Business Segments

9 Months Ended

Sep. 30, 2022

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. An immaterial amount of annuities sold as companion products are included in the life segment. 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 following tables present segment premium revenue by each of Globe Life's distribution channels.

Premium Income by Distribution Channel

	Three Months Ended September 30, 2022
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	378,306	50	$	29,694	9	$	—	—	$	408,000	38
Direct to Consumer	242,550		32	17,455		6	—		—	260,005		24
Liberty National	82,072		11	45,809		14	—		—	127,881		12
United American	1,949		—	134,200		42	1		100	136,150		13
Family Heritage	1,408		—	92,131		29	—		—	93,539		9
Other	48,830		7	—		—	—		—	48,830		4
	$	755,115	100	$	319,289	100	$	1	100	$	1,074,405	100

Premium Income by Distribution Channel

	Three Months Ended September 30, 2021
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	356,456	49	$	29,070	10	$	—	—	$	385,526	37
Direct to Consumer	240,578		33	18,192		6	—		—	258,770		25
Liberty National	78,528		11	46,716		16	—		—	125,244		12
United American	2,199		—	118,240		39	—		—	120,439		12
Family Heritage	1,286		—	86,925		29	—		—	88,211		9
Other	49,877		7	—		—	—		—	49,877		5
	$	728,924	100	$	299,143	100	$	—	—	$	1,028,067	100

	Nine Months Ended September 30, 2022
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	1,124,712	50	$	87,940	9	$	—	—	$	1,212,652	38
Direct to Consumer	743,041		33	53,802		6	—		—	796,843		25
Liberty National	244,242		11	139,650		15	—		—	383,892		12
United American	6,022		—	401,657		42	1		100	407,680		13
Family Heritage	4,147		—	272,429		28	—		—	276,576		8
Other	147,477		6	—		—	—		—	147,477		4
	$	2,269,641	100	$	955,478	100	$	1	100	$	3,225,120	100

	Nine Months Ended September 30, 2021
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	1,039,047	48	$	85,210	10	$	—	—	$	1,124,257	37
Direct to Consumer	734,046		34	56,002		6	—		—	790,048		26
Liberty National	232,118		11	140,874		16	—		—	372,992		12
United American	6,737		—	351,544		39	1		100	358,282		12
Family Heritage	3,630		—	255,272		29	—		—	258,902		8
Other	149,635		7	—		—	—		—	149,635		5
	$	2,165,213	100	$	888,902	100	$	1	100	$	3,054,116	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 in which 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 are recognized. 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 for its insurance products. From time to time, investments are sold or called, or experience a credit loss event, each of which is 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 the Company's 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, 2022
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	755,115	$	319,289	$	1	$	—	$	—	$	—		$	1,074,405
Net investment income	—		—		—		245,625		—		—			245,625
Other income	—		—		—		—		398		—			398
Total revenue	755,115		319,289		1		245,625		398		—			1,320,428
Expenses:
Policy benefits	494,627		198,415		6,974		12		—		—			700,028
Required interest on reserves	(194,279)		(27,637)		(9,548)		231,464		—		—			—
Required interest on DAC	58,413		7,783		47		(66,243)		—		—			—
Amortization of acquisition costs	124,261		31,415		453		—		—		—			156,129
Commissions, premium taxes, and non-deferred acquisition costs	63,938		29,085		5		—		—		—			93,028
Insurance administrative expense(1)	—		—		—		—		75,048		1,416		(2)	76,464
Parent expense	—		—		—		—		2,556		—			2,556
Stock-based compensation expense	—		—		—		—		9,120		—			9,120
Interest expense	—		—		—		23,965		—		—			23,965
Total expenses	546,960		239,061		(2,069)		189,198		86,724		1,416			1,061,290
Subtotal	208,155		80,228		2,070		56,427		(86,326)		(1,416)			259,138
Non-operating items	—		—		—		—		—		1,416		(2)	1,416
Measure of segment profitability (pretax)	$	208,155	$	80,228	$	2,070	$	56,427	$	(86,326)	$	—		260,554
Realized gain (loss)—investments														(29,155)
Legal proceedings														(1,416)
Income before income taxes per Condensed Consolidated Statements of Operations														$	229,983

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

(2)Legal proceedings.

