Frank Martin Svoboda
Executive Vice President & Chief Financial Officer at Globe Life
Thanks, Gary. First, I want to spend a few minutes discussing our share repurchase program, available liquidity and capital position. In the fourth quarter, the company repurchased 1.6 million shares of Globe Life Inc. common stock at a total cost of $145 million at an average share price of $90.97. The parent ended the fourth quarter with liquid assets of approximately $119 million. For the full year, we spent approximately $455 million to purchase 4.8 million shares at an average share price of $95.11. The total amount spent on repurchases included $85 million from excess liquidity at the parent. To date, in 2022, we have repurchased 230,000 shares for $23 million at an average price of $101.17. In 2021, the parent had approximately $450 million of excess cash flows available to be returned to shareholders. Of this amount, $80 million was paid to shareholders in the form of dividends, and $370 million was returned through share repurchases. Including our total share repurchases and the shareholder dividends, the company returned $535 million to its shareholders in 2021. For 2022, while 2021 statutory financials have not been finalized, we expect around $465 million to $470 million in cash flow to be available to the parent before the payment of interest on its debt and dividends to its shareholders. After payments of interest on its debt, the parent should have around $380 million to $385 million available to return to its shareholders either in the form of dividends or through share repurchases. This amount is lower than 2021, primarily due to higher COVID life losses incurred in 2021, and the nearly 15% growth in our exclusive agency sales. Both of which result in lower statutory income in 2021 and thus lower dividends to the parent in 2022 than were received in 2021. Obviously, while an increase in sales creates a drag to the parent's cash flows in the short term, they will result in higher operating cash flows in the future. As noted on previous calls, we will 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 a primary use of the parent's excess cash flows after the payment of shareholder dividends. As previously noted, we had approximately $119 million of liquid assets at the end of the year as compared to the $50 million to $60 million of liquid assets we have historically targeted. We currently expect that approximately $25 million to $30 million of this amount will be needed for additional insurance company capital in 2022.
We will continue to evaluate the potential impact of the pandemic on our capital needs. And should there be excess liquidity, we anticipate the company will return such excess to the shareholders in 2022. In our earnings guidance, we anticipate between $325 million and $350 million of share repurchases will occur during the year. With regard to our capital levels at our insurance subsidiaries, our goal is to maintain our capital at levels necessary to support our current ratings. Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. For 2021, since our statutory financial statements are not yet finalized, our consolidated RBC ratio is not yet known. However, we anticipate the final 2021 RBC ratio will be near the midpoint of this range. At this time, I'd like to provide a few comments related to the impact of COVID-19 on fourth quarter results. For the year, the company incurred approximately $140 million of COVID life claims, including $58 million in the fourth quarter. The claims incurred in the fourth quarter were approximately $23 million higher than anticipated primarily due to elevated levels of COVID deaths in both the third and fourth quarters, likely due to the impact of the Delta variant. The Center for Disease Control and Prevention, or CDC, reported that approximately 115,000 U.S. deaths occurred due to COVID in the fourth quarter, a little higher than the $100,000 projected on our last call. In addition, after the end of last quarter, and based on actual debt certificates received by the agency, the CDC revised their estimate of third quarter death upward by approximately 28,000, indicating the impact of the Delta variant in the third quarter was worse than they originally reported. This is consistent with the adverse claims development we experienced related to the third quarter. The impact of which is included in our fourth quarter results. Based on data we currently have available, we now estimate COVID losses on deaths occurring in the third quarter were at the rate of $3.9 million per 10,000 U.S. deaths, and approximately $3.7 million per 10,000 U.S. deaths occurring in the fourth quarter. This is at the higher end of the range previously provided. For the full year 2021, our losses averaged approximately $3 million per 10,000 U.S. deaths.
The fourth quarter COVID life claims include approximately $27 million in claims incurred in our direct-to-consumer division or 11.5% of its fourth quarter premium income, approximately $10 million at Liberty National or 12.9% of its premium for the quarter, and approximately $16 million at American Income or 4.5% of its fourth quarter premium. To date, we have experienced low levels of COVID claims on policies sold since the start of the pandemic. The vast majority, roughly 68% of COVID claim counts come from policies issued more than 10 years ago and approximately 3% from policies issued in 2020 and 2021. For business issued since March of 2020, we paid 394 COVID life claims with a total amount paid of $5.2 million. The 394 claims comprised only 0.01% of the nearly four million policies issued by Global Life during that time. As noted on past calls, in addition to COVID losses, we continue to experience higher policy obligations from lower policy lapses and non-COVID causes of death. The increase from non-COVID causes of death are primarily medical related, including deaths due to heart and circulatory issues and neurological disorders. The losses we are seeing continue to be elevated over 2019 levels due at least in part, we believe, to the pandemic and the existence of either delayed or unavailable health care. In the fourth quarter, the policy obligations relating to the non-COVID causes of death and favorable lapses were in line with projections at approximately $16 million. For the full year, we incurred approximately $78 million in excess policy obligations with about $46 million of those related to higher reserves due to lower policy lapses and $32 million related to non-COVID claims. With respect to our earnings guidance for 2022, we are projecting net operating income per share will be in the range of $8 to $8.50 for the year ended December 31, 2022. The $8.25 midpoint is lower than the midpoint of our previous guidance of $8.35, primarily due to higher non-COVID policy obligations related to better expected persistency and health underwriting income being slightly lower than previously anticipated. We continue to evaluate data available for multiple sources, including the IHME and CDC to estimate total U.S. deaths due to COVID and to estimate the impact of those deaths on our in-force book. For 2022, we estimate that we will incur COVID life claims at the rate of $3 million to $4 million per 10,000 U.S. COVID deaths. At the midpoint of our guidance, we estimate we'll incur approximately $50 million of COVID life claims, assuming approximately 145,000 COVID deaths in the U.S., most of which are expected to occur in the first half of the year. Now I'd like to take a few moments to comment on some qualitative impacts of the new long-duration accounting standard that will be effective in 2023. We anticipate being in a position to discuss the more quantitative impacts of the standard on our book of business after the second quarter of this year once we finalize and properly test our models, our assumptions and the determination of current discount rates.
