Globe Life Inc.

Welcome to the GlobeLife 4th Quarter 2024 Earnings Release Conference Call. My name is Alan and I will 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. This can be done by pressing star 1 on your telephone keypad. If you require assistance at any time, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Stephen Moda, Senior Director of Investor Relations, to begin today's conference. Thank you.

Thank you. Good morning, everyone. Joining the call today are Frank Stavoda and Matt Darden, our co-chief executive officers. Tom Kambach, 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 They contain forward-looking statements they provided for general guidance purposes only. Accordingly, please refer to our earnings release 2023-10K and the subsequent form 10Q on file with the SEC. 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.

Thank you, Steven, and good morning, everyone. In the fourth quarter, net income was $255 million, or $3.01 per share, compared to $275 million, or $2.88 per share a year ago. Net operating income for the quarter was $266 million, or $3.14 per share, an increase of 12% from a year ago. On a GAAP-reported basis, Return on equity through December 31st is 21.7%, and book value per share is $62.50. Excluding accumulated other comprehensive income, or AOCI, return on equity is 15.1%, and book value per share as of December 31st is $86.40, up 13% from a year ago. In our life insurance operations, Premium revenue for the fourth quarter increased 4% from the year-ago quarter to $823 million. Life underwriting margin was $336 million, up 10% from a year ago, primarily driven by premium growth and lower overall policy obligations. In 2025, we expect life premium revenue to grow at the midpoint of our guidance in the range of 4.5% to 5%. compared to 4% growth for 2024. As a percentage of premium, we anticipate life underwriting margin to be between 40% and 42%. In health insurance, premium revenue grew 7% to $358 million, while health underwriting margin declined 6% to $91 million, due primarily to higher claim costs at United American, resulting from higher utilization. In 2025, we expect health premium revenue to grow in the range of 7.5% to 8.5% compared to 6.5% growth for 2024. We also expect health underwriting margin as a percent of premium to be between 25% and 27%. We are pleased with the overall premium growth we saw in 2024 as the 4.7% growth in total premium income was well above the 3.4% growth rate in 2023. This is especially encouraging as we come out of a high inflationary period that has put a stress on the U.S. consumer, especially those in the demographic we serve, and demonstrates the resiliency of our business. Due to the continued efforts of our sales and conservation teams, we anticipate this growth rate to accelerate and be even higher in 2025. Administrative expenses were $91 million for the quarter. The increase is primarily due to higher information technology costs related to maintaining IT software and services, employee costs, and legal expenses. While our expenses in the fourth quarter were higher than prior quarters, they were largely in line with our expectations. In 2025, 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 fourth quarter marketing operations.

Thank you, Frank. At American Income Life, life premiums were up 7% over the year-ago quarter to $433 million, and life underwriting margin was up 9% to $199 million. In the fourth quarter of 2024, net life sales were $93 million, and this is up 22% from a year ago, and primarily due to increased productivity and agent count growth. The average producing agent count for the fourth quarter was 11,926, up 7% from a year ago. This growth is due to the continued focus on recruiting and improved new agent retention. And I continue to be very pleased by the momentum at American Income. At Liberty National, our life premiums were up 5% over the year-ago quarter to $94 million. and the life underwriting margin was up 8% to $34 million. Net life sales increased 1% to $26 million, while net health sales were $9 million, down 5% from the year-ago quarter. The average producing agent count for the fourth quarter was 3,743. up 11% from a year ago. And I'm excited to see the continued agent count growth at Liberty National, which is primarily driven by our recruiting activity and agency middle management growth. And I am confident that this growth in agent count and agency middle management will drive strong sales growth in 2025. At Family Heritage, the health premiums increased 8% over the year-ago quarter to $111 million. and health underwriting margin increased 12% to $40 million. Net health sales were up 6% to $27 million due primarily to an increase in aging count. The average producing agent count for the fourth quarter was 1,512, and this is up 11% from a year ago. And I continue to be pleased to see the agent count growth, which is driven by this agency's efforts in recent quarters to emphasize recruiting and middle management development. At our direct-to-consumer division at Globe Life, life premiums were down 1% over the year-ago quarter to $245 million, while life underwriting margin increased 20% to $71 million. Net life sales were $23 million, down 11% from the year-ago quarter. Now, as we've mentioned previously, the continued decline in sales is primarily due to lower customer inquiries as we have reduced our 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. 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 quarter, we expect this division to generate over 750,000 leads during 2025, which will be provided to our three exclusive agencies. At United American General Agency, Here the health premiums increased 9% over the year-ago quarter to $151 million, driven by strong prior year sales growth of 23%. Health underwriting margin was $5 million, down approximately $9 million from the year-ago quarter, due to higher claim costs resulting primarily from higher utilization. For the full year 2025, we anticipate mid-single-digit growth in our underwriting margin due to strong sales and premium pricing actions. Net health sales were $30 million, up 7% over the year-ago quarter. Now I'd like to discuss our projections. And based on the recent trends and 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, low double-digit growth. And at Family Heritage, also low double-digit growth. We'd also like to reaffirm our life and health sales guidance we gave on our last earnings call. And as a reminder, this was where net life sales for 2025 are expected to be as follows. American income, high single digit growth. Liberty National, low double digit growth. And our direct to consumer division, low to mid single digit growth. Now 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'd like to make a few brief comments regarding the inquiries made by the SEC and the DOJ that we have previously discussed. While these inquiries are still open, there have been no material developments, and neither agency has asserted any claims or made any allegations against Globe Life or AIL, and we're not aware of any actions being contemplated by the SEC or the DOJ. And with respect to the EEOC matter, as of now, there have been no material developments to share outside of what was disclosed within our NQ as filed on November 6, 2024. And to the extent there's further information to share on any of these items, we will update you accordingly. I'll turn the call back now to Frank.

