or that or that can be returned to shareholders in the form of dividends or share repurchases. In April, we used approximately $47,000,000 to repurchase Globe Life common stock. And for the remainder of 2025, we anticipate using approximately $65,000,000 for shareholder dividends.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

The total amount of excess cash flows in 2025 is higher than in 2024, primarily because of higher statutory earnings in 2024 than in 2023 and due to the inclusion of an extraordinary dividend of approximately $190,000,000 approved late in 2024. The parent company's excess cash flow as we define it primarily results from the dividends received by the parent from its subsidiaries, less to interest paid on debt and is available to return to its shareholders in the form of dividends and through share repurchases. We will continue to use our cash as efficiently as possible. We still believe that share repurchases provide the best return or yield to our shareholders over other available alternatives. Thus, we anticipate share repurchases will continue to be the primary use of the parent's excess cash flows after the payment of shareholder dividends.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

However, we also intend to reduce outstanding commercial paper balances over the course of the year to be more in line with historical levels. It should be noted that the cash received by the parent company from our insurance operations is after our subsidiaries have made substantial investments during the year to new to issue new insurance policies, implement new technologies, and enhance operational capabilities, and modernize existing information technology as well as to acquire new long duration assets to fund their future cash needs. The remaining amount is sufficient to support our targeted capital levels at our insurance operations and maintain the share repurchase program in 2025. In our earnings guidance, we anticipate between $600,000,000 to $650,000,000 of share repurchases will occur over the the full year. Our goal is to maintain capital at levels necessary to support our current ratings.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. As of year end 2024, our consolidated r p RBC ratio was 316%, which provides approximately a hundred million dollars of capital in excess of that needed to meet our minimum target capital of 300%. As we do every quarter, we have performed stress tests in our investment portfolio under multiple economic scenarios, anticipating various levels of downgrades and defaults. If the estimated losses under our stress test were to occur before year end, we have concluded that we have sufficient capital to meet our target RBC ratios given the current excess capital at our subsidiaries and capital resources of the parent while maintaining our share repurchases as planned. For 2025, we intend to maintain our consolidated RBC within the targeted range of 300% to 320%.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

In addition, as mentioned on previous calls, we continue to evaluate the opportunity to manage capital under an economic framework available in Bermuda. We expect to conclude this work in 2025 and intend to provide an update on the strategic decisions made on the next call. Now with regards to policy obligations for the current quarter. As we discussed on prior calls, we have included within the supplemental financial information available on our website an exhibit that details the remeasurement gain or loss by distribution channel. For the quarter, life remeasurement gain was $8,500,000.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

This was favorable to management's estimates and resulted in lower life policy obligations than anticipated. The health remeasurement gain was about $800,000. In other life distribution, during the quarter, we completed the recapture of a reinsurance agreement that involved a small block of business associated with our military life business. This resulted in a onetime favorable impact to life margins of approximately $14,000,000. There have been no changes to our long term assumptions this quarter as we will update life and health assumptions in the third quarter of twenty twenty five.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Due to the continued favorable mortality we are experiencing, we anticipate a favorable margin impact in the third quarter for life assumption updates as recent mortality and lapse experience are incorporated into these new assumptions. At this time, our guidance anticipates a remeasurement gain in the third quarter related to life assumption updates in the range of $60,000,000 to $100,000,000 similar to third quarter's life remeasurement gain last year. As Frank mentioned, we anticipated life margins as a percent of premium to be in the range of 42% to 44% for the full year. However, for the first half of the year, we expect life margins as a percent of premium to be in the range of 40% to 4143% to 46% in the second half of the year, given the anticipated favorable impact from third quarter life assumption updates. For the health segment, we anticipate health obligations will continue to be elevated given recent claim trends outpacing premium rate increases on individual and group Medicare supplement business.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

This appears to be largely impacted by an increase in a select set of procedures taking place in doctor's offices. In addition, although a portion of the premium rate increases for '25 were effective late in the first quarter, the majority are effective in April, and we will reflect in addition, we will reflect recent claim trends in our 2025 premium rate filings, which will be effective in 2026. So finally, with respect to earnings guidance in 2025. For the full year 2025, we reaffirm our previous guidance and estimate net operating earnings per diluted share will be in the range of $13.45 to $14.5 representing 11% growth at the midpoint of our range. Those are my comments.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

I will now turn the call back to Matt.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Thanks, Tom. Those are our comments, and we will now open up the call for questions. Thank

[Operator]

We will take our first question from Jake Matson, BMO Capital Markets. Your line is open. Please go ahead.

