Investments

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investments

Note 4—Investments

Portfolio Composition: Summaries of fixed maturities available for sale by amortized cost, fair value, and allowance for credit losses at March 31, 2020 and December 31, 2019, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows. Redeemable preferred stock is included within the corporates by sector.

As noted in Note 1, the Company prospectively adopted ASU 2016-13 as of January 1, 2020 for the available-for-sale fixed maturities. Results after January 1, 2020 are presented under ASU 2016-13, while prior periods continue to be reported in accordance with previously applicable GAAP. See additional discussion of the allowance for credit losses later in this note.

	At March 31, 2020
	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair  Value(1)		% of Total Fixed Maturities(2)
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	374,781	$	—	$	80,894	$	(124)	$	455,551	2
States, municipalities, and political subdivisions	1,582,294		—		161,591		(4,411)		1,739,474		10
Foreign governments	22,403		—		2,098		(196)		24,305		—
Corporates, by sector:
Financial	4,107,145		—		545,127		(91,331)		4,560,941		26
Utilities	1,927,517		—		346,826		(10,468)		2,263,875		13
Energy	1,662,009		(31,854)		71,866		(235,753)		1,466,268		8
Other corporate sectors	6,507,502		—		761,004		(92,273)		7,176,233		40
Total corporates	14,204,173		(31,854)		1,724,823		(429,825)		15,467,317		87
Collateralized debt obligations	56,733		—		21,764		(10,124)		68,373		—
Other asset-backed securities	131,560		—		392		(7,431)		124,521		1
Total fixed maturities	$	16,371,944	$	(31,854)	$	1,991,562	$	(452,111)	$	17,879,541	100

(1)Amount reported in the balance sheet.

(2)At fair value.

	At December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair  Value(1)		% of Total Fixed Maturities(2)
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	396,079	$	41,737	$	(296)	$	437,520	2
States, municipalities, and political subdivisions	1,559,736		158,546		(626)		1,717,656		9
Foreign governments	25,874		2,073		(396)		27,551		—
Corporates, by sector:
Financial	4,101,917		701,196		(22,307)		4,780,806		25
Utilities	1,937,738		416,114		(1,565)		2,352,287		13
Energy	1,678,969		269,640		(33,725)		1,914,884		10
Other corporate sectors	6,514,677		955,908		(16,765)		7,453,820		40
Total corporates	14,233,301		2,342,858		(74,362)		16,501,797		88
Collateralized debt obligations	56,990		24,298		(7,184)		74,104		—
Other asset-backed securities	143,796		5,094		(371)		148,519		1
Total fixed maturities	$	16,415,776	$	2,574,606	$	(83,235)	$	18,907,147	100

(1)Amount reported in the balance sheet.

(2)At fair value.

A schedule of fixed maturities available for sale by contractual maturity date at March 31, 2020 is shown below on an amortized cost, net of allowance for credit losses basis and on a fair value basis. Actual disposition dates could differ from contractual maturities due to call or prepayment provisions.

	At March 31, 2020
	Amortized Cost, net		Fair Value
Fixed maturities available for sale:
Due in one year or less	$	51,897	$	52,538
Due after one year through five years	668,783		705,821
Due after five years through ten years	1,684,359		1,852,455
Due after ten years through twenty years	5,647,201		6,462,058
Due after twenty years	8,099,163		8,613,350
Mortgage-backed and asset-backed securities	188,687		193,319
	$	16,340,090	$	17,879,541

Analysis of Investment Operations: Net investment income for the three month periods ended March 31, 2020 and 2019 is summarized as follows:

	Three Months Ended March 31,
	2020		2019		%
Fixed maturities available for sale	$	217,127	$	215,763	1
Policy loans	11,118		10,636		5
Other long-term investments(1)	4,623		3,388		36
Short-term investments	307		819		(63)
	233,175		230,606		1
Less investment expense	(4,184)		(3,933)		6
Net investment income	$	228,991	$	226,673	1

(1)For three months ended March 31, 2020 and 2019, the investment funds, accounted for under the fair value option method, recorded $2.0 million and $1.3 million, respectively in net investment income.

Selected information about sales of fixed maturities available for sale is as follows:

	Three Months Ended March 31,
	2020		2019
Fixed maturities available for sale:
Proceeds from sales(1)	$	50,360	$	34,997
Gross realized gains	2,642		46
Gross realized losses	—		(3,027)

(1)There were no unsettled sales in the periods ended March 31, 2020 and 2019.

