Globe Life Inc. (GL) Earnings

Management highlights

Overall Financial Performance - Q2 2026 net income was $288 million ($3.65 per diluted share), a 20% YoY increase; net operating income was $285 million ($3.61 per diluted share), a 10% YoY increase. Double-digit net operating income per share growth has been delivered in 8 of the last 9 quarters, demonstrating the resilience of the business model across economic environments. - GAAP return on equity through June 30 was 18.4%, with book value per share of $70.18; excluding accumulated other comprehensive income (AOCI), return on equity was 14.3% and book value per share was $100.04, up 11% YoY. Distribution Channel Updates - AIL implemented compensation adjustments at the start of Q2 to improve agent recruiting and retention. Average producing agent count was 11,391 in Q2, down 7% YoY but up 3% sequentially from Q1, with early signs of improvement. Net life sales were $95 million, down 2% YoY, with mid-single-digit agent count and sales growth expected in H2 2026. - Liberty National: Average producing agent count grew 8% YoY to 4,194, driving 6% YoY net life sales growth to $26 million. Net health sales are down 15% YoY as the division shifted focus to life, with updated sales presentations being rolled out to re-emphasize health sales. - Family Heritage: Average producing agent count grew 7% YoY to 1,608, driving 4% YoY net health sales growth to $31 million. Ongoing investment in middle management has solidified performance, positioning the division for sustainable growth. - DTC: Net life sales were down 15% YoY to $27 million, as the division navigates a transition caused by AI reducing consumer paid search volume. The division remains on track to generate over 1 million leads for agency channels in 2026, and improved lead conversion has driven margin expansion despite lower sales. - UA: Strong Medicare supplement sales growth (10% YoY net health sales growth to $28 million) driven by tailwinds from population aging, shifts from Medicare Advantage to Medicare Supplement, and implemented rate increases. The startup Every Health group business is currently weighing on margins as it gains scale, with $50 million in 2026 full-year sales expected. Technology and AI Strategy - Management expects broad enterprise-wide benefits from expanded AI implementation, including lower long-term administrative expense ratios, more efficient distribution, and improved underwriting and sales support processes. AI is also being integrated into agent training and sales process optimization to improve retention and productivity. Capital and Liquidity - In Q2, Globe Life repurchased 1.1 million common shares for $175 million, and returned $200 million total to shareholders including $25 million in dividends. The term loan was increased from $250 million to $450 million, with maturity extended to 2029; the credit facility maturity was extended to 2031, adding additional parent liquidity. - The consolidated RBC ratio for U.S. subsidiaries was 316% at end-2025, within the company's 300-320% target range. Reciprocal jurisdiction approval for the Bermuda reinsurance affiliate Globe Life Re has been received from Nebraska, with Indiana approval pending. The first reinsurance transaction to transfer a portion of existing and new business to the Bermuda entity is expected to close in Q3 2026.

Guidance

- Full year 2026 total premium growth is expected to be 6.5% to 7%, with life premium growth of 2.5% to 3% and health premium growth of 14% to 16%. Net operating earnings per diluted share is guided to $15.55 to $15.95, representing 8.5% growth at the midpoint, an upward revision from prior guidance driven by improved life underwriting margins and excess investment income, partially offset by higher financing costs. - Full year 2026 life underwriting margin (excluding Q3 assumption updates) is expected to be 41% to 42%, with full year health underwriting margin guided to 23% to 27%. Administrative expenses are expected to be approximately 7.3% of total premium, consistent with 2025. - Q3 2026 life underwriting margin as a percent of premium is expected to be 52% to 53%, and health underwriting margin 29% to 32%, driven by $110 million to $130 million total in remeasurement gains from annual assumption updates. Q4 2026 health underwriting margin is expected to be 23% to 25%. - Full year 2026 net investment income and required interest are both expected to grow ~4%, resulting in ~7% growth in excess investment income. Full year average long-term invested asset yield is expected to be ~5.31%. - Full year 2026 total shareholder returns are guided to ~$765 million to $795 million, consisting of $95 million in dividends and $670 million to $700 million in share repurchases. This represents a $100 million increase at the midpoint of the share repurchase range from prior guidance, funded by additional term loan proceeds. $350 million to $370 million in total shareholder returns is expected for H2 2026. - For 2026 full year sales: AIL expects mid-single-digit life sales growth in H2; Liberty National expects low double-digit life sales growth and slightly down net health sales; Family Heritage expects low double-digit net health sales growth; UA expects 30% to 35% net health sales growth; DTC expects a single-digit full year decline in net life sales.

