Business Segments

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Business Segments

Note 10—Business Segments

Globe Life is organized into four segments: life insurance, supplemental health insurance, annuities, and investments. In addition, other expenses not included in these segments are reported in "Corporate & Other."

Globe Life's reportable insurance segments are based on the insurance product lines it markets and administers: life insurance, supplemental health insurance, and annuities. These major product lines are set out as reportable segments because of the common characteristics of products within these categories, comparability of margins, and the similarity in regulatory environment and management techniques. There is also an investment segment which manages the investment portfolio, debt, and cash flow for the insurance segments and the corporate function. The Company's chief operating decision makers evaluate the overall performance of the operations of the Company in accordance with these segments.

Life insurance products marketed by Globe Life include traditional whole life and term life insurance. Health insurance products are generally guaranteed-renewable and include Medicare Supplement, critical illness, accident, and limited-benefit supplemental hospital and surgical coverage. Annuities include fixed-benefit contracts.

Globe Life markets its insurance products through a number of distribution channels, each of which sells the products of one or more of Globe Life's insurance segments. Our distribution channels consist of the following exclusive agencies: American Income Life Division (American Income), Liberty National Division (Liberty National)

and Family Heritage Division (Family Heritage); an independent agency, United American Division (United American); and our Direct to Consumer Division (Direct to Consumer). The tables below present segment premium revenue by each of Globe Life's distribution channels.

Premium Income by Distribution Channel

	Three Months Ended September 30, 2020
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	318,917	47	$	27,029	9	$	—	—	$	345,946	36
Direct to Consumer	227,734		34	19,017		7	—		—	246,751		26
Liberty National	73,815		11	47,199		16	—		—	121,014		13
United American	2,402		—	114,325		40	1		100	116,728		12
Family Heritage	1,081		—	80,225		28	—		—	81,306		8
Other	50,072		8	—		—	—		—	50,072		5
	$	674,021	100	$	287,795	100	$	1	100	$	961,817	100

	Three Months Ended September 30, 2019
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	293,149	47	$	25,312	9	$	—	—	$	318,461	35
Direct to Consumer	211,693		34	19,135		7	—		—	230,828		26
Liberty National	71,812		11	47,439		18	—		—	119,251		13
United American	2,602		—	103,112		38	3		100	105,717		12
Family Heritage	971		—	74,168		28	—		—	75,139		8
Other	50,597		8	—		—	—		—	50,597		6
	$	630,824	100	$	269,166	100	$	3	100	$	899,993	100

Premium Income by Distribution Channel

	Nine Months Ended September 30, 2020
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	930,444	47	$	78,310	9	$	—	—	$	1,008,754	36
Direct to Consumer	682,978		34	57,873		7	—		—	740,851		26
Liberty National	220,009		11	142,230		17	—		—	362,239		13
United American	7,373		—	337,269		39	4		100	344,646		12
Family Heritage	3,144		—	235,195		28	—		—	238,339		8
Other	150,525		8	—		—	—		—	150,525		5
	$	1,994,473	100	$	850,877	100	$	4	100	$	2,845,354	100

	Nine Months Ended September 30, 2019
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	863,250	46	$	73,861	9	$	—	—	$	937,111	35
Direct to Consumer	646,530		34	58,644		7	—		—	705,174		26
Liberty National	214,007		11	142,887		18	—		—	356,894		13
United American	8,000		1	308,271		39	4		100	316,275		12
Family Heritage	2,829		—	218,469		27	—		—	221,298		8
Other	151,698		8	—		—	—		—	151,698		6
	$	1,886,314	100	$	802,132	100	$	4	100	$	2,688,450	100

Due to the nature of the life insurance industry, Globe Life has no individual or group that would be considered a major customer. Substantially all of Globe Life's business is conducted in the United States.

The measure of profitability established by the chief operating decision makers for the insurance segments is underwriting margin before other income and administrative expenses, in accordance with the manner the segments are managed. It essentially represents gross profit margin on insurance products before insurance administrative expenses and consists primarily of premium less net policy benefits, acquisition expenses, and commissions. Required interest on net policy liabilities (benefit reserves less deferred acquisition costs) is reflected as a component of the Investment segment (rather than as a component of underwriting margin in the insurance and annuity segments) in order to match this cost with the investment income earned on the assets supporting the net policy liabilities.