[Jack Matten, Vice President Equity Research at BMO Capital Markets]

Hi, good morning. Just a question on the outlook for Health margins. How much of a lag is usually between kind of the rate actions you've taken and when you usually see the benefit flow into your results? I think you mentioned some of the rate increases took effect on April 1. So should we see a significant step up in in March starting in the in the second quarter?

[Jack Matten, Vice President Equity Research at BMO Capital Markets]

Or is there a bit of a a timing impact that we should be thinking about?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. Yeah. No. Almost all the rate increases will be effective or in place in in the beginning of the second quarter. So we'll see the full benefit of those rate increases.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

We'd expect margins for UAGA to be in the in the 5% to 7% range. So, you know, about 6% overall for the year.

[Jack Matten, Vice President Equity Research at BMO Capital Markets]

Got it. Okay. And then, I mean, in in the health business, you you recorded a a small regiment gain even though, I guess, reported margins for the segment were were a little bit weaker on a a year over year basis. So I'm just curious what what was driving like that that outcome in the quarter.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

There's just in the current gap accounting framework under LDTI, there is just a little bit of volatility that's related to the the the way that operates for Medicare supplement business where rate increases are an aggregate rate increase for the entire block. And so there's some cohorts of business where that rate increase is not enough. And there's some cohorts of business where that rate increase is more than sufficient. So it creates a little bit of volatility on a quarter to quarter basis.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. I would just add that if you look at United American, they had a slight, you know, negative remeasurement gain. Whereas, with respect to Liberty, American Income, and Family Heritage, they all had, you know, small remeasurement gains. And the the net of those was about the 400,000,000 or 400 yeah. A thousand dollars that the the top had mentioned.

[Operator]

We will take our next question from Jimmy Bhullar, JPMorgan.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

I

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

had a question first on your EPS guidance for the year. And you grew sort of in line with your guidance this quarter, but the third quarter is obviously very tough comp. So just wondering what gives you the confidence that you can achieve maybe the middle middle end of the range? Or should we assume given the results this quarter that you're much more comfortable with the lower end but decided not to change the range as a result of that?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Jimmy, we're very comfortable with the range. You know, I think, you know, one of the things we've been wanting to see is actually the continued trends of favorable mortality, which would lead to a life mortality assumption update. And we've seen, you know, really good mortality results, you know, in the third quarter, in the fourth quarter, and now in the in the first quarter, which gives us a bit more confidence in. And as we reflect that experience in our assumption updates, we'll see, some favorable remeasurement gains due to those updates.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. Then I I would just say, you know, just to that, Jimmy, that, I mean, we are we are reflecting some of the negative, you know, utilization trends that we're seeing from the UAGA side. So we are expecting that to be a little lower, you know, over the course of the year and you kind of see the range of underwriting margin percentage coming down on that a little bit. And that's, you know, being offset, the negatives of that are are being offset, you know, with some of the positive views that we have with respect to the underwriting margins. Maybe I'll let Matt talk just a little bit about, I think, some of the views on on sales and and why there's some confidence there.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Sure. And, Jimmy, just to to your point, I was gonna also mention that, you know, the third quarter, the remeasurement gain would be, probably in the range of magnitude of what we had last year. So that also kinda gives us some confidence as Tom had mentioned our positive mortality experience over the last three quarters that we're seeing. So that that's really why we're reaffirming our guidance back to the midpoint, not at the lower end of the range. And on on the sales side, we're seeing good, you know, positive trends there.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

We normally don't, discuss, you know, kind of current, but we're a month through the second quarter here. And so we've got, what we're seeing is very strong recruiting and agent count growth as well as sales are in line with our expectations. And so reaffirming our sales guidance for the year, based on what we saw in q one along with our expectations and then, what we're seeing, here early through the month of April in in q two. But, you know, our our average agent count just in the month of April is up 3% over where we were ending March, and it's also higher than where we ended at the end of last year. So not uncommon for us to see a little bit of seasonality at the beginning of the year, and that's what we saw a little bit of weakness, frankly, in January.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And, you know, the and then that ramped up toward the latter half of q one, and that's continuing that trend's continuing on here, through the month of April. Yeah.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

And and, Jimmy, one last thing I'll add on to that. I think with some of the, you know, the better trends that we anticipate for sales for the remainder of the year, And, you know, some of the they call it the, you know, the Dragon Life premium growth that we, you know, around 3% here for the first quarter, a little lower, you know, than than we would like to see. But we see that really, the effects of some of the new sales. And as I we think we anticipate lapses at least, you know, stabilizing here over the course of the year. And so as we kinda get to the latter half of the year, still able to you know, I see think seeing that premium growth, pick up a little bit in the second half of the year, you know, being more in that four and a half to 5% range and and getting that premium life premium growth for the full year to be, you know, close to that 4%.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Okay. And then on your life business, if we look at the nondefer deferrable commissions and policy acquisition expense, for the life division, it's been running, up over the past couple of years, and it was higher in 1Q than it's been in the previous several quarters. So wondering how much of that is economic in terms of you having to spend more money to originate sales versus maybe the result of LDTI or accounting related items?

