It has been about a month since the last earnings report for Globe Life (GL - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Globe Life due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Globe Life Q1 Earnings Meet Estimates, Improve Y/Y
Globe Life Inc.’s first-quarter 2020 net operating income of $1.73 per share matched the Zacks Consensus Estimate. The bottom line improved 5.5% 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 $929.8 million, up 4% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income increased 1% year over year to $228.9 million.
The company’s operating revenues of $1.1 billion grew 0.8% 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. However, the top line missed the Zacks Consensus Estimate by 3.8%.
Excess investment income, a measure of profitability, decreased 4% year over year to $62.7 million.
Total insurance underwriting income grew 4% year over year to $181.2 million. Improvement in Life Insurance underwriting margins and Health Insurance underwriting margins resulted in this upside. However, higher administrative expenses partially offset this upside.
Administrative expenses were up 7.5% year over year to $64 million.
Total benefits and expenses rose 4.4% year over year to $930.1 million, primarily due to increased policyholder benefits, higher amortization of deferred acquisition costs, commissions, premium taxes, and non-deferred acquisition costs and other operating expense.
Premium revenues at Life Insurance operations increased 4% year over year to $649.6 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 1% and LNL Agency inched up 3%.
Life Insurance underwriting income improved 5% year over year to $178.8 million. Net sales of $110.6 million were 5% higher on a year-over-year basis.
Health insurance premium revenues rose 5% year over year to $280.2 million. Underwriting income of $63.5 million increased 3% year over year. Net health sales grew 9% year over year to $42 million.
Annuity underwriting margins declined 6% year over year to $2.3 million.
Adjusted shareholders’ equity as of Mar 31, 2020 increased 4.6% year over year to $5.3 billion.
Globe Life reported book value per share (excluding net unrealized gains on fixed maturities) of $49.66, up 9.3% year over year.
As of Mar 31, 2020, operating return on equity (excluding net unrealized gains on fixed maturities) was 14.1%, reflecting a contraction of 60 basis points year over year.
Share Repurchase and Dividend Update
In the first quarter, Globe Life repurchased 1.6 million shares for a total cost of $139 million for an average share price of $85.47.
Globe Life projects net operating income per share to be in the range of $6.65 to $7.15 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 an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 B. 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 indicates a downward shift. Notably, Globe Life has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.