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Postretirement Benefits

12 Months Ended

Dec. 31, 2019

Note 9—Postretirement Benefits Globe Life has qualified noncontributory defined benefit pension plans and contributory savings plans that cover substantially all employees. There is also a nonqualified noncontributory supplemental executive retirement plan (SERP) that covers a limited number of employees. The tables included herein will focus on the defined benefit plans and SERP.

The total cost of these retirement plans charged to operations was as follows:


	Year Ended December 31,
	2019		2018		2017
Plan Type:
Defined Contribution Plans⁽¹⁾	$	4,817	$	4,068	$	4,145
Defined Benefit Pension Plans⁽²⁾	24,134		32,593		28,828

(1)401K plans.

(2)Qualified pension plans and SERP.

Globe Life accrues expense for the defined contribution plans based on a percentage of the employees’ contributions. The plans are funded by the employee contributions and a Globe Life contribution equal to the amount of accrued expense. Plan contributions are both mandatory and discretionary, depending on the terms of the plan.

Pension Plans: Cost for the defined benefit pension plans has been calculated on the projected unit credit actuarial cost method. All plan measurements for the defined benefit plans are as of December 31 of the respective year. The defined benefit pension plans covering the majority of employees are qualified and funded. Contributions are made to funded pension plans subject to minimums required by regulation and maximums allowed for tax purposes. Globe Life's SERP provides to a limited number of executives an additional supplemental defined pension benefit. The supplemental benefit is based on the participant’s qualified plan benefit without consideration to the regulatory limits on compensation and benefit payments applicable to qualified plans, except that eligible compensation is capped at $1 million. The SERP is nonqualified and unfunded. However, a Rabbi Trust has been established to support the liability for this plan. The trust consists of life insurance policies on the lives of plan participants with an unaffiliated insurance carrier as well as an investment account. Since this plan is nonqualified, the investments and the policyholder value of the insurance policies in the Rabbi Trust are not included as defined benefit plan assets, but rather assets of the Company. They are included in “Other Assets” in the Consolidated Balance Sheets.

Defined benefit and SERP plan contributions were $21.6 million in 2019, $52.8 million in 2018, and $21.3 million in 2017. In 2020, the Company expects to make a similar contribution to the plans as in 2019.

Pension Assets: Plan assets in the funded plans consist primarily of investments in marketable fixed maturities and equity securities that are valued at fair value. Globe Life measures the fair value of its financial assets, including the assets in its benefit plans, in accordance with accounting guidance which establishes a hierarchy for asset values and provides a methodology for the measurement of value. Please refer to Note 1—Significant Accounting Policies under the caption Fair Value Measurements, Investments in Securities for a complete discussion of valuation procedures. The following table presents the assets of the Company's defined benefit pension plans at December 31, 2019 and 2018.

Pension Assets by Component at December 31, 2019


	Fair Value Determined by:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Amount		% to Total
Corporate bonds:
Financial	$	—	$	51,111	$	—	$	51,111	11
Utilities	—		42,758		—		42,758		9
Energy	—		21,907		—		21,907		5
Other corporates	—		89,725		—		89,725		19
Total corporate bonds	—		205,501		—		205,501		44
Exchange traded fund⁽¹⁾	207,176		—		—		207,176		44
Other bonds	—		251		—		251		—
Guaranteed annuity contract⁽²⁾	—		28,278		—		28,278		6
Short-term investments	8,414		—		—		8,414		2
Other	6,876		—		—		6,876		1
	$	222,466	$	234,030	$	—	456,496		97
Other long-term investments⁽³⁾										12,267		3
Total pension assets										$	468,763	100

(1)A fund including marketable securities that mirror the S&P 500 index.

(2)Representing a guaranteed annuity contract issued by Globe Life's subsidiary, American Income Life Insurance Company, to fund the obligations of the American Income Life Insurance Company Non-Exempt Employees Defined Benefit Pension Plan ("American Income Pension Plan").

(3)Included in other long-term investments is an investment fund that reports the Pension Plan's pro-rata share of the limited partnership's net asset value per share or its equivalent (NAV), as a practical expedient for fair value. The Pension Plan owns approximately 1% of the investment fund. As of December 31, 2019, the expected term of the investment fund is approximately 5 years and the unfunded commitment of the investment fund is $4.1 million. The investment is non-redeemable. The investment fund strategy is opportunistic, applying a comprehensive relative value approach across various asset classes and opportunities in public and private markets, geographies, and capital structures.