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

You know, a lot of that, Jimmy, is really just due to some of the higher, you know, investments that we've been making in information technology. And as those systems come on, the depreciation from those as well as, you know, the software from the service and what we're paying, you know, for that and and the data and analytics is being allocated to the investor to the acquisition side. None of that's deferrable. So, you know, we're just seeing a little bit of that tick up just because, of some of that higher largely because of some of that higher technology spend.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Okay. And just just the last one on your health margins. It seems like for the MedSup product, for you guys and many of the other companies, usage has gone up. So you guys have been raising prices, but it's sort of a constant catch up where usage continues and claims continue to go up and you're having to catch up to that. Do you feel that with the higher prices earning in in 2Q and beyond, that margins are gonna be at normal levels?

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Or is it more you're probably gonna need to raise prices more as you get into 2026 season given, just claims usage and inflation?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

I think, Jimmy, I think we need to see exactly what happens, but I think one of the things that gives me confidence is, you know, I think this is a very manageable issue when we see short term increases in in health trends, is that we can in fact manage that through rate increases. It may take us a year or two to effectively get those caught up. So it may be a little bit longer than a year. But we've been very successful in the past getting those rate increases approved by regulators. And, so I'd expect, you know, improvement in 2026.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

And if we continue to see trend, then it might be a little bit we always have a little bit of a timing delay. So we may actually see a little bit of delay in actually getting back to kinda normal margins. But I think the other thing to think about is, you know, this is largely around Medicare Supplement business. Right? And so for our other health lines, we're not seeing the same the same level of claim costs.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

And Medicare Supplement, really, from an under a total underwriting margin perspective is really in that three to 4% range of total total underwriting margin. So it's a fairly small set of just the the core, underwriting margins that we see from the business.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Okay. Thank you.

[Operator]

We will take our next question from Alice Greenspan, Wells Fargo. Your line is open. Please go ahead.

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

Hi, thanks. Good morning. My first question, I guess, is on some of the capital stuff. So you guys the Q1 buyback, right, was, I guess, a bit elevated relative to what the annual guide would imply on a quarterly basis. But I know you guys also said, right, there's some gonna pay down some commercial paper.

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

So how do we think about, I guess, capital return over the back three quarters? Are you thinking it's just even relative to hitting the guide? Or would you potentially, depending upon your stock price, look to front run some of the buyback to earlier q two, q '3, etcetera?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Generally, we think normally ratable throughout the the year, but we will take advantage of kind of market opportunities. So I could see us buying a little bit more in the, first half of the year relative to the second half of the year.

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

Thanks. And then my follow-up, you you guys were talking about, I guess, Bermuda, which you're also talking about a bit last quarter. Just any any updates there, you know, relative to what's going on this quarter? And I know you guys have been talking about that more being, you know, something that's, you know, beneficial in, you know, '26 and into 2027.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. We're still working through it. And so we'll we'll plan to update you on the next call.

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

Okay. Thank you.

[Operator]

We will take our next question from Andrew Kligerman, PD Securities. Your line is open. Please go ahead.

[Andrew Kligerman, Managing Director at TD Securities]

Hey, good morning, everyone or actually good afternoon. So going back to the health margins, you had been guiding to 24 to 20 you're you're guiding now to '24 to '26 versus '25 to '27. And I'm thinking, you know, you kinda gave a time frame where you start to see improvement in '26, but you really don't get to where you need to be or or would like to normally be until '27, if I understand it correctly. Could you give us a sense of what historically have been normal margins? And maybe work through the time line, when you're actually going to get the price increases.