An analysis of realized gains (losses) is as follows:

	Three Months Ended March 31,
	2020		2019
Realized investment gains (losses):
Fixed maturities available for sale:
Sales and other(1)	$	4,934	$	3,670
Provision for credit losses	(31,854)		—
Fair value option—change in fair value	583		(2,185)
Other investments	240		(156)
Realized gains (losses) from investments	(26,097)		1,329
Applicable tax	5,480		(279)
Realized gains (losses), net of tax	$	(20,617)	$	1,050

(1)During the three months ended March 31, 2020 and 2019, the Company recorded $5.9 million and $68.9 million of exchanges of fixed maturities (noncash transactions) that resulted in $0 and $5.8 million, respectively in realized gains (losses).

Fair Value Measurements: The following tables represent the fair value of fixed maturities measured on a recurring basis at March 31, 2020 and December 31, 2019:

	Fair Value Measurement at March 31, 2020 Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—		$	455,551		$	—		$	455,551
States, municipalities, and political subdivisions	—			1,739,474			—			1,739,474
Foreign governments	—			24,305			—			24,305
Corporates, by sector:
Financial	—			4,421,164			139,777			4,560,941
Utilities	—			2,116,566			147,309			2,263,875
Energy	—			1,433,768			32,500			1,466,268
Other corporate sectors	—			6,877,424			298,809			7,176,233
Total corporates	—			14,848,922			618,395			15,467,317
Collateralized debt obligations	—			—			68,373			68,373
Other asset-backed securities	—			111,754			12,767			124,521
Total fixed maturities	$	—		$	17,180,006		$	699,535		$	17,879,541
Percentage of total	—		%	96		%	4		%	100		%

	Fair Value Measurement at December 31, 2019 Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—		$	437,520		$	—		$	437,520
States, municipalities, and political subdivisions	—			1,717,656			—			1,717,656
Foreign governments	—			27,551			—			27,551
Corporates, by sector:
Financial	—			4,628,875			151,931			4,780,806
Utilities	—			2,195,539			156,748			2,352,287
Energy	—			1,873,482			41,402			1,914,884
Other corporate sectors	—			7,131,773			322,047			7,453,820
Total corporates	—			15,829,669			672,128			16,501,797
Collateralized debt obligations	—			—			74,104			74,104
Other asset-backed securities	—			135,342			13,177			148,519
Total fixed maturities	$	—		$	18,147,738		$	759,409		$	18,907,147
Percentage of total	—		%	96		%	4		%	100		%

The following tables represent changes in fixed maturities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Asset- backed Securities			Collateralized Debt Obligations			Corporates			Total
Balance at January 1, 2020	$	13,177		$	74,104		$	672,128		$	759,409
Included in realized gains / losses	—			—			1,213			1,213
Included in other comprehensive income	(276)			(5,475)			(34,072)			(39,823)
Acquisitions	—			—			—			—
Sales	—			—			—			—
Amortization	—			1,139			2			1,141
Other(1)	(134)			(1,395)			(20,876)			(22,405)
Transfers into Level 3(2)	—			—			—			—
Transfers out of Level 3(2)	—			—			—			—
Balance at March 31, 2020	$	12,767		$	68,373		$	618,395		$	699,535
Percent of total fixed maturities	—		%	0.4		%	3.5		%	3.9		%

(1)Includes capitalized interest, foreign exchange adjustments, and principal repayments. 

(2)Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

	Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Asset- backed Securities			Collateralized Debt Obligations			Corporates			Total
Balance at January 1, 2019	$	12,982		$	73,369		$	553,471		$	639,822
Included in realized gains / losses	—			—			—			—
Included in other comprehensive income	298			4,176			10,663			15,137
Acquisitions	—			—			—			—
Sales	—			—			—			—
Amortization	—			1,162			3			1,165
Other(1)	(126)			(1,458)			(1,817)			(3,401)
Transfers into Level 3(2)	—			—			—			—
Transfers out of Level 3(2)	—			—			—			—
Balance at March 31, 2019	$	13,154		$	77,249		$	562,320		$	652,723
Percent of total fixed maturities	0.1		%	0.4		%	3.3		%	3.8		%

(1)Includes capitalized interest, foreign exchange adjustments, and principal repayments. 

(2)Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

The following table presents changes in unrealized gains or (losses) for the period included in other comprehensive income for assets held at the end of the reporting period for Level 3s:

	Changes in Unrealized Gains/Losses included in Other Comprehensive Income for Assets Held at the End of the Period
	Asset- backed Securities		Collateralized Debt Obligations		Corporates		Total
At March 31, 2020	$	(276)	$	(5,475)	$	(34,072)	$	(39,823)
At March 31, 2019	298		4,176		10,663		15,137

Unrealized Loss Analysis: The following table discloses information about fixed maturities available for sale in an unrealized loss position.