Pension Assets by Component at December 31, 2018


	Fair Value Determined by:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Amount		% to Total
Corporate bonds:
Financial	$	—	$	44,236	$	—	$	44,236	11
Utilities	—		39,443		—		39,443		10
Energy	—		19,744		—		19,744		5
Other corporates	—		83,202		—		83,202		22
Total corporate bonds	—		186,625		—		186,625		48
Exchange traded fund⁽¹⁾	157,717		—		—		157,717		40
Other bonds	—		245		—		245		—
Guaranteed annuity contract⁽²⁾	—		26,505		—		26,505		7
Short-term investments	9,289		—		—		9,289		2
Other	3,816		—		—		3,816		1
	$	170,822	$	213,375	$	—	384,197		98
Other long-term investments⁽³⁾										8,475		2
Total pension assets										$	392,672	100

(1)A fund including marketable securities that mirror the S&P 500 index.

(2)Representing a guaranteed annuity contract issued by Globe Life's subsidiary, American Income Life Insurance Company, to fund the obligations of the American Income Pension Plan.

(3)Included in other long-term investments is an investment fund that reports the Pension Plan's pro-rata share of the limited partnership's net asset value per share or its equivalent (NAV), as a practical expedient for fair value. The Pension Plan owns approximately 1% of the investment fund. As of December 31, 2018, the expected term of the investment fund is approximately 6 years and the unfunded commitment of the investment fund is $7.1 million. The investment is non-redeemable. The investment fund strategy is opportunistic, applying a comprehensive relative value approach across various asset classes and opportunities in public and private markets, geographies, and capital structures.

Globe Life's investment objectives for its plan assets include preservation of capital and purchasing power as well as long-term growth. Globe Life seeks to preserve capital through investments made in high quality securities with adequate diversification by issuer and industry sector to minimize risk. The portfolio is monitored continuously for changes in quality and diversification mix. The preservation of purchasing power is intended to be accomplished through asset growth, exclusive of contributions and withdrawals in excess of the rate of inflation. Globe Life intends to maintain investments that when combined with future plan contributions will produce adequate long-term growth to provide for all plan obligations. It is also Globe Life's objective that the portfolio’s investment return will meet or exceed the return of a balanced market index.

The majority of the securities in the portfolio are highly marketable so that there will be adequate liquidity to meet projected payments. There are no specific policies calling for asset durations to match those of benefit obligations.

Allowed investments are limited to equities, fixed maturities, and short-term investments (invested cash). The assets are to be invested in a mix of equity and fixed income investments that best serve the objectives of the pension plan. Factors to be considered in determining the asset mix include funded status, annual pension expense, annual pension contributions, and balance sheet liability. Equities can include common and preferred stocks, securities convertible into equities, mutual funds and exchange traded funds that invest in equities, equity interests in limited partnerships, and other equity-related investments. Primarily, equities are listed on major exchanges and adequate market liquidity is required. Fixed maturities primarily consist of marketable debt securities rated investment grade at purchase by a major rating agency. Short-term investments include fixed maturities with maturities less than one

year and invested cash. Investments outside of the aforementioned list are not permitted, except by prior approval of the Plan’s Trustees.

The investment portfolio is to be well diversified to avoid undue exposure to a single sector, industry, business, or security. The equity and fixed maturity portfolios are not permitted to invest in any single issuer that would exceed 10% of total plan assets at the time of purchase. The Company does not employ any other special risk management techniques, such as derivatives, in managing the pension investment portfolio.

Globe Life's equity securities include an exchange traded fund that mirrors the S&P 500 index which better aligns with a passive approach rather than an actively managed portfolio. At December 31, 2019, there were no restricted investments contained in the portfolio. Plan contributions have been invested primarily in fixed maturity and equity securities during the three years ended December 31, 2019.

SERP: The following table includes premiums paid for the company owned life insurance (COLI), for the three years ended December 31, 2019 and investments of the Rabbi Trust for the two years ended December 31, 2019.


	Year Ended December 31,
	2019		2018		2017
Premiums paid for COLI	$	2,394	$	2,997	$	2,050

	At December 31,
	2019		2018
Total investments:
COLI	$	47,733	$	44,285
Exchange traded funds	65,585		52,659
	$	113,318	$	96,944

Pension Liability: The following table presents projected benefit obligation (PBO) and accumulated benefit obligation (ABO) for the defined benefit pension plans and SERP at December 31, 2019 and 2018.

