Globe Life Banks on Solid Segmental Growth Amid Cost Woes
Globe Life Inc. GL is well-poised to gain from higher life and health sales, improved invested assets, increased productivity and agent count, strong liquidity position and effective capital deployment.
Globe Life has been witnessing a positive trend in revenues, driven by premium growth in its Life Insurance and Health Insurance segments and net investment income.
The strong performance of the American Income and Liberty National divisions should drive the top line in the future. Liberty National is likely to continue to benefit from improved productivity and agent count. GL’s expansion initiatives to capture heavily populated and less penetrated areas should drive growth in the future. Net life sales, as well as net health sales, are expected to grow in the mid-teens for Liberty National.
Moreover, net investment income continues to be another important driver of the company’s top-line growth and has been exhibiting improvement over the last few years. The metric is likely to keep growing, riding on improved invested assets and higher interest rates on new investments.
The company has maintained a strong liquidity position with sufficient cash-generation capabilities. Its operations comprise writing basic protection life and supplemental health insurance policies, which generate strong and stable cash flows. For 2024, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300-320%.
A strong capital position enables Globe Life to enhance its shareholder value via share buybacks and dividend payouts. The insurer has continuously been increasing its dividend over the past eight years (2016-2023) at a CAGR of 6.79%.
Risks to GL
However, GL has been grappling with higher expenses over the past few years. Higher total policyholder benefits, amortization of deferred acquisition costs, commissions, premium taxes and non-deferred acquisition costs, other operating expenses and interest expenses resulted in escalating expenses.
Globe Life has been incurring high administrative expenses over the years. For 2024, GL expects administrative expenses to be approximately 7% of premiums, higher than the 2023 level.
Globe Life’s long-term debt has been increasing over the last few years with debt-to-capital ratio deteriorating. As of June 30, 2024, total debt increased 11% year over year. A high debt level has been inducing higher interest expenses, which also increased in the second quarter of 2024. The company must service its debt uninterruptedly, or else creditworthiness could be dented.
Other Industry Players
Other players from the finance sector include CME Group Inc. CME, MarketAxess Holdings Inc. MKTX and Virtu Financial, Inc. VIRT.
CME Group’s earnings surpassed estimates in each of the last four quarters, the average surprise being 2.67%.
CME Group is well-poised for growth on the strong global presence, a compelling product portfolio, focus on over-the-counter clearing services and a solid capital position. CME Group’s strength lies in its organic growth. Clearing and transaction fees, which contribute the major share to the top line, continue to benefit from increased volatility that aids trading volumes.
MarketAxess’ earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 2.63%.
MarketAxess benefits from increased trading volumes, market share gains across a diversified set of product categories, strategic partnerships and a strong financial position for technology investments.
Virtu Financial’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 9.87%.
Virtu Financial is well-poised to grow on the back of its diversified business and rising interest and dividends income. The expansion of its Execution Services business poises the company’s top line well for growth in the future, despite fluctuations in market volatility.
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CME Group Inc. (CME) : Free Stock Analysis Report
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report
Globe Life Inc. (GL) : Free Stock Analysis Report