It has been about a month since the last earnings report for Globe Life (GL - Free Report) . Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Globe Life due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Globe Life Q3 Earnings Beat Estimates, Improve Y/Y
Globe Life’s third-quarter 2019 net operating income of $1.73 per share beat the Zacks Consensus Estimate by 1.76%. The bottom line also improved 8.8% year over year on the back of higher premiums from Life and Health segments and Insurance underwriting income.
Behind the Headlines
Globe Life reported total premium revenues of $900 million, up 5% year over year. This upside was primarily driven by higher premiums from Life, Health and Annuity Insurance businesses.
Net investment income increased 3% year over year to $228.9 million.
The company’s operating revenues of $1.1 billion grew 4.2% from the year-ago quarter. This top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. Additionally, the top line beat the Zacks Consensus Estimate by 0.45%.
Excess investment income, a measure of profitability, climbed 5% year over year to $64.8 million.
Total insurance underwriting income grew 5% year over year to $184.6 million. Improvement in Life Insurance underwriting margins resulted in this uptrend. However, higher administrative expenses partially offset this upside.
Administrative expenses were up 8.5% year over year to $61 million.
Total benefits and expenses rose 3.5% year over year to $894 million.
Premium revenues at Life Insurance operations increased 4.1% year over year to $630.8 million, driven by higher premiums written by distribution channels like American Income Agency, Global Life Direct Response and Liberty National Exclusive (LNL) Agency. While American Income Agency grew 7%, Global Life Direct Response was up 2% and LNL Agency inched up 2%.
Life Insurance underwriting income improved 7.6% year over year to $181 million. Net sales of 105.6 million were 6% higher on a year-over-year basis.
Health insurance premium revenues rose 5% year over year to $269.2 million. Underwriting income of $60.9 million increased 1.1% year over year. Net health sales grew 16% year over year to $44.7 million.
Annuity underwriting margins declined 8.3% year over year to $2.3 million.
Adjusted shareholders’ equity as of Sep 30, 2019 increased 6% year over year to $5.2 billion.
Globe Life reported book value per share (excluding net unrealized gains on fixed maturities) of $47.58, up 10.4% year over year.
As of Sep 30, 2019, operating return on equity (excluding net unrealized gains on fixed maturities) was 14.7%, unchanged year over year.
Globe Life was earlier called Torchmark. The change in company name came into effect on Aug 8, 2019.
Share Repurchase Update
In the third quarter, Globe Life repurchased shares for a total cost of $83 million.
Globe Life projects net operating income per share to be in the range of $6.71 to $6.77 for the year ending Dec 31, 2019 and $7.00 to $7.30 for the year ending Dec 31, 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
At this time, Globe Life has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Globe Life has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.