Pension Liability


	December 31,
	2019						2018
	PBO		ABO		PBO		ABO
Funded defined benefit pension	$	578,860	$	520,264	$	481,792	$	436,316
SERP	86,347		81,046		74,407		69,582
Pension Benefit Obligation	$	665,207	$	601,310	$	556,199	$	505,898

The following table discloses the assumptions used to determine Globe Life's pension liabilities and costs for the appropriate periods. The discount and compensation increase rates are used to determine current year projected benefit obligations and subsequent year pension expense. The long-term rate of return is used to determine current year expense. Differences between assumptions and actual experience are included in actuarial gain or loss.

Weighted Average Pension Plan Assumptions


For Benefit Obligations at December 31:	2019		2018
Discount rate	3.49	%	4.37	%
Rate of compensation increase	4.00		4.00

For Periodic Benefit Cost for the Year:	2019		2018		2017
Discount rate	4.37	%	3.75	%	4.27	%
Expected long-term returns	6.72		6.72		6.96
Rate of compensation increase	4.00		4.37		4.31

The discount rate is determined based on the expected duration of plan liabilities. A yield is then derived based on the current market yield of a hypothetical portfolio of higher-quality corporate bonds that match the liability duration. The rate of compensation increase is projected based on Company experience, modified as appropriate for future expectations. The expected long-term rate of return on plan assets is management’s best estimate of the average rate of earnings expected to be received on the assets invested in the plan over the benefit period. In determining this assumption, consideration is given to the historical rate of return earned on the assets, the projected returns over future periods, and the discount rate used to compute benefit obligations.

Net periodic benefit cost for the defined benefit plans by expense component was as follows:


	Year Ended December 31,
	2019		2018		2017
Service cost—benefits earned during the period	$	19,929	$	21,092	$	17,942
Interest cost on projected benefit obligation	23,827		22,303		22,124
Expected return on assets	(27,862)		(25,547)		(23,597)
Net amortization	8,211		15,003		12,281
Recognition of actuarial loss	29		(258)		78
Net periodic benefit cost	$	24,134	$	32,593	$	28,828

An analysis of the impact on other comprehensive income (loss) concerning pensions and other postretirement benefits is as follows:


	Year Ended December 31,
	2019		2018		2017
Balance at January 1	$	(150,071)	$	(193,380)	$	(173,883)
Amortization of:
Prior service cost	631		535		476
Net actuarial (gain) loss⁽¹⁾	7,843		14,560		11,960
Total amortization	8,474		15,095		12,436
Plan amendments	—		(2,377)		—
Experience gain (loss)	(40,636)		30,591		(31,933)
Balance at December 31	$	(182,233)	$	(150,071)	$	(193,380)

(1)Includes amortization of postretirement benefits other than pensions of $265 thousand in 2019, $92 thousand in 2018, and $155 thousand in 2017.

The following table presents a reconciliation from the beginning to the end of the year of the PBO and plan assets for the defined benefit plans and SERP. This table also presents the amounts previously recognized as a component of accumulated other comprehensive income.

Pension Benefits


	Year Ended December 31,
	2019		2018
Changes in PBO:
PBO at beginning of year	$	556,199	$	602,606
Service cost	19,929		21,092
Interest cost	23,827		22,303
Plan amendments	—		2,377
Actuarial loss (gain)	88,053		(67,270)
Benefits paid	(22,801)		(24,909)
PBO at end of year	665,207		556,199

Changes in plan assets:
Fair value at beginning of year	392,672		377,624
Return on assets	77,290		(12,824)
Contributions	21,602		52,781
Benefits paid	(22,801)		(24,909)
Fair value at end of year	468,763		392,672
Funded status at year end	$	(196,444)	$	(163,527)


Amounts recognized in accumulated other comprehensive income consist of:
Net loss (gain)	$	174,470	$	143,453
Prior service cost	5,345		5,976
Net amounts recognized at year end	$	179,815	$	149,429

The portion of other comprehensive income that is expected to be reflected in pension expense in 2020 is as follows:


Amortization of prior service cost	$	631
Amortization of net actuarial loss	15,611
Total	$	16,242

Globe Life has estimated its expected pension benefits to be paid over the next ten years as of December 31, 2019. These estimates use the same assumptions that measure the benefit obligation at December 31, 2019, taking estimated future employee service into account. Those estimated benefits are as follows:


For the year(s):
2020	$	22,639
2021	24,448
2022	26,560
2023	28,371
2024	30,348
2025-2029	173,848