Thanks, Matt. We'll now turn to the investment operations. Excess investment income, which we define as net investment income less only required interest, was $38 million, up $3 million from the year-ago quarter. Net investment income was $282 million, up 4%, or $11 million from the year-ago quarter. The increase is largely due to the 3% growth in average invested assets over that period, and to a lesser degree, higher interest rates. Required interest is up 3.5% over the year-ago quarter, in line with the growth in average policy liabilities. For the full year 2025, we expect net investment income to be fairly flat and require interest to grow around 2.5%. The growth in both our average invested assets and our average policy liabilities is lower than historical levels due primarily to the reinsurance of approximately $460 million of our in-force annuity reserves that we noted on our last call. This agreement was effective November 1st. In addition, the impact of higher subsidiary dividends to the parent in 2025 will also contribute to lower average invested asset growth. As such, we anticipate excess investment income to be flat to down 15%. Now regarding our investment yield. In the fourth quarter, we invested $378 million in investment-grade fixed maturities, primarily in the industrial and financial sectors. These investments were at an average yield of 5.83%, at an average rating of A-, and an average life of 35 years. We also invested approximately $52 million 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 non-fixed 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 fourth quarter yield was 5.27%. up four basis points from the fourth quarter of 2023, and up two basis points from the third quarter. As of December 31st, the portfolio yield was 5.25%. Including the cash yield from our commercial mortgage loans and limited partnerships, the fourth quarter earned yield was 5.41%. Now regarding the investment portfolio. Invested assets are $21.2 billion, including $18.8 billion of fixed maturities at amortized cost. Of the fixed maturities, $18.3 billion are investment-grade with an average rating of A-. Overall, the total fixed maturity portfolio is rated A-, same as a year ago. Our fixed maturity investment portfolio has a net unrealized loss position of approximately $1.7 billion 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 entirely to bonds with maturities that extend beyond 10 years. We have the intent and more importantly the ability to hold our investments to maturity. Bonds rated BBB comprise 46% of the fixed maturity portfolio, compared to 48% from the year-ago quarter. This percentage is at its lowest level since 2007. As we have discussed on prior calls, we believe the BBB securities we acquire 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 rates or equity markets. While the percent 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. These all-investment-grade bonds remain at historical lows at $525 million, compared to $530 million a year ago. The percentage of below-investment-grade bonds to total fixed maturities is just 2.8%. At the midpoint of our guidance, for the full year 2025, we expect to invest approximately $900 million to $1.1 billion in fixed maturities at an average yield of 5.5% to 5.7%, and approximately $300 to $500 million in commercial mortgage loans and limited partnership investments with debt-like characteristics and an average expected cash return of 7% to 9%. Now I will turn the call over to Tom for his comments on capital and liquidity.

