Investments

9 Months Ended

Sep. 30, 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 September 30, 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—Significant Accounting Policies, 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 September 30, 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	$	375,836	$	—	$	95,166	$	—	$	471,002	2
States, municipalities, and political subdivisions	1,703,408		—		224,303		(3,887)		1,923,824		10
Foreign governments	44,130		—		3,361		(80)		47,411		—
Corporates, by sector:
Financial	4,335,786		—		898,119		(43,631)		5,190,274		26
Utilities	1,956,732		—		557,816		(27)		2,514,521		12
Energy	1,623,191		(4,387)		244,236		(24,389)		1,838,651		9
Other corporate sectors	6,664,488		—		1,447,649		(18,713)		8,093,424		40
Total corporates	14,580,197		(4,387)		3,147,820		(86,760)		17,636,870		87
Collateralized debt obligations	56,763		—		21,708		(9,814)		68,657		—
Other asset-backed securities	131,720		—		3,446		(5,874)		129,292		1
Total fixed maturities	$	16,892,054	$	(4,387)	$	3,495,804	$	(106,415)	$	20,277,056	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 September 30, 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 September 30, 2020
	Amortized Cost, net		Fair Value
Fixed maturities available for sale:
Due in one year or less	$	46,963	$	47,877
Due after one year through five years	762,252		836,895
Due after five years through ten years	1,794,849		2,118,729
Due after ten years through twenty years	6,027,005		7,578,897
Due after twenty years	8,067,809		9,496,378
Mortgage-backed and asset-backed securities	188,789		198,280
	$	16,887,667	$	20,277,056

Analysis of Investment Operations: Net investment income for the three and nine month periods ended September 30, 2020 and 2019 is summarized as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019		% Change	2020		2019		% Change
Fixed maturities available for sale	$	217,900	$	216,154	1	$	652,583	$	647,784	1
Policy loans	11,241		10,959		3	33,572		32,416		4
Other long-term investments(1)	6,925		5,105		36	18,694		12,484		50
Short-term investments	88		514		(83)	529		2,096		(75)
	236,154		232,732		1	705,378		694,780		2
Less investment expense	(4,722)		(3,827)		23	(13,387)		(11,777)		14
Net investment income	$	231,432	$	228,905	1	$	691,991	$	683,003	1

(1)For the three months ended September 30, 2020 and 2019, the investment funds, accounted for under the fair value option method, recorded $4.0 million and $1.5 million, respectively in net investment income. For the nine months ended September 30, 2020 and 2019, the investment funds, accounted for under the fair value option method, recorded $10.5 million and $4.2 million, respectively in net investment income.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Fixed maturities available for sale:
Proceeds from sales(1)	$	661	$	27,154	$	52,681	$	62,151
Gross realized gains	—		1,031		2,642		1,077
Gross realized losses	(38,782)		(604)		(39,153)		(3,631)

(1)There were no unsettled sales in the periods ended September 30, 2020 and 2019.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Realized investment gains (losses):
Fixed maturities available for sale:
Sales and other(1)	$	(38,608)	$	12,430	$	(27,746)	$	18,337
Provision for credit losses	28,332		—		(4,387)		—
Fair value option—change in fair value	12,053		(487)		(6,798)		197
Other investments	358		—		10,179		(108)
Realized gains (losses) from investments	2,135		11,943		(28,752)		18,426
Realized loss on redemption of debt	(634)		—		(634)		—
	1,501		11,943		(29,386)		18,426
Applicable tax	463		(2,508)		6,949		(3,869)
Realized gains (losses), net of tax	$	1,964	$	9,435	$	(22,437)	$	14,557

(1)During the three months ended September 30, 2020 and 2019, the Company recorded $65.8 million and $43.7 million of exchanges of fixed maturities (noncash transactions) that resulted in $0 and $11.8 million, respectively in realized gains (losses). During the nine months ended September 30, 2020 and 2019, the Company recorded $152.1 million and $161.0 million of exchanges of fixed maturities (noncash transactions) that resulted in $7.9 million and $20.1 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 September 30, 2020 and December 31, 2019:

	Fair Value Measurement at September 30, 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	$	—		$	471,002		$	—		$	471,002
States, municipalities, and political subdivisions	—			1,923,824			—			1,923,824
Foreign governments	—			47,411			—			47,411
Corporates, by sector:
Financial	—			5,042,580			147,694			5,190,274
Utilities	—			2,334,286			180,235			2,514,521
Energy	—			1,801,028			37,623			1,838,651
Other corporate sectors	—			7,794,758			298,666			8,093,424
Total corporates	—			16,972,652			664,218			17,636,870
Collateralized debt obligations	—			—			68,657			68,657
Other asset-backed securities	—			116,324			12,968			129,292
Total fixed maturities	$	—		$	19,531,213		$	745,843		$	20,277,056
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	(318)			(5,220)			11,324			5,786
Acquisitions	—			—			17,820			17,820
Sales	—			—			—			—
Amortization	—			3,415			11			3,426
Other(1)	109			(3,642)			(38,278)			(41,811)
Transfers into Level 3(2)	—			—			—			—
Transfers out of Level 3(2)	—			—			—			—
Balance at September 30, 2020	$	12,968		$	68,657		$	664,218		$	745,843
Percent of total fixed maturities	—		%	1		%	3		%	4		%

