Item 1. Condensed Consolidated Financial Statements

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Item 1. Condensed Consolidated Financial Statements

Globe Life Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollar amounts in thousands, except per share data)

June 30, 2022December 31, 2021
Assets:
Investments:
Fixed maturities—available for sale, at fair value (amortized cost: 2022—$17,996,386; 2021—$17,805,309, allowance for credit losses: 2022— $0; 2021— $387)$17,181,967$21,305,287
Policy loans597,187589,634
Other long-term investments (includes: 2022—$740,006; 2021—$640,263 under the fair value option)898,955793,925
Short-term investments115,82469,145
Total investments18,793,93322,757,991
Cash172,25792,163
Accrued investment income256,548251,307
Other receivables478,571487,443
Deferred acquisition costs5,084,8784,914,728
Goodwill481,791481,791
Other assets775,189782,625
Total assets$26,043,167$29,768,048
Liabilities:
Future policy benefits$16,403,710$16,034,727
Unearned and advance premium68,45165,472
Policy claims and other benefits payable431,652412,940
Other policyholders' funds100,33698,935
Total policy liabilities17,004,14916,612,074
Current and deferred income taxes856,1011,765,021
Short-term debt495,126479,644
Long-term debt (estimated fair value: 2022—$1,489,582; 2021—$1,667,009)1,627,1431,546,494
Other liabilities737,538722,009
Total liabilities20,720,05721,125,242
Commitments and Contingencies (Note 5)
Shareholders' equity:
Preferred stock, par value $1 per share—5,000,000 shares authorized; outstanding: 0 in 2022 and 2021——
Common stock, par value $1 per share—320,000,000 shares authorized; outstanding: (2022—109,218,183 issued; 2021—109,218,183 issued)109,218109,218
Additional paid-in-capital531,516520,564
Accumulated other comprehensive income (loss)(731,493)2,677,583
Retained earnings6,469,9566,182,100
Treasury stock, at cost: (2022—11,703,370 shares; 2021—9,650,845 shares)(1,056,087)(846,659)
Total shareholders' equity5,323,1108,642,806
Total liabilities and shareholders' equity$26,043,167$29,768,048

See accompanying Notes to Condensed Consolidated Financial Statements.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollar amounts in thousands, except per share data)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue:
Life premium$759,924$728,170$1,514,526$1,436,289
Health premium319,189295,586636,189589,759
Other premium———1
Total premium1,079,1131,023,7562,150,7152,026,049
Net investment income243,642238,308487,476474,128
Realized gains (losses)(30,446)8,659(37,690)36,811
Other income299388463683
Total revenue1,292,6081,271,1112,600,9642,537,671
Benefits and expenses:
Life policyholder benefits511,034498,4711,060,3771,016,102
Health policyholder benefits197,218188,854394,073376,683
Other policyholder benefits7,0747,28614,12414,545
Total policyholder benefits715,326694,6111,468,5741,407,330
Amortization of deferred acquisition costs155,205148,021313,589301,014
Commissions, premium taxes, and non-deferred acquisition costs93,59582,312184,408161,978
Other operating expense89,65879,155174,010160,365
Interest expense21,82821,76941,77242,947
Total benefits and expenses1,075,6121,025,8682,182,3532,073,634
Income before income taxes216,996245,243418,611464,037
Income tax benefit (expense)(39,992)(45,625)(77,246)(85,902)
Net income$177,004$199,618$341,365$378,135
Basic net income per common share$1.80$1.94$3.46$3.66
Diluted net income per common share$1.79$1.92$3.43$3.62

See accompanying Notes to Condensed Consolidated Financial Statements.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Dollar amounts in thousands)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income$177,004$199,618$341,365$378,135
Other comprehensive income (loss):
Investments:
Unrealized gains (losses) on fixed maturities:
Unrealized holding gains (losses) arising during period(2,042,210)904,048(4,335,132)(358,011)
Other reclassification adjustments included in net income22,25964518,229(16,497)
Foreign exchange adjustment on fixed maturities recorded at fair value1,8352,2182,1194,660
Total unrealized investment gains (losses)(2,018,116)906,911(4,314,784)(369,848)
Less applicable tax (expense) benefit423,810(190,452)906,10977,667
Unrealized gains (losses) on investments, net of tax(1,594,306)716,459(3,408,675)(292,181)
Deferred acquisition costs:
Unrealized gains (losses) attributable to deferred acquisition costs6,0794086,455767
Less applicable tax (expense) benefit(1,276)(86)(1,355)(161)
Unrealized gains (losses) attributable to deferred acquisition costs, net of tax4,8033225,100606
Foreign exchange translation:
Foreign exchange translation adjustments, other than securities(17,979)6,173(13,841)5,563
Less applicable tax (expense) benefit3,776(1,296)2,907(1,168)
Foreign exchange translation adjustments, other than securities, net of tax(14,203)4,877(10,934)4,395
Pension:
Pension adjustments3,4415,2006,87810,400
Less applicable tax (expense) benefit(723)(1,094)(1,445)(2,185)
Pension adjustments, net of tax2,7184,1065,4338,215
Other comprehensive income (loss)(1,600,988)725,764(3,409,076)(278,965)
Comprehensive income (loss)$(1,423,984)$925,382$(3,067,711)$99,170

See accompanying Notes to Condensed Consolidated Financial Statements.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Condensed Consolidated Statements of Shareholders' Equity

(Unaudited)

(Dollar amounts in thousands, except per share data)

Preferred StockCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotal Shareholders' Equity
Balance at December 31, 2021$—$109,218$520,564$2,677,583$6,182,100$(846,659)$8,642,806
Comprehensive income (loss)———(1,808,088)164,361—(1,643,727)
Common dividends declared ($0.2075 per share)————(20,543)—(20,543)
Acquisition of treasury stock—————(119,482)(119,482)
Stock-based compensation——2,504—(345)6,8769,035
Exercise of stock options————(9,964)35,89525,931
Balance at March 31, 2022—109,218523,068869,4956,315,609(923,370)6,894,020
Comprehensive income (loss)———(1,600,988)177,004—(1,423,984)
Common dividends declared ($0.2075 per share)————(20,238)—(20,238)
Acquisition of treasury stock—————(143,939)(143,939)
Stock-based compensation——8,448———8,448
Exercise of stock options————(2,419)11,2228,803
Balance at June 30, 2022$—$109,218$531,516$(731,493)$6,469,956$(1,056,087)$5,323,110
Preferred StockCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotal Shareholders' Equity
Balance at December 31, 2020$—$113,218$527,435$3,029,244$5,874,109$(772,914)$8,771,092
Comprehensive income (loss)———(1,004,729)178,517—(826,212)
Common dividends declared ($0.1975 per share)————(20,435)—(20,435)
Acquisition of treasury stock—————(132,720)(132,720)
Stock-based compensation——(11,422)—1,16818,1427,888
Exercise of stock options————(12,807)45,53132,724
Balance at March 31, 2021—113,218516,0132,024,5156,020,552(841,961)7,832,337
Comprehensive income (loss)———725,764199,618—925,382
Common dividends declared ($0.1975 per share)————(20,171)—(20,171)
Acquisition of treasury stock—————(162,864)(162,864)
Stock-based compensation——8,634———8,634
Exercise of stock options————(14,033)47,63733,604
Balance at June 30, 2021$—$113,218$524,647$2,750,279$6,185,966$(957,188)$8,616,922

.

