Business Segments

6 Months Ended

Jun. 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 June 30, 2022
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	376,419	50	$	29,392	9	$	—	—	$	405,811	38
Direct to Consumer	249,365		33	17,591		6	—		—	266,956		25
Liberty National	81,451		11	46,655		15	—		—	128,106		12
United American	2,014		—	134,793		42	—		—	136,807		13
Family Heritage	1,370		—	90,758		28	—		—	92,128		8
Other	49,305		6	—		—	—		—	49,305		4
	$	759,924	100	$	319,189	100	$	—	—	$	1,079,113	100

Premium Income by Distribution Channel

	Three Months Ended June 30, 2021
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	347,696	48	$	28,789	10	$	—	—	$	376,485	37
Direct to Consumer	249,440		34	18,450		6	—		—	267,890		26
Liberty National	77,853		11	47,118		16	—		—	124,971		12
United American	2,261		—	116,217		39	—		—	118,478		12
Family Heritage	1,226		—	85,012		29	—		—	86,238		8
Other	49,694		7	—		—	—		—	49,694		5
	$	728,170	100	$	295,586	100	$	—	—	$	1,023,756	100

	Six Months Ended June 30, 2022
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	746,406	49	$	58,246	9	$	—	—	$	804,652	37
Direct to Consumer	500,491		33	36,347		6	—		—	536,838		25
Liberty National	162,170		11	93,841		15	—		—	256,011		12
United American	4,073		—	267,457		42	—		—	271,530		13
Family Heritage	2,739		—	180,298		28	—		—	183,037		8
Other	98,647		7	—		—	—		—	98,647		5
	$	1,514,526	100	$	636,189	100	$	—	—	$	2,150,715	100

	Six Months Ended June 30, 2021
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income	$	682,591	48	$	56,140	9	$	—	—	$	738,731	37
Direct to Consumer	493,468		34	37,810		6	—		—	531,278		26
Liberty National	153,590		11	94,158		16	—		—	247,748		12
United American	4,538		—	233,304		40	1		100	237,843		12
Family Heritage	2,344		—	168,347		29	—		—	170,691		8
Other	99,758		7	—		—	—		—	99,758		5
	$	1,436,289	100	$	589,759	100	$	1	100	$	2,026,049	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 June 30, 2022
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	759,924	$	319,189	$	—	$	—	$	—	$	—		$	1,079,113
Net investment income	—		—		—		243,642		—		—			243,642
Other income	—		—		—		—		299		—			299
Total revenue	759,924		319,189		—		243,642		299		—			1,323,054
Expenses:
Policy benefits	511,034		197,218		7,074		—		—		—			715,326
Required interest on reserves	(191,722)		(27,238)		(9,670)		228,630		—		—			—
Required interest on DAC	56,643		7,562		49		(64,254)		—		—			—
Amortization of acquisition costs	122,532		32,221		452		—		—		—			155,205
Commissions, premium taxes, and non-deferred acquisition costs	63,887		29,703		5		—		—		—			93,595
Insurance administrative expense(1)	—		—		—		—		73,700		4,985		(2)	78,685
Parent expense	—		—		—		—		2,893		(368)		(2)	2,525
Stock-based compensation expense	—		—		—		—		8,448		—			8,448
Interest expense	—		—		—		21,828		—		—			21,828
Total expenses	562,374		239,466		(2,090)		186,204		85,041		4,617			1,075,612
Subtotal	197,550		79,723		2,090		57,438		(84,742)		(4,617)			247,442
Non-operating items	—		—		—		—		—		4,617		(2)	4,617
Measure of segment profitability (pretax)	$	197,550	$	79,723	$	2,090	$	57,438	$	(84,742)	$	—		252,059
Realized gain (loss)—investments														(30,446)
Non-operating expenses														(4,617)
Income before income taxes per Condensed Consolidated Statements of Operations														$	216,996

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

(2)Non-operating expenses.