The measure of profitability for the Investment segment is excess investment income, representing the income earned on the investment portfolio in excess of net policy requirements and financing costs associated with Globe Life's debt. Other than the above-mentioned interest allocations, no other intersegment revenues or expenses exist. Expenses directly attributable to corporate operations are included in the “Corporate & Other” category. Stock-based compensation expense is considered a corporate expense by Globe Life management and is included in this category. All other unallocated revenues and expenses on a pretax basis, including insurance administrative expense, are also included in the “Corporate & Other” segment category.

Globe Life holds a sizable investment portfolio to support its insurance liabilities, the yield from which is used to offset policy benefit, acquisition, administrative and tax expenses. This yield or investment income is taken into account when establishing premium rates and profitability expectations of its insurance products. From time to time, investments are sold or called, or experience a credit loss event, each of which are reflected by the Company as realized gain (loss)—investments. These gains or losses generally occur as a result of disposition due to issuer calls, compliance with Company investment policies, or other reasons often beyond management’s control. Unlike investment income, realized gains and losses are incidental to insurance operations, and only overall yields are considered when setting premium rates or insurance product profitability expectations. While these gains and losses are not relevant to segment profitability or core operating results, they can have a material positive or negative result on net income. For these reasons, management removes realized investment gains and losses when it views its segment operations.

Management removes items that are related to prior periods when evaluating the operating results of current periods. Management also removes non-operating items unrelated to its core insurance activities when evaluating those results. Therefore, these items are excluded in its presentation of segment results, because accounting guidance requires that operating segment results be presented as management views its business. With the exception of the administrative settlements noted in the paragraphs above, all of these items are included in “Other operating expense” in the Condensed Consolidated Statements of Operations for the appropriate year. See additional detail below in the tables.

The following tables set forth a reconciliation of Globe Life's revenues and operations by segment to its major income statement line items. See Note—1 Significant Accounting Policies for additional information concerning reconciling items of segment profits to pretax income.

	Three Months Ended September 30, 2020
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	674,021	$	287,795	$	1	$	—	$	—	$	—		$	961,817
Net investment income	—		—		—		231,432		—		—			231,432
Other income	—		—		—		—		292		—			292
Total revenue	674,021		287,795		1		231,432		292		—			1,193,541
Expenses:
Policy benefits	459,231		184,237		7,508		—		—		—			650,976
Required interest on reserves	(175,794)		(23,770)		(10,347)		209,911		—		—			—
Required interest on DAC	52,709		6,689		81		(59,479)		—		—			—
Amortization of acquisition costs	114,316		26,026		501		—		—		—			140,843
Commissions, premium taxes, and non-deferred acquisition costs	52,856		21,753		5		—		—		—			74,614
Insurance administrative expense(1)	—		—		—		—		63,008		710		(2)	63,718
Parent expense	—		—		—		—		2,689		323		(2)	3,012
Stock-based compensation expense	—		—		—		—		8,667		—			8,667
Interest expense	—		—		—		21,674		—		—			21,674
Total expenses	503,318		214,935		(2,252)		172,106		74,364		1,033			963,504
Subtotal	170,703		72,860		2,253		59,326		(74,072)		(1,033)			230,037
Non-operating items	—		—		—		—		—		1,033		(2)	1,033
Measure of segment profitability (pretax)	$	170,703	$	72,860	$	2,253	$	59,326	$	(74,072)	$	—		231,070
Realized gain (loss)—investments														2,135
Realized loss—redemption of debt														(634)
Non-operating expenses														(1,033)
Income before income taxes per Condensed Consolidated Statements of Operations														$	231,538

(1)Administrative expense is not allocated to insurance segments.

(2)Non-operating expenses.

	Three Months Ended September 30, 2019
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments		Consolidated
Revenue:
Premium	$	630,824	$	269,166	$	3	$	—	$	—	$	—	$	899,993
Net investment income	—		—		—		228,905		—		—		228,905
Other income	—		—		—		—		438		—		438
Total revenue	630,824		269,166		3		228,905		438		—		1,129,336
Expenses:
Policy benefits	406,963		170,875		7,854		—		—		—		585,692
Required interest on reserves	(167,719)		(21,955)		(10,832)		200,506		—		—		—
Required interest on DAC	50,948		6,395		125		(57,468)		—		—		—
Amortization of acquisition costs	108,798		29,151		500		—		—		—		138,449
Commissions, premium taxes, and non-deferred acquisition costs	50,375		23,759		5		—		—		—		74,139
Insurance administrative expense(1)	—		—		—		—		60,570		—		60,570
Parent expense	—		—		—		—		2,472		—		2,472
Stock-based compensation expense	—		—		—		—		11,533		—		11,533
Interest expense	—		—		—		21,094		—		—		21,094
Total expenses	449,365		208,225		(2,348)		164,132		74,575		—		893,949
Subtotal	181,459		60,941		2,351		64,773		(74,137)		—		235,387
Non-operating items	—		—		—		—		—		—		—
Measure of segment profitability (pretax)	$	181,459	$	60,941	$	2,351	$	64,773	$	(74,137)	$	—	235,387
Realized gain (loss)—investments													11,943
Income before income taxes per Condensed Consolidated Statements of Operations													$	247,330