See accompanying Notes to Condensed Consolidated Financial Statements.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollar amounts in thousands)

Six Months Ended June 30,
20222021
Cash provided from (used for) operating activities$693,390$702,039
Cash provided from (used for) investing activities:
Investments sold or matured:
Fixed maturities available for sale—sold219,02774,710
Fixed maturities available for sale—matured or other redemptions305,656108,815
Other long-term investments48,3344,490
Total investments sold or matured573,017188,015
Acquisition of investments:
Fixed maturities—available for sale(717,994)(415,134)
Other long-term investments(157,913)(141,975)
Total investments acquired(875,907)(557,109)
Net (increase) decrease in policy loans(7,553)1,291
Net (increase) decrease in short-term investments(46,679)(264,140)
Additions to properties(13,627)(23,727)
Investments in low-income housing interests(37,181)(19,732)
Cash provided from (used for) investing activities(407,930)(675,402)
Cash provided from (used for) financing activities:
Issuance of common stock34,73466,328
Cash dividends paid to shareholders(40,208)(39,891)
Proceeds from issuance of debt250,492325,000
Payment for debt issuance costs(5,272)(7,639)
Net borrowing (repayment) of commercial paper(150,047)5,028
Acquisition of treasury stock(263,421)(295,584)
Net receipts (payments) from deposit-type products(33,782)(30,736)
Cash provided from (used for) financing activities(207,504)22,506
Effect of foreign exchange rate changes on cash2,138(5,918)
Net increase (decrease) in cash80,09443,225
Cash at beginning of year92,16394,847
Cash at end of period$172,257$138,072

See accompanying Notes to Condensed Consolidated Financial Statements.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 1—Significant Accounting Policies

Business*:* (Globe Life), (the Company), refers to Globe Life Inc., an insurance holding company incorporated in Delaware in 1979, and Globe Life Inc. subsidiaries and affiliates. Globe Life Inc.'s direct or indirect primary subsidiaries are Globe Life And Accident Insurance Company, American Income Life Insurance Company, Liberty National Life Insurance Company, Family Heritage Life Insurance Company of America, and United American Insurance Company. The underwriting companies are owned by their ultimate corporate parent, Globe Life Inc. (the Parent Company).

Globe Life provides a variety of life and supplemental health insurance products and annuities to a broad base of customers. The Company is organized into four reportable segments: life insurance, supplemental health insurance, annuities, and investments.

Basis of Presentation: The accompanying consolidated financial statements of Globe Life have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America (GAAP) for annual financial statements. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial position at June 30, 2022, and the consolidated results of operations, comprehensive income, and cash flows for the periods ended June 30, 2022 and 2021. The interim period consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that are included in the Form 10-K filed with the Securities Exchange Commission (SEC) on February 24, 2022.

Use of Estimates: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See further documentation in the significant accounting policies or the accompanying notes.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 2—New Accounting Standards

Accounting Pronouncements Yet to be Adopted

ASU No. 2018-12 / 2019-09 / 2020-11, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, with clarification guidance issued in November 2019 and 2020.

ASU 2018-12 is a significant change to the accounting and disclosure of long-duration life and health insurance contracts. The guidance was issued primarily to: 1) improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows, 2) simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, 3) simplify the amortization of deferred acquisition costs, and 4) improve the effectiveness of the required disclosures.

As a result of the issuance of ASU 2020-11 in November 2020, the effective date for this standard was changed to January 1, 2023. Early adoption is available; however, the Company will not early adopt the standard and has selected the modified retrospective transition method upon adoption as of the transition date (“Transition Date”) of January 1, 2021. The modified retrospective transition method requires the amended guidance be applied to contracts issued after the beginning of the earliest period presented, or the Transition Date, which will result in the restatement of the 2021 and 2022 consolidated financial statements.

In summary, the Company continues to assess the impact the adoption will have on the consolidated financial statements and has determined it will have a significant impact on the Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Shareholders’ Equity, and the Consolidated Statements of Comprehensive Income (Loss). On a quarterly basis, the Company’s future policy benefits will be remeasured utilizing an upper-medium grade fixed income instrument yield and the effects of the change will be recognized in Accumulated Other Comprehensive Income (“AOCI”), a component of shareholders’ equity. At least annually, the Company will update its estimate of cash flows used for establishing reserves using actual historical experience and updated future cash flow assumptions, such as mortality, morbidity, and persistency. Finally, the adoption requires changes in the future treatment of our Deferred Acquisition Cost (“DAC”) asset and is expected to result in a significant reduction to DAC amortization in the near to intermediate term.

On the Transition Date, the Company expects a significant decrease in AOCI due to the requirement to re-measure future policy benefits using a discount rate currently lower than what is used in valuing the future policy benefits under existing guidance. The methodology for determining current discount rates consists of constructing a discount rate curve intended to be reflective of the currency and tenor of the insurance liability cash flows. Discount rates reflect upper-medium grade fixed-income instrument yields, which generally consist of single-A rated fixed income instruments. The methodology is designed to prioritize observable inputs based on market data available in the local debt markets denominated in the same currency as the policies. For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company will use estimation techniques consistent with the fair value guidance in ASC 820. It is important to note that the impact to AOCI is sensitive to the discount rate assumption and associated fluctuations.

On the Transition Date, using current discount rates applicable at that time, we expect the after-tax impact to AOCI to be a decrease in the range of $7.5 billion to $8.5 billion due to a $9.5 billion to $11.0 billion increase in future policy benefits. Holding all else equal but using discount rates as of June 30, 2022, the increase in future policy benefits would have been $3.0 billion to $4.0 billion. The impact on AOCI would reflect the impact of both the change in future policy benefits and the change in the fair value of invested assets. Under the new standard, the future policy benefits recorded on the Consolidated Balance Sheets are different than those used in the determination of net income. Future policy benefits recorded within the Consolidated Balance Sheets are determined using current discount rates as of the valuation date, while future policy benefits used for the determination of net income are determined using locked-in discount rates1 based on policy issue dates. On the Transition Date, two significant drivers of the increase in future policy benefits and decrease in AOCI within the

1 Locked-in discount rates are those discount rates which are established at issue and locked-in for each year of issue for use in establishing reserves to compute net income.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Consolidated Balance Sheets are the lower level of current discount rates as compared to the locked-in discount rates used under prior guidance and the long average life of the Company’s life insurance cash flows. Another driver of the large increase in future policy benefits is the required use of the same net premium ratio2 using locked-in discount rates and current discount rates.

The new guidance requires a more granular assessment of the net premium ratio. Any blocks of business that require increases in future policy benefits to minimum levels, or that have a net premium ratio greater than 100%, will require an adjustment to the opening balance of retained earnings (decrease). At the Transition Date, we expect a $15 million to $50 million, net of tax, decrease to opening retained earnings related to these items.