	Three Months Ended June 30, 2021
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	728,170	$	295,586	$	—	$	—	$	—	$	—		$	1,023,756
Net investment income	—		—		—		238,308		—		—			238,308
Other income	—		—		—		—		388		—			388
Total revenue	728,170		295,586		—		238,308		388		—			1,262,452
Expenses:
Policy obligations	498,471		188,854		7,286		—		—		—			694,611
Required interest on reserves	(182,495)		(25,434)		(10,016)		217,945		—		—			—
Required interest on DAC	54,222		7,077		66		(61,365)		—		—			—
Amortization of acquisition costs	120,407		27,132		482		—		—		—			148,021
Commissions, premium taxes, and non-deferred acquisition costs	58,810		23,496		6		—		—		—			82,312
Insurance administrative expense(1)	—		—		—		—		67,503		261		(2)	67,764
Parent expense	—		—		—		—		2,757		—			2,757
Stock-based compensation expense	—		—		—		—		8,634		—			8,634
Interest expense	—		—		—		21,769		—		—			21,769
Total expenses	549,415		221,125		(2,176)		178,349		78,894		261			1,025,868
Subtotal	178,755		74,461		2,176		59,959		(78,506)		(261)			236,584
Non-operating items	—		—		—		—		—		261		(2)	261
Measure of segment profitability (pretax)	$	178,755	$	74,461	$	2,176	$	59,959	$	(78,506)	$	—		236,845
Realized gain (loss)—investments														8,659
Legal proceedings														(261)
Income before income taxes per Condensed Consolidated Statements of Operations														$	245,243

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

(2)Legal proceedings

.

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.

	Six Months Ended June 30, 2022
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	1,514,526	$	636,189	$	—	$	—	$	—	$	—		$	2,150,715
Net investment income	—		—		—		487,476		—		—			487,476
Other income	—		—		—		—		463		—			463
Total revenue	1,514,526		636,189		—		487,476		463		—			2,638,654
Expenses:
Policy obligations	1,060,377		394,073		14,124		—		—		—			1,468,574
Required interest on reserves	(381,431)		(54,103)		(19,342)		454,876		—		—			—
Required interest on DAC	112,875		15,025		102		(128,002)		—		—			—
Amortization of acquisition costs	248,611		64,073		905		—		—		—			313,589
Commissions, premium taxes, and non-deferred acquisition costs	126,090		58,305		13		—		—		—			184,408
Insurance administrative expense(1)	—		—		—		—		146,265		5,097		(2)	151,362
Parent expense	—		—		—		—		5,533		(368)		(2)	5,165
Stock-based compensation expense	—		—		—		—		17,483		—			17,483
Interest expense	—		—		—		41,772		—		—			41,772
Total expenses	1,166,522		477,373		(4,198)		368,646		169,281		4,729			2,182,353
Subtotal	348,004		158,816		4,198		118,830		(168,818)		(4,729)			456,301
Non-operating items	—		—		—		—		—		4,729		(2)	4,729
Measure of segment profitability (pretax)	$	348,004	$	158,816	$	4,198	$	118,830	$	(168,818)	$	—		461,030
Realized gain (loss)—investments														(37,690)
Non-operating expenses														(4,729)
Income before income taxes per Condensed Consolidated Statements of Operations														$	418,611

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

(2) Non-operating expenses.

	Six Months Ended June 30, 2021
	Life		Health		Annuity		Investment		Corporate & Other		Adjustments			Consolidated
Revenue:
Premium	$	1,436,289	$	589,759	$	1	$	—	$	—	$	—		$	2,026,049
Net investment income	—		—		—		474,128		—		—			474,128
Other income	—		—		—		—		683		—			683
Total revenue	1,436,289		589,759		1		474,128		683		—			2,500,860
Expenses:
Policy obligations	1,016,102		376,683		14,545		—		—		—			1,407,330
Required interest on reserves	(362,420)		(50,429)		(20,021)		432,870		—		—			—
Required interest on DAC	108,017		14,039		136		(122,192)		—		—			—
Amortization of acquisition costs	243,711		56,339		964		—		—		—			301,014
Commissions, premium taxes, and non-deferred acquisition costs	115,478		46,486		14		—		—		—			161,978
Insurance administrative expense(1)	—		—		—		—		133,679		5,089		(2)	138,768
Parent expense	—		—		—		—		5,075		—			5,075
Stock-based compensation expense	—		—		—		—		16,522		—			16,522
Interest expense	—		—		—		42,947		—		—			42,947
Total expenses	1,120,888		443,118		(4,362)		353,625		155,276		5,089			2,073,634
Subtotal	315,401		146,641		4,363		120,503		(154,593)		(5,089)			427,226
Non-operating items	—		—		—		—		—		5,089		(2)	5,089
Measure of segment profitability (pretax)	$	315,401	$	146,641	$	4,363	$	120,503	$	(154,593)	$	—		432,315
Realized gain (loss)—investments														36,811
Legal proceedings														(5,089)
Income before income taxes per Condensed Consolidated Statements of Operations														$	464,037

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

(2)Legal proceedings.