Thanks, Rick. Let me spend a few minutes discussing our share repurchase program, available liquidity, and capital position. The parent began the year with liquid assets of approximately $48 million and ended the year with approximately $90 million. In the fourth quarter, the company repurchased approximately 338,000 shares of Globe Life Inc. common stock for a total cost of approximately $36 million at an average share price of $105.37. This was slightly higher than we had anticipated in the quarter. For the full year, we purchased 10 million shares for a total cost of $946 million and at an average share price of $93.76. Including shareholder dividend payments of $85 million, the company returned slightly more than $1 billion to shareholders during 2024. In addition to the liquid assets held by the parent, the parent company will generate excess cash flows during 2025. The parent's company's excess cash flow, as we define it, results primarily from dividends received by the parent from its subsidiaries, less interest paid on debt. Although our statutory results are not final, we anticipate the parent company's excess cash flow for the full year of 2025 will be approximately $785 million to $835 million. Excess cash flows are anticipated to be higher in 2025 than in 2024, primarily as resulting from higher statutory earnings in 2024 than in 2023, as well as the impact of previously discussed reinsurance transactions completed in 2024. Statutory income in 2024 is anticipated to be higher than statutory income in 2023, primarily from favorable investment results. statutory reserve changes, improved mortality results, and lower realized losses. At the midpoint of our guidance, the anticipated excess cash flows are expected to be used to distribute approximately $85 million to shareholders in the form of dividend payments and reduce commercial paper to more historical levels with the remainder expected to be used for share repurchases in the range of $600 million to $650 million, absence and alternative use with a higher return to our shareholders. We anticipate liquid assets at the parent of around $60 million at the end of the year. We still believe share repurchases provide the best return or yield to our shareholders. 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. With regards to capital levels at our insurance subsidiaries, our goal is to maintain our capital levels necessary to support our current ratings. Globe Life targets a consolidated company action level RBC in the range of 300% to 320%. Since our statutory financial statements are not yet final, our consolidated RBC ratio is not yet known. However, we anticipate the final 2024 RBC ratio will be within our targeted range. Now with regards to policy obligations for the current quarter, as we discussed on prior calls, life and health assumption changes were made in the third quarter. No assumption changes were made in the fourth quarter. The supplemental financial information available on our website provides an exhibit that details the quarterly remeasurement gain or loss by distribution channel. For the fourth quarter, life obligations continued to be favorable when compared to our assumptions of mortality and persistency. resulting in lower policy obligations and a $19 million remeasurement gain related to experience fluctuations. For the full year, encompassing both assumption changes and experience-related fluctuations, the remeasurement gain from the life segment resulted in $107 million of lower life policy obligations, and for the health segment, $3 million of higher health policy obligations. In recent quarters, Mortality trends in the life segment has been favorable relative to our long-term assumptions. If mortality continues to develop favorably over the next couple of quarters, life obligations will be favorable relative to our long-term assumptions, resulting in life-free measurement gains. Conversely, if mortality experience is higher than our long-term assumptions, we will experience life-free measurement losses. Recent mortality and lapse experience will inform future updates to long-term assumptions which we intend to make in the third quarter of 2025. For the health segment, we anticipate health obligations for our Medicare supplement and group retiree health products will continue to be elevated given recent claim trends outpacing premium rate increases. Finally, with respect to our earnings guidance for 2025, for the full year 2025, we estimate net operating earnings per diluted share will be in the range of $13.45 to $14.05, representing 11% growth at the midpoint of our range. The $13.75 midpoint is higher than our previous guidance due to the favorable mortality experience we've seen in recent quarters and the anticipation that these favorable mortality trends will continue into 2025, resulting in improved life underwriting margins. Those are my comments. I will now turn the call back to Matt.

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

Thank you. Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. You'll be advised when to ask your question. We will take our first question from Jimmy Pular, JP Morgan. Your line is open. Please go ahead.

Hey, good morning. So first, just a question on your results. I thought overall most of the business metrics were good, but one of the negatives was just a little bit of an increase in first-year lapses in the direct channel and also in Liberty, and so hoping if you could discuss what's really causing that, and do you expect that trend to continue to get worse as you get through 2025? Can we take that?

Yeah. Jimmy, I think a couple things. I think we're pleased overall with that lapse experience has stabilized, and in AIL, actually, lapse rates went down a little bit, Overall, for Liberty, they went down a little bit from sequential quarters. So I think there's some good news there that the higher lapse rates that we had seen had stabilized a bit. On DTC, we are seeing a little bit higher lapse rates than we have historically, and some of that is a mix of business. Quite a bit of our new business is coming from the Internet channel versus more of our mail and insert media channels. So those digital channels do experience a little bit higher lapse rates, and I think that's at least part of the story there.

Yeah, one thing, Jimmy, I would just add to that, really, if you go back and look at American income and especially kind of their average, you know, first-year lapse rates, especially pre-pandemic, you know, we're right in line with, you know, where that always fluctuates, of course, on a quarterly basis. And really, it's not really that measurably higher than even the long-term average since, you know, over the last, you know, 10, 15 years.