(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	1,043			5,745			34,971			41,759
Acquisitions	—			—			—			—
Sales	—			—			—			—
Amortization	—			3,459			10			3,469
Other(1)	(343)			(4,412)			(10,710)			(15,465)
Transfers into Level 3(2)	—			—			—			—
Transfers out of Level 3(2)	—			—			—			—
Balance at September 30, 2019	$	13,682		$	78,161		$	577,742		$	669,585
Percent of total fixed maturities	—		%	1		%	3		%	4		%

(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 September 30, 2020	$	(318)	$	(5,220)	$	11,324	$	5,786
At September 30, 2019	1,043		5,745		34,971		41,759

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 September 30, 2020	172	29	201
As of December 31, 2019	82	51	133

Globe Life's entire fixed maturity portfolio consisted of 1,822 issues by 745 different issuers at September 30, 2020 and 1,633 issues by 656 different issuers at December 31, 2019. The weighted-average quality rating of all unrealized loss positions at amortized cost was BBB- as of September 30, 2020 and December 31, 2019.

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 September 30, 2020.

Analysis of Gross Unrealized Investment Losses

	At September 30, 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	$	—	$	—	$	—	$	—	$	—	$	—
States, municipalities and political subdivisions	142,060		(3,887)		—		—		142,060		(3,887)
Foreign governments	9,514		(80)		—		—		9,514		(80)
Corporates, by sector:
Financial	246,528		(5,404)		5,897		(2,603)		252,425		(8,007)
Utilities	2,557		(27)		—		—		2,557		(27)
Energy	82,548		(4,161)		15,536		(1,388)		98,084		(5,549)
Other corporate sectors	77,577		(2,524)		—		—		77,577		(2,524)
Total corporates	409,210		(12,116)		21,433		(3,991)		430,643		(16,107)
Other asset-backed securities	29,744		(4,190)		7		—		29,751		(4,190)
Total investment grade securities	590,528		(20,273)		21,440		(3,991)		611,968		(24,264)
Below investment grade securities:
States, municipalities and political subdivisions	—		—		—		—		—		—
Corporates, by sector:
Financial	34,614		(5,332)		102,402		(30,292)		137,016		(35,624)
Utilities	—		—		—		—		—		—
Energy	117,927		(12,588)		43,620		(6,252)		161,547		(18,840)
Other corporate sectors	46,728		(9,281)		71,979		(6,908)		118,707		(16,189)
Total corporates	199,269		(27,201)		218,001		(43,452)		417,270		(70,653)
Collateralized debt obligations	—		—		10,186		(9,814)		10,186		(9,814)
Other asset-backed securities	—		—		12,339		(1,684)		12,339		(1,684)
Total below investment grade securities	199,269		(27,201)		240,526		(54,950)		439,795		(82,151)
Total fixed maturities	$	789,797	$	(47,474)	$	261,966	$	(58,941)	$	1,051,763	$	(106,415)

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)

Fixed Maturities, Allowance for Credit Losses: A summary of the activity in the allowance for credit losses is as follows. Refer to Note 1 for factors considered in the recording of the allowance for credit losses.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Allowance for credit losses beginning balance	$	32,719	$	—	$	—	$	—
Additions to allowance for which credit losses were not previously recorded	4,387		—		37,106		—
Additions (reductions) to allowance for fixed maturities that previously had an allowance	—		—		—		—
Reduction of allowance for which the Company intends to sell or more likely than not will be required to sell or sold during the period	(32,719)		—		(32,719)		—
Allowance for credit losses ending balance	$	4,387	$	—	$	4,387	$	—

An energy holding in our investment portfolio, which had a credit loss allowance of $32.7 million as of June 30, 2020, filed for Chapter 11 bankruptcy on July 31, 2020. On August 3, 2020, management sold all holdings of this company for $660 thousand and recognized an additional realized loss of $6 million. Total realized loss was $38.8 million. An additional $1 million of accrued investment income was written off.

As of September 30, 2020 and December 31, 2019, the Company did not have any fixed maturities in non-accrual status.

Other Long-Term Investments: Other long-term investments consist of the following assets:

	September 30, 2020		December 31, 2019
Investment funds	$	326,641	$	185,851
Commercial mortgage loan participations	164,902		137,692
Other	1,341		2,804
Total	$	492,884	$	326,347

The investment funds consist of limited partnerships whereby the Company has a pro-rata share of ownership ranging from 1% to 20%. For each investment, the Company has elected the fair value option, but would have been otherwise accounted for as an equity method investment. The fair value option is assessed for each individual investment and concluded at the inception of the investment. Additionally, each investment is evaluated under ASC 810, Consolidation to determine if it is a variable interest entity and would qualify for consolidation; none of the investments qualify for consolidation as the Company is not the primary beneficiary in any of these investments.