	Three Months Ended September 30, 2021
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	728,924	$	299,143	$	—	$	—	$	—	$	—		$	1,028,067
Net investment income	—		—		—		238,975		—		—			238,975
Other income	—		—		—		—		321		—			321
Total revenue	728,924		299,143		—		238,975		321		—			1,267,363
Expenses:
Policy obligations	516,196		187,906		7,303		—		—		—			711,405
Required interest on reserves	(185,295)		(25,859)		(10,034)		221,188		—		—			—
Required interest on DAC	55,066		7,203		64		(62,333)		—		—			—
Amortization of acquisition costs	122,311		28,799		483		—		—		—			151,593
Commissions, premium taxes, and non-deferred acquisition costs	58,652		24,116		6		—		—		—			82,774
Insurance administrative expense(1)	—		—		—		—		68,036					68,036
Parent expense	—		—		—		—		2,176		2,397		(2)	4,573
Stock-based compensation expense	—		—		—		—		7,776		—			7,776
Interest expense	—		—		—		20,886		—		—			20,886
Total expenses	566,930		222,165		(2,178)		179,741		77,988		2,397			1,047,043
Subtotal	161,994		76,978		2,178		59,234		(77,667)		(2,397)			220,320
Non-operating items	—		—		—		—		—		2,397		(2)	2,397
Measure of segment profitability (pretax)	$	161,994	$	76,978	$	2,178	$	59,234	$	(77,667)	$	—		222,717
Realized gain (loss)—investments														19,789
Realized loss—redemption of debt														(9,314)
Non-operating expenses														(2,397)
Income before income taxes per Condensed Consolidated Statements of Operations														$	230,795

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

(2)Non-operating expenses.

.

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.

	Nine Months Ended September 30, 2022
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	2,269,641	$	955,478	$	1	$	—	$	—	$	—		$	3,225,120
Net investment income	—		—		—		733,101		—		—			733,101
Other income	—		—		—		—		861		—			861
Total revenue	2,269,641		955,478		1		733,101		861		—			3,959,082
Expenses:
Policy obligations	1,555,004		592,488		21,098		12		—		—			2,168,602
Required interest on reserves	(575,710)		(81,740)		(28,890)		686,340		—		—			—
Required interest on DAC	171,288		22,808		149		(194,245)		—		—			—
Amortization of acquisition costs	372,872		95,488		1,358		—		—		—			469,718
Commissions, premium taxes, and non-deferred acquisition costs	190,028		87,390		18		—		—		—			277,436
Insurance administrative expense(1)	—		—		—		—		221,313		6,513		(2,3)	227,826
Parent expense	—		—		—		—		8,089		(368)		(3)	7,721
Stock-based compensation expense	—		—		—		—		26,603		—			26,603
Interest expense	—		—		—		65,737		—		—			65,737
Total expenses	1,713,482		716,434		(6,267)		557,844		256,005		6,145			3,243,643
Subtotal	556,159		239,044		6,268		175,257		(255,144)		(6,145)			715,439
Non-operating items	—		—		—		—		—		6,145		(2,3)	6,145
Measure of segment profitability (pretax)	$	556,159	$	239,044	$	6,268	$	175,257	$	(255,144)	$	—		721,584
Realized gain (loss)—investments														(66,845)
Legal proceedings														(1,416)
Non-operating expenses														(4,729)
Income before income taxes per Condensed Consolidated Statements of Operations														$	648,594

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

(2)Legal proceedings.

(3) Non-operating expenses.

	Nine Months Ended September 30, 2021
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	2,165,213	$	888,902	$	1	$	—	$	—	$	—		$	3,054,116
Net investment income	—		—		—		713,103		—		—			713,103
Other income	—		—		—		—		1,004		—			1,004
Total revenue	2,165,213		888,902		1		713,103		1,004		—			3,768,223
Expenses:
Policy obligations	1,532,298		564,589		21,848		—		—		—			2,118,735
Required interest on reserves	(547,715)		(76,288)		(30,055)		654,058		—		—			—
Required interest on DAC	163,083		21,242		200		(184,525)		—		—			—
Amortization of acquisition costs	366,022		85,138		1,447		—		—		—			452,607
Commissions, premium taxes, and non-deferred acquisition costs	174,130		70,602		20		—		—		—			244,752
Insurance administrative expense(1)	—		—		—		—		201,715		5,089		(2)	206,804
Parent expense	—		—		—		—		7,251		2,397		(3)	9,648
Stock-based compensation expense	—		—		—		—		24,298		—			24,298
Interest expense	—		—		—		63,833		—		—			63,833
Total expenses	1,687,818		665,283		(6,540)		533,366		233,264		7,486			3,120,677
Subtotal	477,395		223,619		6,541		179,737		(232,260)		(7,486)			647,546
Non-operating items	—		—		—		—		—		7,486		(2,3)	7,486
Measure of segment profitability (pretax)	$	477,395	$	223,619	$	6,541	$	179,737	$	(232,260)	$	—		655,032
Realized gain (loss)—investments														56,600
Realized loss—redemption of debt														(9,314)
Legal proceedings														(5,089)
Non-operating expenses														(2,397)
Income before income taxes per Condensed Consolidated Statements of Operations														$	694,832

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

(2)Legal proceedings.

(3)Non-operating expenses.