Okay. And then on the regulatory investigation, especially on the DOL and the SEC, from the outside in, how does one get finality to this? Because typically those agencies don't tend to put out releases when they're done investigating something unless there's a fine or something else. But what's your view on how somebody would get, obviously the passage of time, without any new news is a positive. But other than that, how does one get finality? How should we see some finality or resolution to this from the outside?

Yeah, thanks, Jimmy. Our intent is to be able to discuss the conclusion of those inquiries when they happen. Of course, we're working through those processes as we speak. But you're right. Generally, the agencies themselves don't issue something But our intent would be able to communicate when those inquiries have been concluded at the time that that happens.

And then if I could just ask one more. On the health business, there was some optimism last year that with the reimbursement rate changes on MedAdvantage plans, maybe there would be more volumes flowing towards MedSupp. It seems like now the trend could actually end up reversing and the market might shrink a little bit. What are your thoughts on that, given the change in the administration?

Yeah, that one's an interesting one that we want to watch. There's been some in the new administration that have voiced some optimism around MA plans, I do believe also there's a segment of consumers and frankly providers that may be disenfranchised with the structure of Medicare Advantage plans and I think that would still could be a benefit to the Medicare supplement market because people still do like choice and again there are certain providers that have not been happy with reimbursements on the MA side. It's one of those that we're watching and seeing. I don't think it's too early to conclude one way or another how that market's going to shake out with the new administration.

Thank you.

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

Hi. Good morning. First question, your excess cash flow guidance and the higher guidance you gave for 2025, are you able to quantify the different elements of that across the reinsurance accounting changes and maybe the favorable underlying results that you mentioned? Just trying to get at how much of the increase was more maybe one time in nature and how much you would expect to persist into your out-of-year run rate.

Yeah. So thanks for the question. One of the increases is the reinsurance transactions that we did last year. And as I indicated on the call, that those were worth about $100 million. So we actually did file for an extraordinary dividend and got approval at the end of the year. So that's providing some additional excess liquidity to the parent in 2025. And that's reflected in those numbers as well, which incorporates the impact of those reinsurance numbers. The other kind of run rate and statutory earnings are a bit higher because of some valuation manual changes. And there's a little bit of a catch up there. And the full year benefit of that was probably closer to $150 million versus $120 million that I had estimated at last quarter. And that probably cuts in half as we kind of look at it as we go further out into the benefit that we might see from a normal run rate in 2025 and on.

A question on the life margin and the higher guidance there. I guess is that some experience that would flow through kind of the re-measurement gains? I guess I know you had your assumption last quarter. Is there anything in particular that's driving the improved outlook now versus what you had coming out of that review?

Yeah, we really saw, I think, what's we saw in the fourth quarter was just some really good mortality experience and especially development on the claims that were incurred in Q3 and Q2. So even though you kind of were looking at some of the favorable experience that we were seeing early in the year and that at least was an input into how we thought about the assumptions, really in the fourth quarter we saw some very good experience taking place. And so we continue to have a pretty sizable remeasurement gain in Q4, just since that was so much better than that long-term assumption that we had in place.

Thank you.

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

Hi, thanks. Good morning. My first question is on buyback. Should we just think about, you know, that kind of, you know, being evenly spread, the guide throughout the four quarters of the year? And then I know, right, you guys, you know, prior to some of the DOJ, you know, investigations, right, you know, there was, you know, some deal you guys were considering. Do you consider M&A, I guess, kind of returning to the equation in 2025 embedded within your capital outlook?

Yeah, I'll start with that. We did begin share repurchases again at the beginning of the year and stopped that as we entered into a blackout period. But our plan is to continue kind of our historical practices around share repurchases. which is rateable throughout the year. And so it might not be evenly rateable, but generally consistent throughout the year.

And one of the reasons we do do that is that it does allow us to kind of really manage those cash flows. So if we do see an M&A opportunity that we think is really beneficial for the shareholders, then we can pivot and use some of those cash flows for that. We will continue to be open to M&A opportunities and continue, as we've talked about on prior calls, really looking for something that helps us to expand our offerings, if you will, to serve middle-income policyholders with basic protection products that come with some type of distribution. So we will continue to be looking for those opportunities and open to those opportunities if they arise.

Thanks. And then my second question, you know, health utilization, you know, did trend up in the second half of last year. Can you just provide some, you know, kind of color on your thoughts for 2025 there as well?

Yeah, I mean, definitely health utilization was high during the course of 2024. And actually, we saw it get a little bit higher in 2025. It's kind of one of the reasons why we've adjusted our range for health underwriting margin overall is just that we continue to believe that utilization will continue to run a little bit high and outpace the rate increases that we've actually filed and gotten approved for premium increases in 2025. So over time, I think we'll catch up with that. But I think in 2025, we do expect to see higher utilization.