[Andrew Kligerman, Managing Director at TD Securities]

Is it it's gonna be gradual? You know, may maybe just walk through the timeline a little more granularly where a normal historic ratio has been.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. Andrew, I'll I'll start on that and then let, Tom or or Matt add. But, you know, you do look at kind of the, you know, post LDTI, you know, the margins on that business on the UAGA side have been a little bit on the sound like that that 11%. And I think from an overall health somewhere, you know, more in the in the upper twenties, you know, overall as a as a margin percent of premium income. I think with respect to, you know, UAGA and and their and the mid sub specifically, we would be looking into, you know, taking getting the cost and the higher utilization that we're seeing here in the last couple of quarters of twenty four and at least here early in '25 and working those into our third quarter premium rate adjustments that we'd be filing that would be effective in 02/1926.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Depending upon where the utilization trends kind of take, you know, how those emerge over the remainder of the year, will really kind of inform whether or not, you know, can we really capture all of the increase that we need in those third quarter rate filings or not? Or is there some of that that'll be, you know, that we're chasing a little bit into 2020, you know, the the 2027 as well. You know, we do anticipate getting the the full margins for the UAGA to be, you know, closer to that, you know, five to 7% range. So second half of the year, you know, being a little bit north of that because, you know, the the at least the utilization that we're seeing here in the first quarter clearly outran the impacts of the premium increases that we had had put into place. We do think with the with the premium, you know, the the majority of our premium increases coming into play, here in the second quarter, that will help over the course of, over the remainder of the year.

[Andrew Kligerman, Managing Director at TD Securities]

That was very helpful. Maybe shifting over to the life insurance premium. You've been guiding to that, and you mentioned it on this call. You've been guiding to four and a half, 5%, and now you're looking at 4% for the year. Could you give a little more color on lapsation?

[Andrew Kligerman, Managing Director at TD Securities]

Why you may be seeing a little higher, more elevated lapsation? And, you know, how how to think about that going forward?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. I think, from a lapse perspective, at American Income, we are seeing a little bit higher lapses in the in the first year. And and, you know, question for us is whether that's fluctuations or trend and, is, you know, virtual sales kinda just driving a more normal higher lapse level in the first year. But I would say that renewal rates for AIL have been fairly consistent over the past four quarters. So those seem to have stabilized.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

I think DTC lapse rates, you know, are consistent with prior quarters and maybe slightly improved in the in the first year, which

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

is a good sign.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

And renewal lapse rates are are fairly consistent with historical levels as well. So that those seem to be all going very well. I think it's kind of a a testament to the resiliency of our customers even in in times of of economic stress. Our lapse rates move just just a little bit plus and minus depending upon what the economic environment is. And then for Liberty, you know, that's first overall lapse rates have been relatively stable as well.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

So I think we're feeling okay about lapses. You know, we'll certainly keep an eye on it. And then, I do think that, you know, sales that emerge over the course of the second half of the year will actually add to add to premium growth above, above first quarter sales growth. And so that's kind of where we're we're looking at that 4%, around 4% premium growth, life premium growth for the year.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. You know, Andrew, the one thing I'll I'll add to that is that, you know, we did start seeing some of the, you know, blasters especially in the first year at AIL and and maybe a little bit on DTC tick up towards the latter half of last year. So obviously that, know, just kind of look at it period over period as those increases in lapse rates year over year take effect that has that drag on on premium growth on the same year over year period. As we kind of look out over the latter half of the year, we kind of see some of this stabilizing even though they're maybe running a little bit higher than long term averages just because of some of the economic uncertainty. But, you know, as we look back at other periods of some economic stress, where the rates that we're seeing even at at, you know, especially at American income on their first year are not out of line at all.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

And but as we think look at the comparables then in the latter half of the year, you know, we see that was really being stabilizing. And so that'll, help with the, you know, the period over period, premium growth as well. Yeah.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Maybe just one other yeah. Maybe just one other comment is, you know, we don't see dramatic changes in lapse rates, even in periods of economic stress. They're relatively narrow changes and kind of as as we've looked at this for AIL and DTC under, where there's been more economic stress, you know, the lapse rates in renewal years have have moved, you know, less than 1% to a little bit over 1% depending upon the policy duration. So, again, I think really a testament of the resiliency of of our in force book business.

[Andrew Kligerman, Managing Director at TD Securities]

And then just and that was very helpful. One last quick one. I saw a line item for legal proceedings, dollars 4,800,000.0. Maybe this is not an answerable question, but could that be an indication that maybe you're coming towards the tail end of the back and forth with the regulators? Is this an indication that we more of these type expenses?

[Andrew Kligerman, Managing Director at TD Securities]

I I don't know. I I I was just kinda throwing it out there to see if there's there's some kind of read through on that number, which which I hadn't seen before.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. I don't know if there's anything to read through that. Andrew, I think from time to time, we're subject to litigation, and it's common in the in industry, the insurance industry. So, you know, the uptick in litigation claims expenses over the past several quarters, they've really been stemming from claims made by recent short sellers. So, some of that, you know, hopefully subsides.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

And and this quarter, the legal proceedings includes an estimate for settlements related to an outstanding litigation, not related to the DOJ, SEC matters, as well as certain other legal expenses as well. So there is a number of items that can come through there, but, they're usually, you know, not related to the normal operations of the business and not indicative of of past performance or future pros prospects of the insurance operations, and that's why we put them below the line.