Under the new standard, the annual amortization of DAC in our Consolidated Statements of Operations will be significantly lower in the near and intermediate term due to: 1) the requirement to no longer defer renewal commissions until such year as the commissions are actually incurred, 2) the requirement to no longer accrue and amortize interest on our DAC balances, and 3) the modification of the method for amortizing DAC including the updating of assumptions. For business with deferrals of renewal commissions, as is the case with our captive agency channels, the expected amortization rate, as a percentage of premium, for certain blocks of business will no longer be level but will increase over the period of time during which commissions are deferred. The decrease in amortization in the near term will primarily impact our life insurance line of business. In total, we expect the impact on net income from the decrease in amortization to be in the range of $120 million to $145 million, net of tax. As time progresses, we expect this impact to diminish as the deferral of future renewal commissions increases amortization amounts.

Policyholder benefits, as reported in our Consolidated Statement of Operations, will be restated in 2021 and 2022 under the new guidance. It is expected to be lower in 2021 and 2022, resulting in higher net income for those respective periods than under the current guidance. Going forward, fluctuations in experience and changes in assumptions will result in changes in both future policy obligations and amortization of DAC as a percent of premium.

While the requirements of the new guidance represent a significant change from existing GAAP, the new guidance will not impact capital and surplus or net income under statutory accounting practices, cash flows on our policies, or the underlying economics of our business.

ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

ASU 2022-03 adds disclosure requirements specific to equity securities subject to contractual sale restrictions. The disclosures clarify the nature of the contractual sale as well as the duration of the restriction and the circumstances that could cause a lapse in the restriction.

This standard is effective for the Company on January 1, 2024, and will be implemented on a prospective basis. Early adoption is available. The Company does not expect the standard will have a material impact on the Consolidated Financial Statements.

2 The net premium ratio is the ratio between the present value of benefits and the present value of gross premium.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income

Components of Accumulated Other Comprehensive Income: An analysis of the change in balance by component of Accumulated Other Comprehensive Income is as follows for the three and six month periods ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022
Available for Sale AssetsDeferred Acquisition CostsForeign ExchangePension AdjustmentsTotal
Balance at April 1, 2022$950,921$(3,121)$22,656$(100,961)$869,495
Other comprehensive income (loss) before reclassifications, net of tax(1,611,891)4,803(14,203)—(1,621,291)
Reclassifications, net of tax17,585——2,71820,303
Other comprehensive income (loss)(1,594,306)4,803(14,203)2,718(1,600,988)
Balance at June 30, 2022$(643,385)$1,682$8,453$(98,243)$(731,493)
Three Months Ended June 30, 2021
Available for Sale AssetsDeferred Acquisition CostsForeign ExchangePension AdjustmentsTotal
Balance at April 1, 2021$2,166,932$(4,420)$22,820$(160,817)$2,024,515
Other comprehensive income (loss) before reclassifications, net of tax715,9493224,877—721,148
Reclassifications, net of tax510——4,1064,616
Other comprehensive income (loss)716,4593224,8774,106725,764
Balance at June 30, 2021$2,883,391$(4,098)$27,697$(156,711)$2,750,279
Six Months Ended June 30, 2022
Available for Sale AssetsDeferred Acquisition CostsForeign ExchangePension AdjustmentsTotal
Balance at January 1, 2022$2,765,290$(3,418)$19,387$(103,676)$2,677,583
Other comprehensive income (loss) before reclassifications, net of tax(3,423,076)5,100(10,934)—(3,428,910)
Reclassifications, net of tax14,401——5,43319,834
Other comprehensive income (loss)(3,408,675)5,100(10,934)5,433(3,409,076)
Balance at June 30, 2022$(643,385)$1,682$8,453$(98,243)$(731,493)
Six Months Ended June 30, 2021
Available for Sale AssetsDeferred Acquisition CostsForeign ExchangePension AdjustmentsTotal
Balance at January 1, 2021$3,175,572$(4,704)$23,302$(164,926)$3,029,244
Other comprehensive income (loss) before reclassifications, net of tax(279,148)6064,395—(274,147)
Reclassifications, net of tax(13,033)——8,215(4,818)
Other comprehensive income (loss)(292,181)6064,3958,215(278,965)
Balance at June 30, 2021$2,883,391$(4,098)$27,697$(156,711)$2,750,279

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Reclassification Adjustments: Reclassification adjustments out of Accumulated Other Comprehensive Income are presented below for the three and six month periods ended June 30, 2022 and 2021.

Three Months Ended June 30,Six Months Ended June 30,Affected line items in the Statement of Operations
Component Line Item2022202120222021
Unrealized investment (gains) losses on available for sale assets:
Realized (gains) losses$22,422$(866)$17,485$(19,656)Realized (gains) losses
Amortization of (discount) premium(163)1,5117443,159Net investment income
Total before tax22,25964518,229(16,497)
Tax(4,674)(135)(3,828)3,464Income taxes
Total after-tax17,58551014,401(13,033)
Pension adjustments:
Amortization of prior service cost158158316316Other operating expense
Amortization of actuarial (gain) loss3,2835,0426,56210,084Other operating expense
Total before tax3,4415,2006,87810,400
Tax(723)(1,094)(1,445)(2,185)Income taxes
Total after-tax2,7184,1065,4338,215
Total reclassification (after-tax)$20,303$4,616$19,834$(4,818)

Note 4—Investments

Portfolio Composition*:* Summaries of fixed maturities available for sale by amortized cost, fair value, and allowance for credit losses at June 30, 2022 and December 31, 2021, 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 "Corporates, by sector."

At June 30, 2022
Amortized CostAllowance for Credit LossesGross Unrealized GainsGross Unrealized LossesFair Value**(1)**% of Total Fixed Maturities**(2)**
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises$386,907$—$875$(8,438)$379,3442
States, municipalities, and political subdivisions2,614,124—54,087(388,631)2,279,58013
Foreign governments55,302—144(9,683)45,763—
Corporates, by sector:
Financial4,639,902—147,936(322,283)4,465,55526
Utilities1,916,537—102,727(69,418)1,949,84611
Energy1,497,600—53,410(74,477)1,476,5339
Other corporate sectors6,759,669—169,924(484,110)6,445,48338
Total corporates14,813,708—473,997(950,288)14,337,41784
Collateralized debt obligations36,762—15,939—52,701—
Other asset-backed securities89,583—9(2,430)87,1621
Total fixed maturities$17,996,386$—$545,051$(1,359,470)$17,181,967100

(1)Amount reported in the balance sheet.

(2)At fair value.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

At December 31, 2021
Amortized CostAllowance for Credit LossesGross Unrealized GainsGross Unrealized LossesFair Value**(1)**% of Total Fixed Maturities**(2)**
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises$383,083$—$64,513$(164)$447,4322
States, municipalities, and political subdivisions2,252,997—239,135(2,907)2,489,22512
Foreign governments59,861—900(5,132)55,629—
Corporates, by sector:
Financial4,569,160(387)907,741(9,349)5,467,16526
Utilities1,931,391—490,119(1,012)2,420,49811
Energy1,587,892—346,780(1,683)1,932,9899
Other corporate sectors6,879,459—1,454,464(13,362)8,320,56139
Total corporates14,967,902(387)3,199,104(25,406)18,141,21385
Collateralized debt obligations36,468—27,037—63,505—
Other asset-backed securities104,998—3,715(430)108,2831
Total fixed maturities$17,805,309$(387)$3,534,404$(34,039)$21,305,287100

(1)Amount reported in the balance sheet.