The investments are reported at the Company's pro-rata share of the investment fund's net asset value or its equivalent (NAV) as a practical expedient for fair value. Changes in the net asset value are recorded in Realized gains (losses) on the Condensed Consolidated Statements of Operations. Distributions received from the funds arise from income generated by the underlying investments as well as the liquidation of the underlying investments. Periodic distributions are recorded in net investment income until cumulative distributions exceed our pro-rata share of operating earnings at which point the distributions will reduce the carrying value. Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. During the quarter, the Company has not committed to any new limited partnerships. The Company had $50 million of capital called during the quarter from existing investment funds, reducing our unfunded commitments. Our unfunded commitments were $408 million as of September 30, 2020.

Commercial Mortgage Loan Participations (commercial mortgage loans): Summaries of commercial mortgage loans by property type and geographical location at September 30, 2020 and December 31, 2019 are as follows:

	September 30, 2020			December 31, 2019
	Carrying Value		% of Total	Carrying Value		% of Total
Property type:
Office	$	41,622	25	$	42,350	31
Mixed use	48,348		29	27,501		20
Hospitality	23,030		14	22,324		16
Industrial	17,885		11	17,612		13
Retail	19,137		12	17,318		12
Multi-family	18,599		11	10,587		8
Total recorded investment	168,621		102	137,692		100
Less allowance for credit losses	(3,719)		(2)	—		—
Carrying value, net of allowance for credit losses	$	164,902	100	$	137,692	100

	September 30, 2020			December 31, 2019
	Carrying Value		% of Total	Carrying Value		% of Total
Geographic location:
South Atlantic	$	52,397	32	$	50,867	37
Pacific	62,297		38	36,546		27
Middle Atlantic	28,268		17	25,328		18
East North Central	10,597		6	10,568		8
West South Central	8,971		5	8,072		6
East South Central	4,700		3	4,676		3
West North Central	1,391		1	—		—
New England	—		—	1,635		1
Total recorded investment	168,621		102	137,692		100
Less allowance for credit losses	(3,719)		(2)	—		—
Carrying value, net of allowance for credit losses	$	164,902	100	$	137,692	100

As of September 30, 2020, the Company evaluated the commercial mortgage loan portfolio on a pool basis to determine the allowance for credit losses, except for individual loans where the practical expedient was elected. At the end of the period, the Company had 25 loans in the portfolio.

As noted in Note 1, the Company adopted ASU 2016-13 using the modified retrospective method for commercial mortgage loans. On January 1, 2020, a cumulative effect adjustment was recorded to retained earnings of $335 thousand ($265 thousand, net of tax). For the three months ended September 30, 2020, the allowance for credit losses was decreased by $119 thousand to $3.7 million. The provision for credit losses, recorded in Realized gains (losses) in Other investments, includes the provision for credit losses for the pool and the individual loan as described below.

The Company determined that one of the commercial mortgage loans (multi-family) was probable of foreclosure and elected the practical expedient to record the loan at the fair value of the property less amortized cost, adjusted for selling and other associated costs. As of September 30, 2020, the allowance was $1 million.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Allowance for credit losses beginning balance	$	3,838	$	—	$	—	$	—
Cumulative effect of adoption ASU 2016-13	—		—		335		—
Provision (reversal) for credit losses	(119)		—		3,384		—
Loans charge-off	—		—		—		—
Allowance for credit losses ending balance	$	3,719	$	—	$	3,719	$	—

The following table presents the aging of the amortized cost basis of delinquent commercial mortgage loans. Loans are considered delinquent after 30 days.

As of September 30, 2020	30-59 Days Delinquent		60-89 days Delinquent		Greater than 90 Days Delinquent		Total Delinquent
Commercial mortgage loans	$	—	$	—	$	3,524	$	3,524
Number of delinquent commercial mortgage loans	—		—		1		1

There were no delinquent commercial mortgage loans as of December 31, 2019. As of September 30, 2020, the Company had one commercial mortgage loan in non-accrual status. As of December 31, 2019, the Company did not have any commercial mortgage loans in non-accrual status. Additionally, all other commercial mortgage loans were current with respect to payment status and none of the commercial mortgage loans were classified as a troubled debt restructuring (TDR).

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 primarily invests in commercial mortgage loans that have a loan-to-value ratio less than 80%. Generally, higher LTV ratios can potentially equate to higher risk of loss.

	September 30, 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%	$	15,282	$	107,381	$	—	$	122,663	74
70% to 80%	1,368		16,753		—		18,121		11
81% to 90%	7,591		—		—		7,591		5
Greater than 90%	5,290		11,237		—		16,527		10
Total	$	29,531	$	135,371	$	—	$	164,902	100

	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(2):
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).

(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, greater than 30 days delinquent, or in technical default.