Thank you.

We will take our next question from Wilma Curtis. Raymond James, your line is open. Go ahead.

Good morning. So if I took out the reinsurance and the valuation manual updates, I'm estimating organic exit cash flow of around, I think it was around $550 to $600 million. Is that a good base? And then the $75 million or I guess half of $150 million that you expect to continue in 2026, Over what time frame will that persist?

Thank you. Yeah. Thanks, Wilma. I think your base is good. We haven't really finalized 2024 statutory earnings. And so next quarter, I can give you a better update on kind of where we think that run rate is. I think one of the things we want to factor in is that Investment income is expected to be fairly flat, so I think that's going to limit some of that upside. So we can give you an update next quarter on that as well once we finalize statutory earnings. But I think you're in the ballpark anyway. And then on the valuation manual changes, I think we saw in 24, that was really kind of an impact to the in-force business. And so as the in-force business goes, as that subsides from the existing in-force business, some of it will be made up by new business that comes on. So I think, although I don't have a crystal ball there, I think that 70 million, that is the midpoint or half of that is will decline a little bit over time, but I think a lot of that is sustainable additional statutory earnings.

Thank you. And Nate, could you talk a little bit about what the recruiting and sales environment is like right now from a macro perspective? Middle-income consumers seem to be in a modestly better financial condition. Does that have any impact on sales or recruitment? And then can you talk a little bit about what you're seeing in the point-of-market statistics?

Yeah, thanks, Wilma. I think we're still seeing some strong growth in our recruiting efforts and hiring efforts. And so we anticipate that to continue forward into 2025. And so that's reflective in the growth numbers that we're anticipating on our agent count side. And then, of course, that translates into our sales growth. One of the things we just wanted to acknowledge as an example for American income, prior to Q4, we're coming off of four quarters of double-digit growth, and in some cases very high, up to 20% growth if I go back four quarters ago. And so we're tempering that a little bit of just maintaining 15% and 20% agent count growth quarter over quarter. is a little bit higher than our historical norms. But again, I still think we're going to have a good environment for 2025 if I look at just our momentum across all three agencies coming out of the end of 24. Then on the sales side, we continue to see growth there. We actually, as we look at the new business that we're selling, we're having improvements in just the premium on a per policy basis. And so as we've discussed before, the macroeconomic environment, we seem to be pretty resilient from that is, you know, I go back to when we were experiencing eight and nine percent inflation rates, we were still able to grow both on the recruiting agent count side as well as on the sales side. And so we we continue to see our customer base be very resilient. And I think that just gets back to this marketplace continues to have a significant amount of opportunity with a significant number of people that are underinsured or uninsured in this marketplace. And we have a good opportunity to continue to develop sales in that area. And as we've discussed before, The benefit, I think, of our policies is the small, you know, their basic protection. They're easy to understand. They're designed for middle-income America. And the premiums are small on a relative basis per month. You know, depending on the channel, they're $30 to $60 a month in premium. And so it's not really price prohibitive to take out those kind of policies for our customers. And I think that gets into the resiliency of our in-force space as we talk about our lapse rates that we discussed. They move around a little bit, but it's in a pretty narrow band as different economic cycles kind of go.

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

Thank you for the opportunity. My first question is on agent trends, and I appreciate that you gave the guidance for agent growth for the year. But I understand there's some seasonality in fourth quarter with the holidays, if that occurs. But how have first-year agents trended in January, essentially first quarter so far across those channels?

Yeah, John, you're right. It's not unusual around the holidays. So the latter half of Q4 and, you know, frankly, sometimes that bleeds over into the very first part of Q1. We do have a little bit of seasonality on the recruiting and agent retention side. And so our guides are really reflective of the entire year. And generally, we see a pickup in particularly in in Q2 and within Q3 of strong agent count growth. And so really, as we've discussed before, we talk about it quarter over quarter, but we really like looking at it on a year over year basis. And what I'm very pleased about is that we have very high correlation between producing agent count and our sales For example, if you look at a three-year CAGR for American income, we have about an 8% agent count growth, and we have about an 8% sales growth over that time frame, and similar statistics if I walk through Liberty and Family Heritage. So our long-term potential is really focused on around that 10% agent count growth and trying to achieve a similar number for sales growth that really drives our expectation for our premium earnings that ultimately are in our results for the year. So I'd say to answer your question, the fourth quarter activity is kind of what I would expect to be normal from a little bit of seasonality and I think we're starting off strong for this year around what we would expect and how that builds over time.