(2)At fair value.

A schedule of fixed maturities available for sale by contractual maturity date at June 30, 2022, is shown below on an amortized cost basis, net of allowance for credit losses, and on a fair value basis. Actual disposition dates could differ from contractual maturities due to call or prepayment provisions.

At June 30, 2022
Amortized Cost, netFair Value
Fixed maturities available for sale:
Due in one year or less$131,203$132,177
Due after one year through five years1,015,2771,045,058
Due after five years through ten years1,691,2891,759,932
Due after ten years through twenty years7,125,2797,207,999
Due after twenty years7,906,8916,896,832
Mortgage-backed and asset-backed securities126,447139,969
$17,996,386$17,181,967

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Analysis of Investment Operations: "Net investment income" for the three and six month periods ended June 30, 2022 and 2021 is summarized as follows:

Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
Fixed maturities available for sale$226,753$223,2782$452,037$444,9972
Policy loans11,58011,324223,00822,5922
Other long-term investments(1)10,7038,8802123,41617,04237
Short-term investments12261933124101140
249,158243,4882498,585484,6413
Less investment expense(5,516)(5,180)6(11,109)(10,513)6
Net investment income$243,642$238,3082$487,476$474,1283

(1)For the three months ended June 30, 2022 and 2021, the investment funds, accounted for under the fair value option method, recorded $8.6 million and $6.5 million of distributions, respectively, in net investment income. For the six months ended June 30, 2022 and 2021, the investment funds, accounted for under the fair value option method, recorded $19.3 million and $12.3 million of distributions, respectively, in net investment income. Refer to Other Long-Term Investments below for further discussion on the investment funds.

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

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Fixed maturities available for sale:
Proceeds from sales(1)$143,911$12,852$219,027$74,710
Gross realized gains——7731,134
Gross realized losses(41,168)(82)(44,847)(12,101)

(1)There were no unsettled sales in the periods ended June 30, 2022 and 2021.

An analysis of "Realized gains (losses)" is as follows:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Realized investment gains (losses):
Fixed maturities available for sale:
Sales and other(1)$(22,421)$865$(17,872)$16,309
Provision for credit losses——3873,346
Fair value option—change in fair value9472,543(4,391)12,428
Other investments(8,972)5,251(15,814)4,728
Realized gains (losses) from investments(30,446)8,659(37,690)36,811
Applicable tax6,394(1,818)7,915(7,730)
Realized gains (losses), net of tax$(24,052)$6,841$(29,775)$29,081

(1)During the three months ended June 30, 2022 and 2021, the Company recorded $1.9 million and $22.4 million of exchanges of fixed maturities (noncash transactions) that resulted in $0 and $0, respectively, in realized gains (losses). During the six months ended June 30, 2022 and 2021, the Company recorded $1.9 million and $108.3 million of exchanges of fixed maturities (noncash transactions) that resulted in $0 and $25.2 million, respectively, in realized gains (losses).

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Fair Value Measurements: The following tables represent the fair value of fixed maturities measured on a recurring basis at June 30, 2022 and December 31, 2021:

Fair Value Measurement at June 30, 2022 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$—$379,344$—$379,344
States, municipalities, and political subdivisions—2,279,580—2,279,580
Foreign governments—45,763—45,763
Corporates, by sector:
Financial—4,338,871126,6844,465,555
Utilities—1,832,289117,5571,949,846
Energy—1,464,39212,1411,476,533
Other corporate sectors—6,171,890273,5936,445,483
Total corporates—13,807,442529,97514,337,417
Collateralized debt obligations——52,70152,701
Other asset-backed securities—87,162—87,162
Total fixed maturities$—$16,599,291$582,676$17,181,967
Percentage of total—%97%3%100%
Fair Value Measurement at December 31, 2021 Using:
Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total Fair Value
Fixed maturities available for sale
U.S. Government direct, guaranteed, and government-sponsored enterprises$—$447,432$—$447,432
States, municipalities, and political subdivisions—2,489,225—2,489,225
Foreign governments—55,629—55,629
Corporates, by sector:
Financial—5,303,547163,6185,467,165
Utilities—2,266,231154,2672,420,498
Energy—1,919,41613,5731,932,989
Other corporate sectors—8,010,331310,2308,320,561
Total corporates—17,499,525641,68818,141,213
Collateralized debt obligations——63,50563,505
Other asset-backed securities—108,283—108,283
Total fixed maturities$—$20,600,094$705,193$21,305,287
Percentage of total—%97%3%100%

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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 SecuritiesCollateralized Debt ObligationsCorporatesTotal
Balance at January 1, 2022$—$63,505$641,688$705,193
Included in realized gains / losses————
Included in other comprehensive income—(11,098)(89,359)(100,457)
Acquisitions————
Sales————
Amortization—2,24832,251
Other(1)—(1,954)(22,357)(24,311)
Transfers into Level 3(2)————
Transfers out of Level 3(2)————
Balance at June 30, 2022$—$52,701$529,975$582,676
Percent of total fixed maturities—%—%3%3%

(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 SecuritiesCollateralized Debt ObligationsCorporatesTotal
Balance at January 1, 2021$12,870$71,598$714,505$798,973
Included in realized gains / losses(82)(6,787)840(6,029)
Included in other comprehensive income6313,528(12,489)1,102
Acquisitions————
Sales(12,851)(13,213)—(26,064)
Amortization—2,27042,274
Other(1)—(2,989)(24,115)(27,104)
Transfers into Level 3(2)————
Transfers out of Level 3(2)————
Balance at June 30, 2021$—$64,407$678,745$743,152
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.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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 SecuritiesCollateralized Debt ObligationsCorporatesTotal
At June 30, 2022$—$(11,098)$(89,359)$(100,457)
At June 30, 20216313,528(12,489)1,102

Unrealized Loss Analysis*:* The following table discloses information about fixed maturities available for sale in an unrealized loss position.

Less than Twelve MonthsTwelve Months or LongerTotal
Number of issues (CUSIPs) held:
As of June 30, 20221,581531,634
As of December 31, 202113842180

Globe Life's entire fixed maturity portfolio consisted of 2,177 issues by 923 different issuers at June 30, 2022 and 2,060 issues by 843 different issuers at December 31, 2021. The weighted-average quality rating of all unrealized loss positions at amortized cost was A- as of June 30, 2022 and December 31, 2021.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following tables disclose unrealized investment losses by class and major sector of fixed maturities available for sale at June 30, 2022 and December 31, 2021.

