The Long and Short

Globe Life offers credit stability and issuer diversification

| October 29, 2021

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)

CUSIP: 37959EAA0
Amount outstanding: $400 million
Rating: Baa1/A/BBB+

Global Issue

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.

Dan Bruzzo, CFA
dan.bruzzo@santander.us
1 (646) 776-7749

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