The Long and Short
Globe Life offers credit stability and issuer diversification
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
Based in McKinney Texas, Globe Life (GL, previously Torchmark) is the holding company of four life and supplemental health insurance operating subsidiaries. The company generates the majority of premiums through individual life insurance coverage, with additional business lines in supplemental health, investments, and a now small portion of run-off annuities businesses. GL maintains consistent operating performance through conservative cost controls at its operating subs. As of the second quarter of 2021, GL had combined life statutory operating assets of $21.0 billion and policy reserves of $18.1 billion. GL intermediate bonds offer a stable credit with higher ratings (Baa1/A), and issuer diversification from the dominant debt issuers (MET/PRU/LNC, etc.) in the life insurance segment.
Exhibit 1: GL vs Life Insurance Comps (BBB rated or higher)
Source: Amherst Pierpont Securities, Bloomberg/TRACE indications
GL 2.15% 8/15/30 @ +75/10YR; G+79; 2.31%; $98.76
Issuer: Globe Life Inc. (GL)
Amount outstanding: $400 million
GL is well capitalized, redundant at the AAA level according to the rating agencies. The aggregate risk-based capital ratio for its life operating subsidiaries was 619% at year-end 2020 and has remained consistent over the past five years. Capital and surplus stands at $1.27 billion as of the second quarter of 2021.
The Company made a small, strategic bolt-on acquisition in 2021 (Beazley in August 2021) but has largely abstained from any significant M&A activity since 2012 (Family Heritage Life for $218.5 million) and 2010 (United Investors Life Insurance for $260.0 million).
GL appears to be weathering the pandemic well with manageable impact to operational results. The company saw just $67 million in COVID-related life claims for full year 2020. Related claims were slightly higher than expected in 3Q21 at $33mm, due in large part to the impact of the delta variant. However, the year-to-date total of $82 million and projections for $110-125 million for full year 2021 still appear highly manageable overall. Meanwhile, aggregate profit margins have seen limited impact throughout the pandemic.
Total statutory life cash and investments stood at $19.2 billion as of year-end 2020. GL boasts a conservative investment portfolio with total bond holdings ($16.9 billion) at an aggregate rating of BBB+. Bonds rated less than NAIC 1-2 made up less than 6% of total bond holdings. There were no reported equity instruments in among their investment assets as of year-end 2020.
GL has a very solid liquidity profile. Although the company has only $96mm in cash on the balance sheet, they generate highly consistent free cash flows. GL has no remaining maturities in 2021, and just $300 million in 2022, plus an additional $166 million in the following year. Their entire $355 million credit facility remains available through 2026, with no other public debt maturities until 2028. Issuance of the 2030 notes improved the liquidity profile, as proceeds were utilized to pay off the outstanding principal balance on GL’s term loan facility.
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Copyright © 2024 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.