Analysis of Gross Unrealized Investment Losses

At June 30, 2022
Less than Twelve MonthsTwelve Months or LongerTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises$289,383$(7,858)$3,465$(580)$292,848$(8,438)
States, municipalities and political subdivisions1,674,505(386,550)4,066(2,081)1,678,571(388,631)
Foreign governments9,838(1,254)23,380(8,429)33,218(9,683)
Corporates, by sector:
Financial2,260,544(284,797)50,713(14,674)2,311,257(299,471)
Utilities650,822(65,538)3,970(1,530)654,792(67,068)
Energy662,038(57,153)——662,038(57,153)
Other corporate sectors3,859,625(438,608)53,633(21,941)3,913,258(460,549)
Total corporates7,433,029(846,096)108,316(38,145)7,541,345(884,241)
Collateralized debt obligations——————
Other asset-backed securities74,578(1,813)——74,578(1,813)
Total investment grade securities9,481,333(1,243,571)139,227(49,235)9,620,560(1,292,806)
Below investment grade securities:
States, municipalities and political subdivisions——————
Corporates, by sector:
Financial79,869(10,269)43,105(12,543)122,974(22,812)
Utilities28,547(2,350)——28,547(2,350)
Energy48,666(8,428)19,176(8,896)67,842(17,324)
Other corporate sectors162,448(19,219)6,999(4,342)169,447(23,561)
Total corporates319,530(40,266)69,280(25,781)388,810(66,047)
Collateralized debt obligations——————
Other asset-backed securities——12,493(617)12,493(617)
Total below investment grade securities319,530(40,266)81,773(26,398)401,303(66,664)
Total fixed maturities$9,800,863$(1,283,837)$221,000$(75,633)$10,021,863$(1,359,470)

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. The Company considers many factors when determining whether an allowance for a credit loss should be recorded. While the Company holds securities that may be in an unrealized loss position from time to time, Globe Life does not generally intend to sell and it is likely that management will not be required to sell the fixed maturities prior to their anticipated recovery or maturity due to the strong cash flows generated by its insurance operations.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Analysis of Gross Unrealized Investment Losses

At December 31, 2021
Less than Twelve MonthsTwelve Months or LongerTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises$118$(1)$3,867$(163)$3,985$(164)
States, municipalities and political subdivisions141,310(2,824)2,436(83)143,746(2,907)
Foreign governments12,567(561)23,144(4,571)35,711(5,132)
Corporates, by sector:
Financial133,654(1,507)52,864(1,932)186,518(3,439)
Utilities25,447(692)2,372(320)27,819(1,012)
Energy6,519(238)——6,519(238)
Other corporate sectors115,444(3,566)40,249(3,670)155,693(7,236)
Total corporates281,064(6,003)95,485(5,922)376,549(11,925)
Collateralized debt obligations——————
Other asset-backed securities10,489(16)1—10,490(16)
Total investment grade securities445,548(9,405)124,933(10,739)570,481(20,144)
Below investment grade securities:
States, municipalities and political subdivisions——————
Corporates, by sector:
Financial15,695(272)56,897(5,638)72,592(5,910)
Utilities——————
Energy——26,639(1,445)26,639(1,445)
Other corporate sectors700(11)26,581(6,115)27,281(6,126)
Total corporates16,395(283)110,117(13,198)126,512(13,481)
Collateralized debt obligations——————
Other asset-backed securities——13,043(414)13,043(414)
Total below investment grade securities16,395(283)123,160(13,612)139,555(13,895)
Total fixed maturities$461,943$(9,688)$248,093$(24,351)$710,036$(34,039)

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Fixed Maturities, Allowance for Credit Losses*:* A summary of the activity in the allowance for credit losses is as follows.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Allowance for credit losses beginning balance$—$—$387$3,346
Additions to allowance for which credit losses were not previously recorded————
Additions (reductions) to allowance for fixed maturities that previously had an allowance————
Reduction of allowance for which the Company intends to sell or more likely than not will be required to sell or sold during the period——(387)(3,346)
Allowance for credit losses ending balance$—$—$—$—

As of June 30, 2022 and December 31, 2021, 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:

June 30, 2022December 31, 2021
Investment funds$740,006$640,263
Commercial mortgage loan participations141,696141,843
Other17,25311,819
Total$898,955$793,925

The following table presents additional information about the Company's investment funds as of June 30, 2022 and December 31, 2021 at fair value:

Fair ValueUnfunded Commitments
Investment CategoryJune 30, 2022December 31, 2021June 30, 2022Redemption Term/Notice
Commercial mortgage loans$417,442$423,776$363,852Fully redeemable and non-redeemable with varying terms.
Opportunistic credit168,287178,215—Initial 2 year lock on each new investment/semi-annual withdrawals thereafter/full redemption within 36 month period.
Other154,27738,272146,367
Total investment funds$740,006$640,263$510,219

The Company had $143 million of capital called during the year from existing investment funds. Our unfunded commitments were $510 million as of June 30, 2022.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Commercial Mortgage Loan Participations (commercial mortgage loans): Summaries of commercial mortgage loans by property type and geographical location at June 30, 2022 and December 31, 2021 are as follows:

June 30, 2022December 31, 2021
Carrying Value% of TotalCarrying Value% of Total
Property type:
Mixed use$61,84644$57,99641
Hospitality20,7831523,18616
Retail19,3991419,81114
Industrial17,9001217,90013
Multi-family14,5271014,87211
Office8,35068,9056
Total recorded investment142,805101142,670101
Less allowance for credit losses(1,109)(1)(827)(1)
Carrying value, net of allowance for credit losses$141,696100$141,843100
June 30, 2022December 31, 2021
Carrying Value% of TotalCarrying Value% of Total
Geographic location:
California$70,24550$67,65948
New York19,1331418,37313
Pennsylvania11,672811,6738
Indiana9,71779,7177
Florida8,26368,2136
Texas6,07545,8984
Other17,7001221,13715
Total recorded investment142,805101142,670101
Less allowance for credit losses(1,109)(1)(827)(1)
Carrying value, net of allowance for credit losses$141,696100$141,843100

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following tables are reflective of Management's internal risk ratings of the loan portfolio. Loans are rated low, moderate, and high. The risk categories consider many different factors such as quality of asset, borrower status, as well as macroeconomic factors including COVID-19. These loans, originated in 2017 to 2020, are transitional or under construction and may not yet be income producing. Certain ratios, such as loan to value and debt service coverage ratios, may not be evaluated as the value of the underlying transitional property significantly fluctuates based on completion of the project.