[Andrew Kligerman, Managing Director at TD Securities]

Thanks very much.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah.

[Operator]

We will take our next question from Wilma Burdin, Raymond James. Your line is open. Please go ahead.

[Wilma Burdis, Director at Raymond James Financial]

Hey. Good does the higher life margin in second half of twenty twenty five imply a more favorable run rate in 2026 and beyond, or how should we think about that? Thanks.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. I think after you end up making the assumption changes, I think from a policy obligations perspective, you would expect it to be a little bit higher run rate going forward. Then keep in mind that, you know, we are continuing to still see over the next, you know, couple of couple of years to at least probably into '26, you know, some of the increases in in amortization expense just because of the transition, you know, to LDTI that we talked about in the prior calls as well as kind of renewal commissions. You know, so there's probably a little bit of a tick up in the amortization that we're still gonna see over the next couple of years. So I think, looking forward, you know, it's it's,

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

you know, you know, probably somewhat of Probably in the range. And it's

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

yeah. Yeah.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

So probably Similar range to what we've what we've seen in the first half of of we've anticipated the first half of twenty five.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah.

[Wilma Burdis, Director at Raymond James Financial]

Okay. And then life sales were below full year 25 guys in the first quarter, but you maintained the full year outlook. Could you just talk about some of the dynamics in the quarter and what you're seeing over the balance of the year? Thanks.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Sure. Really, January was softer than we anticipated. And as we've talked before, a little bit of recruiting and sales, on the agency side is kind of a momentum game as they would say. And so with the, the holidays, both Christmas and New Year's fall in the middle of two weeks running kinda really started all of our agencies off to a little bit of slow start in January that ticked up through the the remainder of the quarter. And so, as I mentioned to an answer of our earlier question, you know, we we also looked at what was going on in April.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And and April sales are consistent with our expectations as well as our agent count growth, in April as compared to March or as as compared to the prior year end is is higher. You know, it's about a 3% higher just in the month of April, our agent count across all three agencies. And so that that trend that we were seeing in the last half of q one is continuing now here in the first part of q two. Now I'll I'll have the caveat of one quarter I mean, one month does not a quarter make, but, you know, the the trends continue to, to be positive. And so that gave us the confidence to reaffirm our sales guidance, for the year for, all of our various distributions because we're really not seeing anything significantly different than what our expectations were.

[Wilma Burdis, Director at Raymond James Financial]

Great. Thank you.

[Operator]

We will take our next question from John Barnidge, Piper Sandler. Your line is open. Please go ahead.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Thank you for the opportunity. You talked about intention to have an opportunity to reduce commercial paper this year. Where do you intend to get it to? Thank you.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. The our commercial paper balances typically historically have been in that 300,000,000 range. And so we're kind of looking to bring it down from where we're at today, right around $4.10, closer to that that 303 hundred $25,000,000 range.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. And, John, if you kind of look back at at few years back, 02/2223, we were probably running about 3% of our total total capitalization, you know, including the short term debt, you know, it's about 3%. You know, last year, it got you know, we ran that up a little bit more and it's closer to 4%. So probably, gonna bring it back closer to that level, that 3% level. And,

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

John, we're looking at debt to capital ratio at the end of the year right around 25%, which is kind of in the midpoint of of kind of our operating range for our normal operating range for debt debt to capital ratios.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Thank you for that. That's helpful. My follow-up question, is the increase in health usage more frequency or severity driven? I was reading about some human bandage fraud article recently, so curious about that. Thanks.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

That's that's a it's a great question, John. It it is you know, utilization is the big driver, but, one of the causes of utilization increase is, related to, claims related to bandages, these special specialty bandages, which does have a higher claim cost to it. So it's adding a little bit to, the average claim cost as well. And that's something that, you know, we are taking action on to mitigate the impact of of, of any fraud that's apparent in that from from those those billing. So we we're taking actions there to help manage those costs.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