And then on my follow-up question, I know you're doing some efforts to get a Bermuda platform up. Any update you can provide or any markers on the weigh station we should watch out for? Thank you.

Yeah, thanks. I think we're on track with our analysis. You know, we had communicated that we'd update you kind of mid-year as far as what our plans are there, and we're on track to do that. So we feel pretty good with where we are.

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

Hey, thank you. Good morning. Um, I had a broader question on the stock and capital management, but obviously the stock came under some intense pressure last year and you as a management team took some pretty significant actions and bought back a lot of stock. And I understand your guidance for 2025, but as you sit here today, the stock still trading at a pretty significant price earnings, multiple discount relative to historical trends. So just curious how you're thinking about taking any other reinsurance, more significant action, Or are you feeling a little bit more business as usual now? Or are you waiting on maybe some of these investigations to conclude?

Yeah. Thanks, Wes. You know, as we really do look at it, we really do think that there's still some opportunities, clearly, you know, in the valuations of our shares. I do think we will, you know, continue to look really hard at where are there pockets of opportunity for us to, you know, you know, manage that capital. Are there opportunities for us to release some additional capital, you know, over the course of the year? So we are continuing to look at some of those opportunities. And, you know, we still, we do think that the stock is a good buy. So we will, you know, be taking a look at that. Now, I say that, and I think as we mentioned earlier, from a timing perspective, Largely want to be thinking about our share purchases coming over the course of the year. And there may be a little bit of front end loading on that just a little bit. But for the most part, it helps us to manage cash flows over the course of the year. But again, I think we'll continue to look at opportunities and try to be a little bit aggressive with respect to freeing up some additional cash or additional capital in order to take advantage of current share price. Got it. Thanks. That's helpful.

And I just had two kind of housekeeping follow-ups. I think in the release there was some legal accrual of about $12.5 million below the line. That's a little bit chunkier than it's run. Can you just talk about the nature of what you're booking there? And my follow-up was just on commercial paper. Can you give us a sense on how much you're you're allocating excess cash flows this year for that.

Yeah, so as you know, Globe Life and its subsidiaries are subject to litigation from time to time, and it's common in the insurance, and that's uncommon in the insurance industry in general. We've seen an update, an uptick in litigation claims and expenses over the past several quarters, as well as legal expenses stemming from claims made by recent short-sellers. The line item for legal proceedings this quarter includes an estimate of costs associated with settlements of certain litigation claims not related to the DOJ, SEC, or EEOC matters, as well as certain other legal expenses that we incurred. As we are sure you can appreciate, our policy is to refrain from commenting on pending or ongoing legal matters involving the company or any of its subsidiaries, so we're unable to provide any more detail at this time.

And then, Wes, I think with respect to the commercial paper, right now we're kind of, you know, we're looking at trying to bring that down into probably those more normal levels somewhere in the low 300s. I think we ended the year around 415, so, you know, kind of pointing to around that $100 million or so of, you know, use of that to get it back. And really, we'll kind of look at that over the course of the year and look at cash availability and cash flow needs as well. But we kind of manage that to help, again, manage our overall liquidity risk and how we just think of having cash available for our operations. So we'd like to try to get that back into a little bit more of a normal range if we are able to. Thank you.

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

Hey, good morning. So my first question is around your shift at American income to virtual. Clearly, 2024 was really strong in terms of recruiting and sales. And now you said it would moderate a bit this year, but it's still very good, right? You said average agent count at AI would be mid-single digit. And then you said life sales would be up at American income, high single digit. And some of that I think you mentioned was a reflection of higher policy limits. But I'm kind of curious, like maybe moving out to 26 or even – longer term, you know, what kind of an impact is the virtual approach versus, you know, in office having on your recruiting, on your sales? I mean, is this something, you know, where you could see a big pickup in 2026 again? How are you thinking about this longer term? It sounds like something better is happening.