Net Book Value of Commercial Mortgage Loans Receivable by Year of Origination
As of June 30, 2022
Risk Rating:Number of Loans202220212020201920182017Total
Low13$—$—$26,403$11,685$41,224$36,000$115,312
Moderate5——1,19515,161——16,356
High2———4,1107,027—11,137
Total commercial mortgage loans20$—$—$27,598$30,956$48,251$36,000142,805
Less allowance for credit losses on the investment pool(862)
Less allowance for credit losses on individual loans(247)
Carrying value, net of valuation allowance$141,696
Net Book Value of Commercial Mortgage Loans Receivable by Year of Origination
As of December 31, 2021
Risk Rating:Number of Loans20212020201920182017Total
Low14$—$23,636$11,925$41,209$35,729$112,499
Moderate6—1,40017,173——18,573
High2——4,5937,005—11,598
Total commercial mortgage loans22$—$25,036$33,691$48,214$35,729142,670
Less allowance for credit losses on the investment pool(827)
Less allowance for credit losses on individual loans—
Carrying value, net of valuation allowance$141,843

As of June 30, 2022, the Company evaluated the commercial mortgage loan portfolio on a pool basis to determine the allowance for credit losses. At the end of the period, the Company had 20 loans in the portfolio. For the six months ended June 30, 2022, the allowance for credit losses increased $282 thousand. The provision for credit losses is included in "Realized gains (losses)" in the Condensed Consolidated Statements of Operations.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Allowance for credit losses beginning balance$827$2,147$827$3,505
Provision (reversal) for credit losses282(508)282(1,866)
Allowance for credit losses ending balance$1,109$1,639$1,109$1,639

There were no delinquent commercial mortgage loans as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, the Company had one commercial mortgage loan in non-accrual status, which went into foreclosure during the quarter. The outstanding principal balance of this loan was $4.1 million as of June 30, 2022 and December 31, 2021. The Company's unfunded commitment balance to commercial loan borrowers was $23 million as of June 30, 2022.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 5—Commitments and Contingencies

Guarantees: The Parent Company has guaranteed letters of credit in connection with its credit facility with a group of banks. The letters of credit were issued by TMK Re, Ltd., a wholly-owned subsidiary, to secure TMK Re, Ltd.’s obligation for claims on certain policies reinsured by TMK Re, Ltd. that were sold by other Globe Life insurance subsidiaries. These letters of credit facilitate TMK Re, Ltd.’s ability to reinsure the business of Globe Life's insurance carriers. The agreement was amended on September 30, 2021 and now expires in 2026. The maximum amount of letters of credit available is $250 million. The Parent Company would be liable to the extent that TMK Re, Ltd. does not pay the reinsured party. The amount outstanding at June 30, 2022 was $125 million.

Litigation: Globe Life Inc. (formerly Torchmark Corporation) and its subsidiaries, in common with the insurance industry in general, are subject to litigation, including putative class action litigation, alleged breaches of contract, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of agents of the Parent Company's insurance subsidiaries, employment discrimination, worker misclassification, and miscellaneous other causes of action. Based upon information presently available, and in light of legal and other factual defenses available to the Parent Company and its subsidiaries, management does not believe that it is reasonably possible that such litigation will have a material adverse effect on Globe Life's financial condition, future operating results or liquidity; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future. This bespeaks caution, particularly in states with reputations for high punitive damage verdicts. Globe Life's management recognizes that large punitive damage awards bearing little or no relation to actual damages continue to be awarded by juries in jurisdictions in which the Parent Company's insurance subsidiaries have substantial business, creating the potential for unpredictable material adverse judgments in any given punitive damage suit.

On July 22, 2022, putative class and collective action litigation was filed against Arias Agencies and American Income Life Insurance Company (“American Income”) (collectively, “Defendants”) in United States District Court for the Western District of Pennsylvania (David Burkes v. Arias Agencies and American Income Life Insurance Company, Case No. 2:22-cv-1054). The complaint alleges that insurance agent trainees should have been classified as employees, and after contracting should have been classified as employees instead of independent contractors. Plaintiff David Burkes is a former Pennsylvania independent sales agent and asserts claims under Pennsylvania law on behalf of a putative class of all individuals who trained to become and/or worked as sales agents for American Income in the three years prior to July 22, 2022 through case conclusion. Burkes makes claims (a) under the Pennsylvania Minimum Wage Act and the Pennsylvania Wage Payment and Collection Law for the alleged failure to pay minimum wage, alleged failure to pay for time spent in training, alleged failure to pay for missed meals and rest breaks, allegedly requiring putative class members to pay for work-related expenses, and allegedly subjecting putative class members to “chargebacks”; (b) for unjust enrichment for allegedly benefiting from the uncompensated labor of putative class members; and (c) for the rescission of putative class members’ agent contracts. Burkes also asserts a collective action on behalf of the same group of individuals for minimum wage, overtime, liquidated damages, and attorney’s fees and costs under the Fair Labor Standards Act for the three years prior to July 22, 2022 through case conclusion, as well as a claim that American Income allegedly did not keep accurate records of hours worked by sales agents. American Income intends to vigorously dispute the individual and class and collective claims, including enforcing the class action waiver and right to individual arbitration found in agent contracts, which has been recognized by other federal courts in Pennsylvania.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 6—Liability for Unpaid Claims

Activity in the liability for unpaid health claims is summarized as follows:

June 30, 2022December 31, 2021
Balance at beginning of period$167,832$162,261
Incurred related to:
Current year345,294638,054
Prior year(14,208)(22,477)
Total incurred331,086615,577
Paid related to:
Current year210,170487,096
Prior year112,782122,910
Total paid322,952610,006
Balance at end of period$175,966$167,832

Below is the reconciliation of the liability of *"*Policy claims and other benefits payable" in the Condensed Consolidated Balance Sheets.

June 30, 2022December 31, 2021
Policy claims and other benefits payable:
Life insurance$255,686$245,108
Health insurance175,966167,832
Total$431,652$412,940

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 7—Postretirement Benefits

Globe Life has qualified noncontributory defined benefit pension plans (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 officers. The tables included herein will focus on the Pension Plans and SERP.

Pension Assets: The following table presents the assets of the Company's Pension Plans at June 30, 2022 and December 31, 2021.

Pension Assets by Component at June 30, 2022

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% of Total
Corporate bonds:
Financial$—$42,594$—$42,5949
Utilities—36,132—36,1327
Energy—18,653—18,6534
Other corporates—65,233—65,23313
Total corporate bonds—162,612—162,61233
Exchange traded fund(1)251,687——251,68752
Other bonds—212—212—
Guaranteed annuity contract(2)—34,986—34,9867
Short-term investments17,436——17,4364
Other5,539——5,5391
$274,662$197,810$—472,47297
Other long-term investments(3)14,5253
Total pension assets$486,997100

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

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

(3)Included in other long-term investments is an investment fund that reports the Globe Life Inc. 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 Globe Life Inc. Pension Plan owns less than 1% of the investment fund. As of June 30, 2022, the expected term of the investment fund is approximately 3 years and the commitment of the investment is fully funded. The investment is non-redeemable.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Pension Assets by Component at December 31, 2021

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% of Total
Corporate bonds:
Financial$—$52,522$—$52,5229
Utilities—43,663—43,6637
Energy—22,719—22,7194
Other corporates—88,673—88,67315
Total corporate bonds—207,577—207,57735
Exchange traded fund(1)315,720——315,72052
Other bonds—239—239—
Guaranteed annuity contract(2)—34,743—34,7436
Short-term investments13,731——13,7312
Other10,388——10,3882
$339,839$242,559$—582,39897
Other long-term investments(3)15,1493
Total pension assets$597,547100

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

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

(3)Included in other long-term investments is an investment fund that reports the Globe Life Inc. 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 Globe Life Inc. Pension Plan owns approximately 1% of the investment fund. As of December 31, 2021, the expected term of the investment fund was approximately 3 years and the commitment of the investment is fully funded. The investment is non-redeemable.