To the extent we are in a position to discuss the quantitative impact sooner, we will do so. Remember, nearly all of our business is impacted by the new rules, and we are required to apply historical data and future assumptions on every one of our 16 million policies subject to the rules. Given the volume and complexity of computations, we need to ensure the computations have been validated with proper controls in place before discussing the quantitative impacts. In general, this accounting change will have no economic impact on the cash flows of our business. Meaning it will not impact our premium rates, the amount of premiums we collect nor the amount of claims we ultimately pay. In addition, it will not influence us to change our business model of providing basic protection-oriented products to the underserved and low to middle income market. The accounting change will also not impact our capital management philosophies as this is a GAAP accounting change and will not impact the capital required by our regulators to be held at our insurance subsidiaries or the amount of dividend cash flow to the parent, both of which are driven by statutory accounting rules. The accounting standard simply modifies the timing of when the profits emerge on our insurance policies. With respect to the impact on earnings, overall, we anticipate our reported GAAP net income and net operating income to increase under the new standard. With respect to our reported underwriting income, we expect a relatively small change to our overall policy obligation ratios and expect the amortization of our deferred acquisition cost to be significantly lower in the near and intermediate term. This significant reduction in amortization is primarily due to the requirement to stop interest accruals on DAC asset balances and to unlock lapse assumptions, which will generally extend amortization periods beyond current schedules. Both of these changes will result in less amortization being incurred as a percent of premium. Thus, we anticipate our reported underwriting income and our underwriting margin as a percent of premium to increase due to these changes. A portion of the expected increase in underwriting income will be offset by a reduction in excess investment income relating to the elimination of interest accruals on our DAC asset. With respect to the potential impact to our equity, under the standard, we will elect a modified retrospective approach as of January 1, 2021. This standard requires a much more granular view of reserve sufficiency. For certain blocks that have embedded policy reserve deficiencies, we will be required to increase the policy reserve balance as of the transition date or January 1, 2021.
We do not expect this adjustment to cause a significant change to equity, excluding AOCI, upon adoption of the standard. We do, however, expect that our reported GAAP equity, including the effects of AOCI will be significantly reduced upon adoption. This is primarily due to the requirement to use current discount rates to remeasure the policy liabilities for AOCI purposes, which are lower than our current valuation rates that are based on historical investment strategies and assumptions. Since current rates are lower than the rates assumed in valuing our policy liabilities for income statement purposes, we will have an unrealized interest rate loss that is recognized through AOCI. This is especially relevant for Globe given the high persistency of our products and the fact that we have many policies still on the books that were sold 30, 40 or even 50 years ago, when the interest rate environment was much higher than today. While the required methodology requires the unrealized interest rate loss to be reflected in AOCI, it ignores the unrealized gains from underwriting margins on future premiums that are available to fund future policy benefits and changes in interest rates, which has the effect of overstating the policy liability that will be reflected on the balance sheet upon adoption.
Given our strong persistency, this exclusion is especially impact for the Globe, due to our strong underwriting margins and low policy obligation ratio. The lower the ratio, the more future gains from future premiums that are excluded from the computation of the new liability. Finally, as the average duration of our policy liabilities is over 20 years, the amount of the AOCI adjustment is expected to be larger in the AOCI market rate adjustment on our fixed maturity portfolio, will be sensitive to changes in interest rates and will have the potential to be volatile going forward when the current interest rate used to determine the reported policy liabilities is reset each quarter. Should interest rates decrease from period to period, we will see a decrease in our reported AOCI. If interest rates increase, we will see an increase in our reported AOCI. Again, none of these interest rate changes will impact the amount of claims we will pay in the future. In summary, we expect the new guidance will be a positive to our net -- our GAAP net income and net operating income, and will initially result in a significantly lower GAAP equity, including AOCI due to the adjustments required in computing the policy liabilities to reflect current interest rates. While the new guidance will likely lower GAAP equity, including AOCI as of the transition date for many life insurance companies, we expect the impact will be amplified for Globe and other companies like Globe, that have a substantial portion of their business subject to the new guidance, reserves on policies issued many years ago, policy liabilities with long duration and strong underwriting margins. Following the transition date, we expect GAAP equity, including AOCI, to be more volatile as market rate adjustments impacting our policy liabilities will be greater than those impacting our fixed maturity assets. Given the noneconomic impact on our business operations from these market adjustments due to our intent and ability to hold assets to maturity and the noninterest-sensitive nature of our liability cash flows, we still believe that equity, excluding AOCI, will be a superior and more meaningful measure of Globe's financial condition going forward. Those are my comments. I will now turn the call back to Larry.
