Globe Life (GL) Down 12.3% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Globe Life (GL). Shares have lost about 12.3% 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 Q4 Earnings Miss Estimates, Improve Y/Y

Globe Life’s fourth-quarter 2019 net operating income of $1.70 per share missed the Zacks Consensus Estimate by 1.16%.However, the bottom line improved nearly 9% 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 $906.7 million, up 6% year over year. This upside was primarily driven by higher premiums from Life, Health and Annuity Insurance businesses.

Net investment income increased 1.4% year over year to $227.5 million.

The company’s operating revenues of $1.1 billion grew 6.7% 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 0.41%.

Excess investment income, a measure of profitability, climbed 1% year over year to $62.6 million.

Total insurance underwriting income grew 5% year over year to $179.6 million. Improvement in Life Insurance underwriting margins resulted in this uptrend. However, higher administrative expenses partially offset this upside.

Administrative expenses were up 7% year over year to $61.1 million.

Total benefits and expenses rose 5.6% year over year to $909.5 million.

Segmental Update

Premium revenues at Life Insurance operations increased 5% year over year to $631.5 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 8%, Direct to Consumer was up 4% and LNL Agency inched up 3%.

Life Insurance underwriting income improved 6% year over year to $177.1 million. Net sales of $106.7 million were 7% higher on a year-over-year basis.

Health insurance premium revenues rose 7% year over year to $275.2 million. Underwriting income of $61 million increased 5% year over year. Net health sales grew 13% year over year to $63.8 million.

Annuity underwriting margins declined 12.6% year over year to $2.3 million.

Financial Update

Adjusted shareholders’ equity as of Dec 31, 2019 increased 6.9% year over year to $5.3 billion.

Globe Life reported book value per share (excluding net unrealized gains on fixed maturities) of $48.26, up 8.9% year over year.

As of Dec 31, 2019, operating return on equity (excluding net unrealized gains on fixed maturities) was 14.5%, down 10 basis points year over year.

Share Repurchase Update

In the fourth quarter, Globe Life repurchased shares for a total cost of $93 million.

Guidance Update

Globe Life projects net operating income per share of $7.03-$7.23 for the year ending on Dec 31, 2020, compared with $7.00-$7.30 mentioned earlier.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Globe Life has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision 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.