Yeah, thanks, Andrew. You know, we started the the virtual sales and virtual recruiting during the height of the pandemic and all that was associated with that. We found such a benefit to it is that we've kept that model going forward. And really, we're seeing a lot of good activity associated with that. On the agent recruiting side, what we see is that I think we're attracting additional individuals that may not have been interested in a sales opportunity that was face-to-face in a customer's home across the kitchen table, as they would say, is now those sales can be done from the comfort of their home or wherever they may be located. And you can see what's happening with corporate America with the return back to the office and you see more and more companies announcing back to the office mandates and the like. that's providing additional tailwind to our opportunity as individuals are looking for flexibility and autonomy and the ability to do that. And so that has definitely benefited our recruiting efforts over the last, you know, many quarters. As I mentioned, you know, I go back to starting in early 2023, you know, we've had, 20, 15%, 13%, et cetera, agent count growth throughout the end of 23 through 24. And I think that'll continue to be a benefit to us, that virtual environment. And then the same thing happens on the sales side is that the ability for our agents to work leads throughout the area where they're licensed. So we've seen our agents have an uptick in licensing in multiple states to be able to work leads across state lines. And so it's just much more efficient from that perspective if I look at our agent activity, as well as we're on the benefit of the consumer has changed. The consumer now is much more used to having virtual interactions, you know, you have virtual interactions with your doctor from a telemed perspective, and there's a variety of other interactions. And so you have the consumer much more willing, I think, now as compared to prior to 2020, being willing to have sales interactions through a virtual experience as well. We don't really see that abating anytime soon. I think that's just kind of a new normal as we go forward. And so we think that will continue to be a benefit. You know, I'm very pleased with American Income. If I look at, as an example, their five-year CAGR from an agent count growth perspective, it's over 9%. And that lines up very well with approximately 9% sales growth over that same timeframe. So they're very much in lockstep over a longer-term perspective. And so like we've talked about before, we get quarter-to-quarter fluctuations a little bit, but that long-term growth we believe is definitely sustainable.

Very helpful. And then just shifting over to the life underwriting margin, which came in at 41%. and you're guiding in 25 to 40 to 42. That's pretty nice, just given in 23 it was about 38%. And as I kind of went through the supplement, it looks like a lot of the benefit this year came from direct-to-consumer. Is that the right observation? Have you kind of corrected for something in direct-to-consumer and Do you think that 41% is very sustained or 40 to 42 is sustainable beyond 2025?

Yeah, Andrew, I think you are right in the observation that we really are seeing some favorable developments on direct-to-consumer especially. It's been you know, and that tends to be the segment or the distribution, you know, that's a little bit more of a, uh, ensures a wider swath of the U S population and, and does of course have tends to have a higher mortality in general than, you know, each of the other distributions have. So as there's, um, you know, coming out of the COVID, you know, we're seeing a lot of excess deaths and, um, and that's what we're seeing in the U S population as a whole. Um, and the, um, And so as we've been seeing here over the last couple of years, especially 2024, I mean, Our pay claims in 2024 have been basically flat, if not dropped a little bit from 2023, while at the same time, premium increased in 2024 by 4%. So we're really seeing that kind of really favorable experience. And especially in the last couple of quarters here this year, Q3 and Q4, we just saw a really good experience. and low levels of claims, and in certain causes of death, actually seeing that at below some of those pre-pandemic levels. And so we'll see how, I think with respect to 2025, it really depends on will we continue to see that continuing level of favorable mortality persist, or is it a fluctuation that we've just happened to maybe be seeing here over the last few quarters? That's within the range kind of takes into account, you know, whether or not we continue to see some of that favorable mortality or not. And we're, of course, hopeful that we will. And then, you know, we'll be and go from there. And again, beyond 2025, you know, there's a lot of things to kind of work their way out here. And we'll kind of see, you know, we've talked for the last couple of years of was there some pull forward of deaths from COVID, and would that result in some better mortality? And of course, at the time, it was like, well, it's always possible, but it's really too early to tell. And again, maybe we are seeing a little bit of that, but again, we're kind of still waiting to see how that kind of pans out here over the next several quarters, and then we'll get a better sense of whether we think that'll persist or not.

I mean, just a quick follow-up on that, just more specifically to direct a consumer. It sounds like you're gaining a little confidence because you guided to low to mid-single-digit sales growth. Is that the right way to think about it?

Yeah, we're really looking at, we think we've kind of bottomed out, so to speak, a new level and been able to kind of maintain and grow a little bit from here. As we've talked about before, You know, that is one of our areas that is a little bit more price sensitive. It's a passive sale that has a little bit more sensitivity to competition and economics, so to speak. But we do think, and that's why we got into that, what we did, is we do think we're kind of bottoming out here and being able to have a new level to grow from.

Thanks so much.

We will take our next question from Sunit Kamar. Jeffrey, your line is open. Please go ahead.

Great. Thank you. I know you hit on this earlier, but I just wanted to follow up on potential reinsurance transactions. Should we assume that maybe things are on hold a little bit until you get your Bermuda subsidiary, sort of that whole strategy set up, or could you be contemplating doing something even before that happens?

I think we'll consider other opportunities, but I think really our focus is quite a bit on that Bermuda, completing our analysis on the Bermuda subsidiary and making some final decisions there. But we're open to some other reinsurance opportunities if they make sense to us. But I think it's fair that our priority is on the Bermuda.