I think one of the challenges on that, John, is that given some of those new procedures, and I think the article that was out there kind of talked about that, is that they tend to be higher cost until they really get, you know, worked through, and then they become kind of a it's more of a standard Medicare reimbursement rates, and then that would, you know, tend to bring the rates down over time. But at least that is that is at least one of the drivers, and we're seeing a few other procedures that are being done in the off you know, in the doctor's office that are also, you know, giving rise at least to, you know, some of higher our higher costs.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Yeah. I I was gonna say I think that's some of the things that give us confidence that we can manage through this like we've done for the decades that we've been writing this business is that it a lot of our trend is associated with a few specific procedures in the office. And so as we work through that, as Frank mentioned, the, adjustments that most likely will happen on the allowables as these new procedures get in, to the CMS allowables, then, you know, going forward, coupled with continued rate action, I think we'll be able to manage through that. It just may take us one more cycle.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. As Tom mentioned, this is actually one of the areas that we're really trying to spend some time and and looking at how do we use some artificial intelligence, use our data to really try to identify areas of potentially fraudulent claims that are coming through, working with CMS, you know, to try to stem some of that, but really taking a look, you know, where we might have some of that. Not always can we get it done before we end up paying a claim because of our the way we're connected with CMS, but, we continue to make, you know, advances on on where we can reduce some of that fraud cost, you know, on our on our side.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

But all those trends are industry trends. They're not unique to United American.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Thank you.

[Operator]

We will take our next question from Tom Gallagher, Evercore. Your line is open. Please go ahead.

[Thomas Gallagher, Senior Managing Director at Evercore]

Good afternoon. The my first question is just in your guidance for '25 on health margins, are you assuming that this claims frequency issue stabilizes at current level, gets better, gets worse? What is the trend assumption you're using? It sounds like you got your arms around the rate increase earn in. But what about on the claim side?

[Thomas Gallagher, Senior Managing Director at Evercore]

What are you assuming?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. Yeah. We're assuming that it stays elevated at least through the second quarter and then expect it to moderate just a little bit in the second half of the year, which it tends to moderate generally as as deductibles are used up that, we're able to, that the trend would tend to moderate a little bit in the second half of the year.

[Thomas Gallagher, Senior Managing Director at Evercore]

So when you say, remains elevated, so at a comparable level to q one?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yes. Yep.

[Thomas Gallagher, Senior Managing Director at Evercore]

Gotcha. And then

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

But but again, just to be clear, the the level of q one from an obligation perspective doesn't reflect the premium rate increases that are coming into play for the remaining three quarters of the year.

[Thomas Gallagher, Senior Managing Director at Evercore]

Understood. The my my follow-up is how do we think about what all of this means for 25 statutory earnings? Because the reserve release that you, the 60,000,000 to $100,000,000 that GAAP only? Or is there any statutory impact for that? Because I presume the stat earnings on the health side are going to be consistent with GAAP, meaning they'll be weaker.

[Thomas Gallagher, Senior Managing Director at Evercore]

But life, I'm a little less clear on whether you will see some kind of benefit. Or is that a GAAP only and so meaning, long winded way of asking, is '25 stat earnings likely to be weaker than '24?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

That that's a that's a great question. The 60 to a hundred million is a gap assumption unlocking, so it's it's gap only. But when we see a favorable claims trends, a % of those that benefit comes through on the statutory side. Where on the gap side, generally, there's a smoothing mechanism that spreads, good claims or bad claims over the over the future. So we should you know, favorable mortality will impact statutory results in a favorable way as well.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yeah. The one

[Thomas Gallagher, Senior Managing Director at Evercore]

thing Got it. So what sorry. Go ahead.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Well, let's say that that as we think about, you know, 25 statutory earnings versus 24 statutory earnings, I think I just wanted to make clear as well. Tom, I I agree with Tom that the, you know, the favorable experience that we're seeing will work its way through statutory income as well. Remember that we did have that, the the reserve revaluation adjustment in 2024. And as Tom has talked about on the last call, while we still anticipate some continuing benefits from that benefits from that in 2025, we don't anticipate seeing them at the same level that we had them in 2024. So there'll be a little less statutory income generated from that reserve valuation adjustment probably to the tune of roughly $75,000,000 or so.

[Thomas Gallagher, Senior Managing Director at Evercore]

We

[Operator]

will take our next question from Ryan Fruger, KBW.

[Ryan Krueger, Managing Director at Keefe, Bruyette & Woods (KBW)]

I

[Ryan Krueger, Managing Director at Keefe, Bruyette & Woods (KBW)]

had a related follow-up. I think you gave the free cash flow for the rest of the year. I was trying to back into, I think, the first quarter, but figured I would just ask if you just have the full year free cash flow expectation for this year?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yes. Excess cash flow is expected to be $785,000,000 to $835,000,000 for the full year, unchanged from where I

[Ryan Krueger, Managing Director at Keefe, Bruyette & Woods (KBW)]

went in the last And then I guess just kind of coming back to what you were just talking about so that for when thinking about the moving pieces next, next year or the you'll get you won't have the reinsurance benefit and then you'll have less of the valuation manual benefit. Are those the two key moving pieces we should think about?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

Yes. The reinsurance benefit we won't have and then a less of an impact on the valuation manual changes, but also a favorable impact to just growth of the business and and the favorable mortality trends that we're seeing. You know, kind of in my Okay. In my in my estimation run rate, for excess cash flows would be in the 500 to 600 range kinda going forward. So I'm thinking more midpoint of that range.