SERP: The following table includes information regarding the SERP.

Six Months Ended June 30,
20222021
Premiums paid for insurance coverage$443$443
June 30, 2022December 31, 2021
Total investments:
Company owned life insurance$53,982$52,791
Exchange traded funds72,40187,133
$126,383$139,924

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Pension Plans and SERP Liabilities: The following table presents liabilities for the defined benefit pension plans and SERP at June 30, 2022 and December 31, 2021.

June 30, 2022December 31, 2021
Pension Plans$585,944$686,917
SERP91,86192,017
Pension benefit obligation$677,805$778,934

Net Periodic Benefit Cost: The following table presents the net periodic benefit costs for the Pension Plans and SERP by expense components for the three and six months ended June 30, 2022 and 2021.

Components of Net Periodic Benefit Cost

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Service cost$8,656$7,918$17,311$15,836
Interest cost6,1215,46912,24410,936
Expected return on assets(8,885)(8,083)(17,770)(16,166)
Amortization:
Prior service cost158158316316
Actuarial (gain) loss3,2084,9846,4179,969
Net periodic benefit cost$9,258$10,446$18,518$20,891

Note 8—Earnings Per Share

Earnings per Share*:* A reconciliation of basic and diluted weighted-average shares outstanding used in the computation of basic and diluted earnings per share is as follows:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Basic weighted average shares outstanding98,222,993102,895,43598,745,402103,187,567
Weighted average dilutive options outstanding717,6861,337,911841,9401,331,047
Diluted weighted average shares outstanding98,940,679104,233,34699,587,342104,518,614
Antidilutive shares3,882,88431,2692,232,6621,326,599

Antidilutive shares are excluded from the calculation of diluted earnings per share.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 9—Debt

On May 19, 2022, Globe Life completed the issuance of $400 million principal amount of 4.8% Senior notes due June 15, 2032, of which $150 million is owned by Globe Life affiliates. Total proceeds received by the Parent from the issuance, net of the underwriters’ discount, were $395 million. The proceeds will be used to fund $300 million of 3.8% Senior notes maturing on September 15, 2022, as well as for the reduction of commercial paper and other general corporate purposes.

The following table presents information about the terms and outstanding balances of Globe Life's debt.

Selected Information about Debt Issues

As of
June 30, 2022December 31, 2021
InstrumentIssue DateMaturity DateCoupon RatePar ValueUnamortized Discount & Issuance CostsBook ValueFair ValueBook Value
Senior notes5/27/19935/15/20237.875%$165,612$(257)$165,355$171,168$165,216
Senior notes(1)9/24/20129/15/20223.800%150,000(74)149,926150,251149,752
Senior notes9/27/20189/15/20284.550%550,000(4,725)545,275541,486544,949
Senior notes8/21/20208/15/20302.150%400,000(4,001)395,999327,492395,778
Senior notes(1)5/19/20226/15/20324.800%250,000(4,726)245,274246,459—
Junior subordinated debentures11/17/201711/17/20575.275%125,000(1,597)123,403125,325123,396
Junior subordinated debentures6/14/20216/15/20614.250%325,000(7,808)317,192248,820317,155
1,965,612(23,188)1,942,4241,811,0011,696,246
Less current maturity of long-term debt(1)315,612(331)315,281321,419149,752
Total long-term debt1,650,000(22,857)1,627,1431,489,5821,546,494
Current maturity of long-term debt(1)315,612(331)315,281321,419149,752
Commercial paper180,000(155)179,845179,845329,892
Total short-term debt495,612(486)495,126501,264479,644
Total debt$2,145,612$(23,343)$2,122,269$1,990,846$2,026,138

(1)An additional $150 million par value and book value is held by insurance subsidiaries that eliminates in consolidation.

The commercial paper has the highest priority of all the debt, followed by senior notes then junior subordinated debentures. The senior notes due 2023 are noncallable, the remaining senior notes are callable under a make-whole provision, and the junior subordinated debentures are subject to an optional redemption five years from issuance. Interest on the 4.25% junior subordinated debentures is payable quarterly while all other long-term debt is payable semi-annually.

Federal Home Loan Bank (FHLB) Funding*:* In 2021, four of our insurance subsidiaries became members of the FHLB of Dallas. FHLB membership provides the insurance subsidiaries with access to various low-cost collateralized borrowings and funding agreements. The membership requires ownership of FHLB common stock, as well as the purchase of activity-based common stock equal to approximately 4.1% of outstanding borrowings.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Globe Life owns $11.3 million in FHLB common stock as of June 30, 2022 and $7.9 million as of December 31, 2021. The FHLB stock is restricted for the duration of the membership and recorded at cost (par) as required by applicable guidance. The FHLB stock is included in "Other long-term investments*"* in the Condensed Consolidated Balance Sheets and activity is recorded in "Net receipts (payments) from deposit-type products" in the Condensed Consolidated Statement of Cash Flows.

As of June 30, 2022, there were no outstanding borrowings with the FHLB. Borrowings with the FHLB are subject to the availability of pledged assets at Globe Life. As of June 30, 2022, Globe Life's maximum borrowing capacity under the FHLB facility was approximately $545 million, based on pledged assets with a fair value of $638 million.

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
LifeHealthAnnuityTotal
Distribution ChannelAmount% of TotalAmount% of TotalAmount% of TotalAmount% of Total
American Income$376,41950$29,3929$——$405,81138
Direct to Consumer249,3653317,5916——266,95625
Liberty National81,4511146,65515——128,10612
United American2,014—134,79342——136,80713
Family Heritage1,370—90,75828——92,1288
Other49,3056————49,3054
$759,924100$319,189100$——$1,079,113100

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Premium Income by Distribution Channel

Three Months Ended June 30, 2021
LifeHealthAnnuityTotal
Distribution ChannelAmount% of TotalAmount% of TotalAmount% of TotalAmount% of Total
American Income$347,69648$28,78910$——$376,48537
Direct to Consumer249,4403418,4506——267,89026
Liberty National77,8531147,11816——124,97112
United American2,261—116,21739——118,47812
Family Heritage1,226—85,01229——86,2388
Other49,6947————49,6945
$728,170100$295,586100$——$1,023,756100
Six Months Ended June 30, 2022
LifeHealthAnnuityTotal
Distribution ChannelAmount% of TotalAmount% of TotalAmount% of TotalAmount% of Total
American Income$746,40649$58,2469$——$804,65237
Direct to Consumer500,4913336,3476——536,83825
Liberty National162,1701193,84115——256,01112
United American4,073—267,45742——271,53013
Family Heritage2,739—180,29828——183,0378
Other98,6477————98,6475
$1,514,526100$636,189100$——$2,150,715100
Six Months Ended June 30, 2021
LifeHealthAnnuityTotal
Distribution ChannelAmount% of TotalAmount% of TotalAmount% of TotalAmount% of Total
American Income$682,59148$56,1409$——$738,73137
Direct to Consumer493,4683437,8106——531,27826
Liberty National153,5901194,15816——247,74812
United American4,538—233,304401100237,84312
Family Heritage2,344—168,34729——170,6918
Other99,7587————99,7585
$1,436,289100$589,759100$1100$2,026,049100