(1)Administrative expense is not allocated to insurance segments.

	Nine Months Ended September 30, 2020
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	1,994,473	$	850,877	$	4	$	—	$	—	$	—		$	2,845,354
Net investment income	—		—		—		691,991		—		—			691,991
Other income	—		—		—		—		1,021		—			1,021
Total revenue	1,994,473		850,877		4		691,991		1,021		—			3,538,366
Expenses:
Policy benefits	1,340,746		546,444		22,571		—		—		—			1,909,761
Required interest on reserves	(520,207)		(69,131)		(31,135)		620,473		—		—			—
Required interest on DAC	156,934		19,790		253		(176,977)		—		—			—
Amortization of acquisition costs	346,426		82,905		1,509		—		—		—			430,840
Commissions, premium taxes, and non-deferred acquisition costs	159,369		70,304		18		—		—		—			229,691
Insurance administrative expense(1)	—		—		—		—		188,194		3,985		(2,3)	192,179
Parent expense	—		—		—		—		7,536		323		(3)	7,859
Stock-based compensation expense	—		—		—		—		26,655		—			26,655
Interest expense	—		—		—		65,295		—		—			65,295
Total expenses	1,483,268		650,312		(6,784)		508,791		222,385		4,308			2,862,280
Subtotal	511,205		200,565		6,788		183,200		(221,364)		(4,308)			676,086
Non-operating items	—		—		—		—		—		4,308		(2,3)	4,308
Measure of segment profitability (pretax)	$	511,205	$	200,565	$	6,788	$	183,200	$	(221,364)	$	—		680,394
Realized gain (loss)—investments														(28,752)
Realized loss—redemption of debt														(634)
Legal proceedings														(3,275)
Non-operating expenses														(1,033)
Income before income taxes per Condensed Consolidated Statements of Operations														$	646,700

(1)Administrative expense is not allocated to insurance segments.

(2)Legal proceedings.

(3)Non-operating expenses.

	Nine Months Ended September 30, 2019
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	1,886,314	$	802,132	$	4	$	—	$	—	$	—		$	2,688,450
Net investment income	—		—		—		683,003		—		—			683,003
Other income	—		—		—		—		1,077		—			1,077
Total revenue	1,886,314		802,132		4		683,003		1,077		—			3,372,530
Expenses:
Policy benefits	1,227,616		511,403		23,792		—		—		—			1,762,811
Required interest on reserves	(496,894)		(65,131)		(32,840)		594,865		—		—			—
Required interest on DAC	151,270		19,019		383		(170,672)		—		—			—
Amortization of acquisition costs	327,407		83,508		1,521		—		—		—			412,436
Commissions, premium taxes, and non-deferred acquisition costs	150,567		70,719		16		—		—		—			221,302
Insurance administrative expense(1)	—		—		—		—		179,177		5,900		(2,3)	185,077
Parent expense	—		—		—		—		7,987		—			7,987
Stock-based compensation expense	—		—		—		—		33,348		—			33,348
Interest expense	—		—		—		63,804		—		—			63,804
Total expenses	1,359,966		619,518		(7,128)		487,997		220,512		5,900			2,686,765
Subtotal	526,348		182,614		7,132		195,006		(219,435)		(5,900)			685,765
Non-operating items	—		—		—		—		—		5,900		(2,3)	5,900
Measure of segment profitability (pretax)	$	526,348	$	182,614	$	7,132	$	195,006	$	(219,435)	$	—		691,665
Realized gain (loss)—investments														18,426
Administrative settlements														(400)
Legal proceedings														(5,500)
Income before income taxes per Condensed Consolidated Statements of Operations														$	704,191

(1)Administrative expense is not allocated to insurance segments.

(2)Administrative settlements.

(3)Legal proceedings.