[Ryan Krueger, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. Perfect. Thank you.

[Operator]

Yep. We will take our next question from Wes Carmichael Autonomous Research. Your line is open. Please go ahead.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Hey, thank you. Good afternoon. On the remeasurement gains and assuming $200,006,000 with the 3Q review, are those pretty much baked in your view? Or could there be some deviation? And I guess it's not that small of a range at $40,000,000 So maybe what might drive that higher or lower in the next couple of quarters?

[Wes Carmichael, Senior Analyst at Autonomous Research]

And really, what is it is that the determinant of where you come in in your EPS guide, do you think?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

It's definitely included in our guidance range. Right? So that that is, you know, part of what's what's incorporated in there. On the pluses and minuses, it it really is it's a very detailed process to go through, setting the assumptions. And so, you know, which the assumptions are very, what I'm gonna say, detailed, with regards to issue years, issue ages, attained ages, genders.

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

So, there's a lot of pluses and minuses that go across. And so until we actually put those into our evaluation systems, that will kinda determine exactly what that result will be. So, you know, so I think until we do that, that's why we have a bit of a a wider range as far as where we think that estimate will be. So it's really kind of the implementation of of changes and the final determination and judgment around what changes are made.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

The one

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

thing I would just add to that is that, I mean, that's, you know, kind of what we're what we've seen here through the first quarter is Tom kind of mentioned before. We really like to see, again, how does how does mortality and lasses, really, prove out in the second quarter, because that'll have some influence on it. It's not, you know, final determination on it, but but, you know, it's it's the ability to kind of, test those final assumptions and and where they kinda land. So just and and because the reserves are as big as they are, you know, minor changes to some of those, you know, the assumptions, you know, can move that number around a little bit. So while there's some, you know, pretty good confidence within that range, it it definitely can move just a little bit of what we see here in the second quarter and and how that kind of influences, you know, those final decisions.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Great. That's helpful. And I guess just a quick follow-up. But the the rate increases that you're gonna have in health and med sup, do you expect some elevated lapses as policyholders receive those rate increases?

[Thomas Kalmbach, Executive VP & CFO at Globe Life]

We we definitely see a little bit of drop off when we do rate increases, but, in general, I think they value the coverage that they have. And, you know, we're they're they're fairly persistent.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

Yeah. I it goes back to the comment that was made earlier is that what we're saying really is not unusual. You know, as far as I don't think it's limited to just, United American. And so it's an industry situation. So we would anticipate, that other carriers would be raising rates as well.

[Frank Svoboda, Co-Chairman & Co-CEO at Globe Life]

And and then that's where maybe the MedSup or excuse me, the Medicare Advantage dynamic comes into play a little bit that, you know, there's still some issues out there. We are seeing with acceptance with Medicare Advantage and and where that coverage is going and and dropping, you know, doctors in networks and things like that. So where that's been, you know, perhaps a little bit of a tailwind this past year, and then we'll have to see where that kind of, you know, it's a little bit of a wild card where that goes. But, you know, that's why we don't really anticipate that there'd be a large scale, you know, off or or lapse if if in fact we were to if as as we put in our our rate increases.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

I think the industry is seeing trend, and everybody's pricing for it accordingly. So Yeah.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Great. Thank you.

[Operator]

We will take our next question from Suneet Kamath, Jefferies. Your line is open. Please go ahead.

[Suneet Kamath, Senior Research Analyst at Jefferies & Company Inc]

Great. Thanks. It sounds like some of the confidence you have in terms of maintaining the guidance for sales and such is April results. But I'm just wondering, given how quickly things sort of changed in April, normally, when you see these shocks, is there a little bit of a lag between, you know, kind of the environment changing and then when it impacts your customer behavior? Or does it sort of catch up?

[Suneet Kamath, Senior Research Analyst at Jefferies & Company Inc]

Or does it kinda show through pretty quickly there?

