8 Things Globe Life Is Saying About How the World Really Is

Globe Life was the first publicly traded U.S. life insurer to release its earnings for the second quarter, and that means it's getting a few days of obsessive attention from investors.

Globe Life is the first company that has talked, in detail, about what it's like to run a life insurance company during an entire three-month period affected by the COVID-19 outbreak.

Resources

Links to Globe Life earnings resources are available here.
An article about Globe Life's new numbers is available here.

The McKinney, Texas-based company reported earnings $173 million for the quarter on $1.2 billion in revenue, in spite of all of the large and sudden changes.

Company executives then participated in a conference call with securities analysts, to answer the analysts' questions about the results.

The Globe Life representatives on the call were Gary Coleman, Globe Life's co-chairman and co-chief executive; Larry Hutchison, the company's other co-chairman and co-CEO; and Frank Svoboda, the company's chief financial officer.

Most publicly traded companies hold similar calls every quarter. Members of the public can listen to the calls while the calls are under way. Once the calls are over, the companies that organize the calls make recordings available on their websites.

Here are eight things the Globe Life executives said during their company's quarterly earnings call, drawn from the recorded version of the call.

1. Globe Life believes it has incurred about $22 million in COVID-19-related life insurance claims, and it expects to receive about $45 million in life claims related to the outbreak for the full year.

Globe Life has already paid about $10 million to $10.5 million in cash life insurance benefits due to COVID-19, Svoboda said.

Svoboda predicted that the company will receive about $2 million in COVID-19-related life insurance claims for every 10,000 COVID-19-related U.S. deaths.

2. The shift to new, quarantine-friendly sales processes has increased the amount of time it takes between the time an agent talks to a life insurance applicant and the time Globe Life records the issuance of a policy.

"While life sales were down for the quarter, we have seen an increase in agent activity," Hutchison said. "The rise in activity is not reflected in the second quarter sales due to increased time for policies to be issued, resulting from changes in our underwriting procedures. These changes are designed to accommodate the virtual sales process, to work around limitations in obtaining certain data, and to protect the company from antiselection. As we continue to work through this, our processing time will improve."

3. The current economic turmoil is good for hiring.

Companies like Globe Life hire many would-be life insurance agents, in an effort to find people with the drive and skills to help get consumers covered.

In some years, Globe Life has had with finding would-be agents.

This year, "we continue to see a significant pool of high-quality candidates, due to current unemployment levels," Hutchison said. "Overall, we're encouraged by our virtual sales and recruiting."

The average number of producing agents increased to 8,393 in the second quarter, up 14% from the average for the second quarter of 2019, Hutchison said.

4. Running worksite sales programs is harder.

Because of COVID-19, employers have furloughed some workers, and sent other workers to work at home. Many employers that still have workers coming in to an office, store or other location to work have imposed bans or restrictions on visitors.

Because of all of the changes, "the worksite business is more challenging," Hutchison said. "While the persistency of the worksite business is stronger than anticipated, it's more difficult to generate sales activity."

But Globe Life expects to see worksite sales increase, as agents get used to the new way of doing things, Hutchison said.

5. Economic turmoil has not led to a noticeable increase in product lapse rates.

"We've actually seen fewer claims and greater persistency, which, in our minders, reiterates our view of the importance of life insurance to our policyholders," Svoboda said. "We also saw situations where our policyholders were accelerating their payments of premiums. So, rather than seeing higher lapses, we've actually seen people paying a little ahead of time on their policies."

6. Life insurance underwriting rules have changed.

Hutchison said that, for the direct-to-consumer channel, Globe Life has limited the amount of insurance available at older ages.

The company has also discontinued access to some policy add-on features for older applicants, and it's temporarily stopped offering policies to applicants with some health problems.

7. Securities analysts are messing with Texas.

COVID-19-related hospitalization rates have risen to high levels in Texas in recent weeks.

One securities analyst asked the Globe Life executives about the company's exposure to mortality risk in Texas.

Svoboda said that about 7.5% of the company's total life insurance death benefits exposure is for policies in force in Texas.

8. Interest rates are a lot lower.

Globe Life, like other U.S. life insurers, uses large amounts of corporate bonds to support life insurance obligations.

The company is now assuming that the average rate it will earn on money newly invested in bonds is just 3.3% to 3.4% for the second half of the year, and 3.76% for the full year, compared with 4.47% for all of 2019.

Coleman said that Globe Life can handle a relatively short period of rates so low without any problems, because it expects to have an average turnover in its investment portfolio of less than 2% per year for the next five years.

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