Segment performance

Life Insurance: Q2 2026 premium revenue of $861 million, a 3% year-over-year (YoY) increase, contributing 66% of total Q2 premium. Life underwriting margin was $359 million, up 6% YoY, representing 42% of life premium (up from 41% YoY). Breakdown by distribution: American Income Life (AIL) life premiums of $466 million (+5% YoY) with underwriting margin of $214 million (+4% YoY); Liberty National life premiums of $101 million (+3% YoY) with underwriting margin of $37 million (+10% YoY); Direct-to-Consumer (DTC) life premiums of $244 million (-1% YoY) with underwriting margin of $76 million (+10% YoY). Health Insurance: Q2 2026 premium revenue of $437 million, a 16% YoY increase, contributing 34% of total Q2 premium. Health underwriting margin was $99 million, up 1% YoY, representing 23% of health premium (down from 26% YoY). Breakdown by distribution: Family Heritage health premiums of $126 million (+9% YoY) with underwriting margin of $45 million (+10% YoY); United American (UA) health premiums of $211 million (+29% YoY) with underwriting margin of $11 million (-$1 million YoY, impacted by the startup Every Health group business). Investment Segment: Q2 2026 net investment income of $294 million (+4% YoY); excess investment income (net investment income minus required interest) of $38 million (+10% YoY). Total invested assets stood at $22.1 billion, with 97.3% of fixed maturities investment grade, and only 2.7% below investment grade (near historical lows). The earned yield on total long-term invested assets was 5.51% for Q2.

Risks & headwinds

- DTC operations face near-term headwinds from the shift of consumer search to AI, which has reduced traditional paid search volume and increased search costs, pressuring near-term sales growth as the company adapts its advertising strategy. - Higher-than-expected Q2 2026 health claims were driven by prior-period Medicare supplement reimbursement adjustments, adverse high-severity claims at the startup Every Health, and quarterly fluctuation in cancer claims at Liberty National, though management expects claims to moderate in the remainder of the year. - Startup group health business at Every Health is not yet at scale, resulting in lower than target margins and a drag on UA's overall health margin in 2026, though the business is immaterial to overall company results. - While the company's BBB-rated bond allocation is at its lowest level since 2003 and below-investment-grade exposure is near historical lows, the BBB and below-investment-grade exposure as a percent of equity remains a point of focus for investors, though management notes the company's ability to hold bonds to maturity, reducing downside risk. - The rollout of the Bermuda reinsurance entity is dependent on regulatory approvals, with capital benefits and dividend distributions to the parent not expected before 2027, and full benefits expected to emerge over 3-5 years rather than being realized immediately.

Analyst Q&A

• Q: How is Globe Life adapting its DTC advertising strategy to the shift to AI-driven search, how long will the transition take, and will margins be impacted? /

  A: Traditional paid search volume has declined, increasing the cost of per-click advertising. The company is maintaining discipline by not chasing unprofitable sales, and is shifting spend to other platforms including Instagram and Facebook, while working directly with search platforms to participate in new AI-native advertising formats. Management does not expect the transition requires giving up margin, and notes DTC already improved margins in Q2 as higher lead conversion for agency channels offsets lower direct sales. The shift is an industry-wide advertising dynamic, not a product demand issue, and management is confident DTC will successfully adapt.

• Q: Why did management increase full-year 2026 share repurchase guidance, and what will the pace be for the rest of the year? /

  A: The $100 million increase in share repurchase guidance is funded by proceeds from the expanded term loan. The company leaned into buybacks in the first half due to favorable share pricing, completing over 50% of the full year target in H1. For the remainder of the year, buybacks will proceed on a roughly pro rata pace. Management still views share repurchases as the best use of excess capital, as it believes the current share price remains below intrinsic value, even after recent appreciation.

• Q: What is driving the expected Q3 2026 remeasurement gain from assumption updates, even after higher Q2 health claims? /

  A: The assumption update reflects multi-year trends, not just single quarter claims volatility. The health assumption gain is driven by improved long-term morbidity trends across AIL, Family Heritage, and Liberty National. The higher Q2 cancer claims at Liberty National are viewed as a one-off quarterly fluctuation, not a change to long-term morbidity trends. Total remeasurement gains of $110 million to $130 million are expected, with $90 million to $100 million from life assumption updates and $20 million to $30 million from health assumption updates.

• Q: AIL's sales growth has been below outlook, is this driven by economic pressure on target consumers or just agent count? What is the outlook for H2? /

  A: Management notes the slowdown is entirely agent count driven, not economy or consumer demand driven. Per-agent premium continues to rise, and conversion rates remain stable, indicating healthy consumer demand. Agent count was down YoY in Q2 but grew 3% sequentially from Q1 following Q2 compensation adjustments focused on improving new agent recruiting and retention, and the recruiting pipeline is up 8% from Q1. Agent growth is momentum-driven, so the sequential improvement is expected to translate to mid-single-digit agent and sales growth in H2 2026, in line with the strong agent growth seen at Liberty National and Family Heritage with the same model.