One thing I would add is there's always some transition with As Tom has talked about, Bermuda takes a little bit of time to get in place and for there actually to get some, you know, measurable benefits, you know, from that type of transaction. So we're at least, you know, open to and thinking about, you know, is there something kind of in the interim that helps us to kind of, we can do something that bridges the gap and gives us some benefits a little bit earlier.

Okay, that makes sense. So maybe Bermuda is more of a 26 kind of story than a 25 story?

I think it gives a little bit of benefit in 26. I think the real benefit comes in 27 once we have two full years of financials for a Bermuda sub that we can get reciprocal jurisdiction, which is one of the requirements for doing that.

Yes, we really kind of look at that as being a real, you know, we're optimistic at this point in time as far as it being, you know, a really good long-term, you know, solution, if you will, or opportunity for us.

Got it. And then my second question is just on underwriting and remeasurement. So are you factoring in remeasurement gains into your plan for 2026, or are we sort of on hold until we go through the unlocking assumption in the third quarter, and then we kind of see what happens there?

Yeah, our range is intended to encompass encompass whether we continue to see favorable mortality trends consistent with where we saw them late in in 2024 or they come back a little bit as well so that's really what's intended uh in the range and so um i think there's a little bit of wait and see um we really you know there's no question we had a really good quarter in the fourth quarter and we'd like to just see how that develops and And the development of fourth quarter and then the results for first and second quarter will inform any assumption update that we make in the third quarter of 2023. Male Speaker 1 Yeah.

And I think you said 2026, but I think you meant 25. Male Speaker 1 I meant 25, sorry. Male Speaker 1 No, I mean, and that's Tom's answers were for 2025, of course. Male Speaker 1 Yeah.

Male Speaker 1 Yeah. I said 23 at the end, sorry. Yeah. Male Speaker 1 Okay.

Thanks. Male Speaker 1 Yeah. Male Speaker 1 We will take our next question from Tom Gallagher. Evercore, your line is open.

Please go ahead. Hi. Just first question on Bermuda. When you mentioned it might be a really good long-term solution or opportunity beginning in 2027, I assume that means that you see this more as a sustainable solution kind of ongoing free cash flow benefit, not just like a one-time release? Is that a fair way to think about how you're approaching it?

Yeah, Tom, that's exactly how I'm thinking about it, is that it becomes part of an overall capital management strategy and strategy to return cash to shareholders.

And it really goes, Tom, to just think about capital requirements around the liability side of our balance sheet and the amount of managing that a little bit more efficiently through that jurisdiction.

And would you be looking to fund it all yourself, or are you contemplating third-party sidecar capital vehicles?

Not really considering third... third-party sidecar capital vehicles. We think it's really just an opportunity for us to do it ourselves, that we don't think we need third-party capital to be able to make that an effective vehicle.

Gotcha. And then just one final question on the health business. How do we think about the timing of repricing? It sounds like what you've put in place for repricing is somewhat below trend, and that's why your margin guide is coming down. But how do I think about the timing of when the periods of repricing occur? Is it most of it annual? Is it staggered throughout the year? And should we assume margins start low earlier part of 25 and gradually get better over the year? And how do you think that also would play out in the 26?

Yeah. So the way that we go through rate filings and rate evaluation is we generally will make those determinations in the early third quarter and file those with the regulatory agencies. It's really an annual process rather than a continuous process throughout the year. And we did see quite a bit of the utilization come through in the earlier part of 2024 and the later part of 23. So a lot of the utilization was reflected in our rate filings that we made with states. It was really kind of the tail end of 24 that we saw some incremental increases in utilization that didn't get factored in. So that would get factored in as well as the experience in early 2025 into our rate filings that we make in 2025, which would then become effective in 2026. And those generally become effective right around the end of the first quarter, beginning of the second quarter is when those rates become effective.

Gotcha. And do you think, based on the trend they're seeing, you would expect some level of improvement into 2026? or is stable a better assumption for now?

Yeah, it's hard to say, because it really depends on what happens to utilization. But I think our plan would be to kind of catch up with that into 26, and things would be more back to more normal. Now, if utilization continued to increase above what our rate findings were, we'd see a little bit of a drag there. And if they came back better, we'd see a little bit of a positive there as well.

That's kind of how we're thinking about it right now. Yeah, at least that is our hope is that we would catch up, if you will, by 2026.

Okay, thanks.

We will take our next question from Wilma Bertis. Raymond James, your line is open. Just go ahead.

Somebody covered my question. Thank you.

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

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

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