	Less than Twelve Months	Twelve Months or Longer	Total
Number of issues (CUSIPs) held:
As of March 31, 2020	348	34	382
As of December 31, 2019	82	51	133

Globe Life's entire fixed maturity portfolio consisted of 1,676 issues at March 31, 2020 and 1,633 issues at December 31, 2019. The weighted-average quality rating of all unrealized loss positions at amortized cost as of March 31, 2020 was BBB compared with BBB- as of December 31, 2019. The increase in quality rating is primarily attributed to an overall increase in market rates that caused certain higher rated securities to move from an unrealized gain position to an unrealized loss position.

The following table discloses unrealized investment losses by class and major sector of fixed maturities available for sale for which an allowance for credit losses has not been recorded at March 31, 2020.

Analysis of Gross Unrealized Investment Losses

	At March 31, 2020
	Less than Twelve Months				Twelve Months or Longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—	$	—	$	1,896	$	(124)	$	1,896	$	(124)
States, municipalities and political subdivisions	133,114		(4,411)		—		—		133,114		(4,411)
Foreign governments	5,751		(196)		—		—		5,751		(196)
Corporates, by sector:
Financial	662,300		(43,549)		5,105		(3,395)		667,405		(46,944)
Utilities	158,406		(3,790)		—		—		158,406		(3,790)
Energy	815,807		(172,760)		1,218		(730)		817,025		(173,490)
Other corporate sectors	1,006,257		(62,923)		27,162		(2,656)		1,033,419		(65,579)
Total corporates	2,642,770		(283,022)		33,485		(6,781)		2,676,255		(289,803)
Other asset-backed securities	79,404		(5,992)		8		—		79,412		(5,992)
Total investment grade securities	2,861,039		(293,621)		35,389		(6,905)		2,896,428		(300,526)
Below investment grade securities:
States, municipalities and political subdivisions	—		—		—		—		—		—
Corporates, by sector:
Financial	19,232		(3,397)		91,734		(40,990)		110,966		(44,387)
Utilities	27,081		(3,405)		12,976		(3,273)		40,057		(6,678)
Energy	56,412		(30,872)		30,509		(31,391)		86,921		(62,263)
Other corporate sectors	125,431		(10,434)		63,801		(16,260)		189,232		(26,694)
Total corporates	228,156		(48,108)		199,020		(91,914)		427,176		(140,022)
Collateralized debt obligations	—		—		9,876		(10,124)		9,876		(10,124)
Other asset-backed securities	—		—		12,736		(1,439)		12,736		(1,439)
Total below investment grade securities	228,156		(48,108)		221,632		(103,477)		449,788		(151,585)
Total fixed maturities	$	3,089,195	$	(341,729)	$	257,021	$	(110,382)	$	3,346,216	$	(452,111)

Gross unrealized losses may fluctuate quarter over quarter due to adverse factors in the market that affect our holdings, such as changes in interest rates or credit spreads. As noted in Note 1, the Company considers many factors when determining whether a credit loss exists. While the Company holds securities that may be in an unrealized loss position from time to time, Globe Life does not intend to sell and it is likely that Management will not be required to sell the fixed maturities prior to their anticipated recovery due to the strong cash flows generated by its insurance operations.

The following table discloses unrealized investment losses by class and major sector of fixed maturities available for sale at December 31, 2019. Globe Life considered these investments to be only temporarily impaired.

Analysis of Gross Unrealized Investment Losses

	At December 31, 2019
	Less than Twelve Months				Twelve Months or Longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	1,255	$	(2)	$	21,044	$	(294)	$	22,299	$	(296)
States, municipalities and political subdivisions	66,774		(626)		—		—		66,774		(626)
Foreign governments	6,496		(396)		—		—		6,496		(396)
Corporates, by sector:
Financial	117,389		(1,733)		7,183		(1,317)		124,572		(3,050)
Utilities	8,400		(166)		—		—		8,400		(166)
Energy	52,312		(1,058)		1,833		(115)		54,145		(1,173)
Other corporate sectors	136,386		(1,584)		61,473		(3,260)		197,859		(4,844)
Total corporates	314,487		(4,541)		70,489		(4,692)		384,976		(9,233)
Other asset-backed securities	—		—		—		—		—		—
Total investment grade securities	389,012		(5,565)		91,533		(4,986)		480,545		(10,551)
Below investment grade securities:
States, municipalities and political subdivisions	—		—		—		—		—		—
Corporates, by sector:
Financial	—		—		113,481		(19,257)		113,481		(19,257)
Utilities	7,529		(135)		14,985		(1,264)		22,514		(1,399)
Energy	14,968		(146)		69,956		(32,406)		84,924		(32,552)
Other corporate sectors	—		—		67,655		(11,921)		67,655		(11,921)
Total corporates	22,497		(281)		266,077		(64,848)		288,574		(65,129)
Collateralized debt obligations	—		—		12,816		(7,184)		12,816		(7,184)
Other asset-backed securities	—		—		13,879		(371)		13,879		(371)
Total below investment grade securities	22,497		(281)		292,772		(72,403)		315,269		(72,684)
Total fixed maturities	$	411,509	$	(5,846)	$	384,305	$	(77,389)	$	795,814	$	(83,235)