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

Yeah. Let me start with it's not it's not just April. It was the trend that we were seeing throughout q one. As I'd mentioned, January was was softer than we anticipated, but looked at how February and particularly March, performed, and then we're seeing that trend continue through April. So it's really the results of multiple months.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And how we think about that is we look at the momentum in our agent count with recruiting and, growing our overall, agents that are producing and submitting, business. And so that is really a precursor, a leading indicator to ultimate, you know, sales growth. So, you know, we're also seeing we as I've mentioned before, we track our, agent onboarding recruiting pipeline before they ever start producing business. And so people that are in the early stages of that pipeline before they get a license and start selling, you know, we're seeing, double digit growth in what we call our hires or people that are starting in that process. And so that bodes well for future growth as well.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And on the consumer side, we generally don't we've talked about this before, see significant impacts based on economic factors to our customers. I think that really gets back to our customers value our products. They have a need for that. And, you know, more than 50% of our demographic does not have our coverage. And the affordability of our policies where it's thirty or fifty or sixty dollars a month still makes that affordable.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And what we really see is that as long as our customers have jobs or employed that, you know, they still find value in the biz in the products that we're offering as well as the cost of what they're trying to cover from an experience perspective, as those costs go up, we see them taking out more coverage. And so what I continue to be encouraged about is if I look at the trends of just the premium on a per policy basis, those trends are up in q one compared to to last year. And so people are paying a little bit more to take out a a little bit more coverage for for their needs. So really not seeing any weakness there, and I'd say that's consistent. We go back to, you know, the 02/2008 through '10 time frame, 02/2021.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

We had double digit growth in our agent count. We had double digit growth in sales across those time frames. And so, you know, I think that bodes well. One last comment I was gonna make and kinda circle back to I realized I didn't completely answer Wilma's comment, which I think will also or question, which I think will also get to part of your question as well, is that I I failed to mention the our direct to consumer channel. I'll say that is, you know, we anticipated on our annual sales guidance that that would kick in in the latter half of this year.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

And so, q one results are not dissimilar from what our expectations were, and that's why you see we reaffirmed our overall sales guidance for our direct to consumer channel. And a lot of that is based on some of the things that we've been working on for quite some time related to, underwriting automation and some other tools and data that we're using in that organization. We've been testing that for quite some time and anticipate, that coming more fully online in the latter half of the year. And that will really help with our issue rates and, really, help us increase there. And so that's why our guide is, low low single digits overall for an annual basis for for DTC as some of the good good things that we're doing there, and it relates to some of that technology spend.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

We've we've been talking about it for, quite some time seeing that come into fruition.

[Suneet Kamath, Senior Research Analyst at Jefferies & Company Inc]

Okay. That makes sense.

[Suneet Kamath, Senior Research Analyst at Jefferies & Company Inc]

And then I just have one more, and thanks for going over a little bit. Just just on the reviews, I mean, I know you said that there's nothing new to, you know, update us on, and I get that signed. But is your expectation still that at some point, we will get sort of a, you know, all clear and and any sense of how close we are to something like that?

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

We do anticipate, and that's what we're working through these processes of having a finalization that we can communicate. So that is definitely our goal in that area. It is hard to handicap the time frame just, you're dealing with, you know, as we've mentioned before, governmental agencies that don't have a lot of transparency in where they are in the in the process. I would venture to say that there's been a little bit of distraction in the government system, so to speak, over the last several months. And, you know, that that may bode well from a long term perspective for us from a a lower, regulatory burden.

[J. Matthew Darden, Co-Chairman and Co-CEO at Globe Life]

But, in the near term, it might cause a little bit of, slowdown in in some processes. So hard hard to handicap time, but we definitely anticipate, having the opportunity to be able to, report out conclusions on those matters.

[Suneet Kamath, Senior Research Analyst at Jefferies & Company Inc]

Okay. Thank you.

[Operator]

There are no further questions on the line. So I will now hand you back to your host for closing remarks.

[Stephen Mota, Senior Director - IR at Globe Life]

All right. Thank you for joining us this morning. Those are our comments, and we'll talk to you again next quarter.

[Operator]

Thank you for joining today's call. You may now disconnect.

Participants

Executives

• Stephen Mota, Senior Director - IR
• J. Matthew Darden, Co-Chairman and Co-CEO

Analysts

• Frank Svoboda, Co-Chairman & Co-CEO at Globe Life
• Thomas Kalmbach, Executive VP & CFO at Globe Life
• Jack Matten, Vice President Equity Research at BMO Capital Markets
• Jimmy Bhullar, Equity Research Analyst at JP Morgan
• Elyse Greenspan, Managing Director at Wells Fargo Securities
• Andrew Kligerman, Managing Director at TD Securities
• Wilma Burdis, Director at Raymond James Financial
• Thomas Gallagher, Senior Managing Director at Evercore
• Ryan Krueger, Managing Director at Keefe, Bruyette & Woods (KBW)
• Wes Carmichael, Senior Analyst at Autonomous Research
• Suneet Kamath, Senior Research Analyst at Jefferies & Company Inc