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

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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
LifeHealthAnnuityInvestmentCorporate & OtherAdjustmentsConsolidated
Revenue:
Premium$759,924$319,189$—$—$—$—$1,079,113
Net investment income———243,642——243,642
Other income————299—299
Total revenue759,924319,189—243,642299—1,323,054
Expenses:
Policy benefits511,034197,2187,074———715,326
Required interest on reserves(191,722)(27,238)(9,670)228,630———
Required interest on DAC56,6437,56249(64,254)———
Amortization of acquisition costs122,53232,221452———155,205
Commissions, premium taxes, and non-deferred acquisition costs63,88729,7035———93,595
Insurance administrative expense(1)————73,7004,985(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 expenses562,374239,466(2,090)186,20485,0414,6171,075,612
Subtotal197,55079,7232,09057,438(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.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Three Months Ended June 30, 2021
LifeHealthAnnuityInvestmentCorporate & OtherAdjustmentsConsolidated
Revenue:
Premium$728,170$295,586$—$—$—$—$1,023,756
Net investment income———238,308——238,308
Other income————388—388
Total revenue728,170295,586—238,308388—1,262,452
Expenses:
Policy obligations498,471188,8547,286———694,611
Required interest on reserves(182,495)(25,434)(10,016)217,945———
Required interest on DAC54,2227,07766(61,365)———
Amortization of acquisition costs120,40727,132482———148,021
Commissions, premium taxes, and non-deferred acquisition costs58,81023,4966———82,312
Insurance administrative expense(1)————67,503261(2)67,764
Parent expense————2,757—2,757
Stock-based compensation expense————8,634—8,634
Interest expense———21,769——21,769
Total expenses549,415221,125(2,176)178,34978,8942611,025,868
Subtotal178,75574,4612,17659,959(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)—investments8,659
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

.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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
LifeHealthAnnuityInvestmentCorporate & OtherAdjustmentsConsolidated
Revenue:
Premium$1,514,526$636,189$—$—$—$—$2,150,715
Net investment income———487,476——487,476
Other income————463—463
Total revenue1,514,526636,189—487,476463—2,638,654
Expenses:
Policy obligations1,060,377394,07314,124———1,468,574
Required interest on reserves(381,431)(54,103)(19,342)454,876———
Required interest on DAC112,87515,025102(128,002)———
Amortization of acquisition costs248,61164,073905———313,589
Commissions, premium taxes, and non-deferred acquisition costs126,09058,30513———184,408
Insurance administrative expense(1)————146,2655,097(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 expenses1,166,522477,373(4,198)368,646169,2814,7292,182,353
Subtotal348,004158,8164,198118,830(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.

GL Q2 2022 FORM 10-Q

Globe Life Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Six Months Ended June 30, 2021
LifeHealthAnnuityInvestmentCorporate & OtherAdjustmentsConsolidated
Revenue:
Premium$1,436,289$589,759$1$—$—$—$2,026,049
Net investment income———474,128——474,128
Other income————683—683
Total revenue1,436,289589,7591474,128683—2,500,860
Expenses:
Policy obligations1,016,102376,68314,545———1,407,330
Required interest on reserves(362,420)(50,429)(20,021)432,870———
Required interest on DAC108,01714,039136(122,192)———
Amortization of acquisition costs243,71156,339964———301,014
Commissions, premium taxes, and non-deferred acquisition costs115,47846,48614———161,978
Insurance administrative expense(1)————133,6795,089(2)138,768
Parent expense————5,075—5,075
Stock-based compensation expense————16,522—16,522
Interest expense———42,947——42,947
Total expenses1,120,888443,118(4,362)353,625155,2765,0892,073,634
Subtotal315,401146,6414,363120,503(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)—investments36,811
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.

GL Q2 2022 FORM 10-Q

CAUTIONARY STATEMENTS

We caution readers regarding certain forward-looking statements contained in the foregoing discussion and elsewhere in this document, and in any other statements made by, or on behalf of Globe Life whether or not in future filings with the Securities and Exchange Commission. Any statement that is not a historical fact, or that might otherwise be considered an opinion or projection concerning the Company or its business, whether express or implied, is meant as and should be considered a forward-looking statement. Such statements represent management's opinions concerning future operations, strategies, financial results or other developments. We specifically disclaim any obligation to update or revise any forward-looking statement because of new information, future developments, or otherwise.

Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control, including uncertainties related to the impact of the COVID-19 pandemic and associated direct and indirect effects on our business operations, financial results and financial condition. If these estimates or assumptions prove to be incorrect, the actual results of Globe Life may differ materially from the forward-looking statements made on the basis of such estimates or assumptions. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, which may be national in scope, related to the insurance industry generally, or applicable to the Company specifically. Such events or developments could include, but are not necessarily limited to:

1.Economic and other conditions, including the impact of inflation and the COVID-19 pandemic on the U.S. economy, leading to unexpected changes in lapse rates and/or sales of our policies, as well as levels of mortality, morbidity, and utilization of health care services that differ from Globe Life's assumptions;

2.Regulatory developments, including changes in accounting standards or governmental regulations (particularly those impacting taxes and changes to the Federal Medicare program that would affect Medicare Supplement);

3.Market trends in the senior-aged health care industry that provide alternatives to traditional Medicare (such as Health Maintenance Organizations and other managed care or private plans) and that could affect the sales of traditional Medicare Supplement insurance;

4.Interest rate changes that affect product sales and/or investment portfolio yield;

5.General economic, industry sector or individual debt issuers’ financial conditions (including developments and volatility arising from the COVID-19 pandemic, particularly in certain industries that may comprise part of our investment portfolio) that may affect the current market value of securities we own, or that may impair an issuer’s ability to make principal and/or interest payments due on those securities;

6.Changes in the competitiveness of the Company's products and pricing;

7.Litigation results;

8.Levels of administrative and operational efficiencies that differ from our assumptions (including any reduction in efficiencies resulting from increased costs arising from operating during the COVID-19 pandemic and the impact of higher than anticipated inflation);

9.The ability to obtain timely and appropriate premium rate increases for health insurance policies from our regulators;

10.The customer response to new products and marketing initiatives;

11.Reported amounts in the consolidated financial statements which are based on management estimates and judgments which may differ from the actual amounts ultimately realized;

12.Compromise by a malicious actor or other event that causes a loss of secure data from, or inaccessibility to, our computer and other information technology systems;

13.The severity, magnitude and impact of natural or man-made catastrophic events, including but not limited to pandemics, tornadoes, hurricanes, earthquakes, war and terrorism, on our operations and personnel, commercial activity and demand for our products; and

14.Our ability to access the commercial paper and debt markets, particularly if such markets become unpredictable or unstable for a certain period.

Readers are also directed to consider other risks and uncertainties described in other documents on file with the Securities and Exchange Commission.

GL Q2 2022 FORM 10-Q

GLOBE LIFE INC.

Management's Discussion & Analysis

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