Commercial Mortgage Loan Participations (commercial mortgage loans): Summaries of commercial mortgage loans by property type and geographical location at March 31, 2020 and December 31, 2019 are as follows:

	March 31, 2020			December 31, 2019
	Carrying Value		% of Total	Carrying Value		% of Total
Property type:
Office	$	42,670	26	$	42,350	31
Mixed use	42,010		26	27,501		20
Hospitality	22,602		14	22,324		16
Industrial	22,422		14	17,612		13
Retail	18,605		11	17,318		12
Multi-family	13,867		9	10,587		8
Total recorded investment	162,176		100	137,692		100
Less allowance for credit losses	(335)		—	—		—
Carrying value, net of allowance for credit losses	$	161,841	100	$	137,692	100

	March 31, 2020			December 31, 2019
	Carrying Value		% of Total	Carrying Value		% of Total
Geographic location:
South Atlantic	$	51,539	32	$	50,867	37
Pacific	55,909		35	36,546		27
Middle Atlantic	28,073		17	25,328		18
East North Central	10,579		6	10,568		8
West South Central	8,368		5	8,072		6
East South Central	4,684		3	4,676		3
West North Central	1,386		1	—		—
New England	1,638		1	1,635		1
Total recorded investment	162,176		100	137,692		100
Less allowance for credit losses	(335)		—	—		—
Carrying value, net of allowance for credit losses	$	161,841	100	$	137,692	100

As of March 31, 2020, the Company evaluated the commercial mortgage loan portfolio on a pool basis to determine the allowance for credit losses. At the end of the quarter, the Company had 27 loans in the portfolio. The portfolio includes similar characteristics such as origination period, delinquent status, and geography. Factors considered include, but are not limited to, collateral value, loan-to-value ratio, debt service coverage ratio, local market conditions, credit quality of the borrower and tenants, and loan performance.

A summary of the activity in the allowance for credit losses is as follows. As noted in Note 1, the Company adopted ASU 2016-13 using the modified retrospective method for commercial mortgage loans. A cumulative effect adjustment was recorded to retained earnings of $335 thousand ($265 thousand, net of tax). There were no additional credit losses recorded during the three months ended March 31, 2020.

	Commercial Mortgage Loans
Balance at January 1, 2020	$	—
Cumulative effect of adoption ASU 2016-13	335
Provision for credit losses	—
Balance at March 31, 2020	$	335

As of March 31, 2020 and December 31, 2019, the Company did not have any commercial mortgage loans in non-accrual status. Additionally, all of our commercial mortgage loans were current with respect to payment status and no commercial mortgage loans were classified as a troubled debt restructuring (TDRs).

The following tables are reflective of the key factors, debt service coverage ratios and loan-to-value ratios (LTVs), that are utilized by management to monitor the performance of the portfolios. The Company only invests in commercial mortgage loans that have a loan-to-value ratio less than 80%. Generally, a higher LTV ratios can potentially equate to higher risk of loss.

	March 31, 2020
	Recorded Investment
	Debt Service Coverage Ratios(1)
	<1.00x		1.00x—1.20x		>1.20x		Total		% of Total
Loan-to-value ratio(2):
Less than 70%	$	62,270	$	67,799	$	12,678	$	142,747	88
70% to 80%	13,047		1,790		—		14,837		9
81% to 90%	—		—		—		—		—
Greater than 90%	4,592		—		—		4,592		3
Total	$	79,909	$	69,589	$	12,678	$	162,176	100

(1)Annual net operating income divided by annual mortgage debt service (principal and interest).

(2)Loan balance divided by the fair value of the property. LTVs are generally assessed on an annual basis, or more frequently when a loan is materially underperforming, 30 days delinquent, or in technical default.

	December 31, 2019
	Recorded Investment
	Debt Service Coverage Ratios(1)
	<1.00x		1.00x—1.20x		>1.20x		Total		% of Total
Loan-to-value ratio:
Less than 70%	$	64,160	$	47,634	$	12,666	$	124,460	90
70% to 80%	11,445		1,787		—		13,232		10
81% to 90%	—		—		—		—		—
Greater than 90%	—		—		—		—		—
Total	$	75,605	$	49,421	$	12,666	$	137,692	100

(1)Annual net operating income divided by annual mortgage debt service (principal and interest).