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GLOBE LIFE INC. - Quarter Report: 2022 June (Form 10-Q)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ________
Commission File Number: 001-08052
GLOBE LIFE INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0780404
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
3700 South Stonebridge Drive, McKinney, Texas 75070
(Address of principal executive offices) (Zip Code)

(972) 569-4000
(Registrant’s telephone number, including area code)

NONE
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par value per shareGLNew York Stock Exchange
4.250% Junior Subordinated DebenturesGL PRDNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                 Yes       No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                             Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at July 29, 2022
Common Stock, $1.00 Par Value 97,437,508
Q2 2022 FORM 10-Q

Table of Contents
Globe Life Inc.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.








As used in this Form 10-Q, “Globe Life,” the “Company,” “we,” “our” and “us” refer to Globe Life Inc., a Delaware corporation incorporated in 1979, its subsidiaries and affiliates.
Q2 2022 FORM 10-Q

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PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

Globe Life Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollar amounts in thousands, except per share data)
June 30,
2022
December 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 loans597,187 589,634 
Other long-term investments (includes: 2022—$740,006; 2021—$640,263 under the fair value option)
898,955 793,925 
Short-term investments115,824 69,145 
Total investments18,793,933 22,757,991 
Cash172,257 92,163 
Accrued investment income256,548 251,307 
Other receivables478,571 487,443 
Deferred acquisition costs5,084,878 4,914,728 
Goodwill481,791 481,791 
Other assets775,189 782,625 
Total assets$26,043,167 $29,768,048 
Liabilities:
Future policy benefits$16,403,710 $16,034,727 
Unearned and advance premium68,451 65,472 
Policy claims and other benefits payable431,652 412,940 
Other policyholders' funds100,336 98,935 
Total policy liabilities17,004,149 16,612,074 
Current and deferred income taxes856,101 1,765,021 
Short-term debt495,126 479,644 
Long-term debt (estimated fair value: 2022—$1,489,582; 2021—$1,667,009)
1,627,143 1,546,494 
Other liabilities737,538 722,009 
Total liabilities20,720,057 21,125,242 
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)
109,218 109,218 
Additional paid-in-capital531,516 520,564 
Accumulated other comprehensive income (loss)(731,493)2,677,583 
Retained earnings6,469,956 6,182,100 
Treasury stock, at cost: (2022—11,703,370 shares; 2021—9,650,845 shares)
(1,056,087)(846,659)
Total shareholders' equity5,323,110 8,642,806 
Total liabilities and shareholders' equity$26,043,167 $29,768,048 

See accompanying Notes to Condensed Consolidated Financial Statements.
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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 premium319,189 295,586 636,189 589,759 
Other premium— — — 
Total premium1,079,113 1,023,756 2,150,715 2,026,049 
Net investment income243,642 238,308 487,476 474,128 
Realized gains (losses)(30,446)8,659 (37,690)36,811 
Other income299 388 463 683 
Total revenue1,292,608 1,271,111 2,600,964 2,537,671 
Benefits and expenses:
Life policyholder benefits511,034 498,471 1,060,377 1,016,102 
Health policyholder benefits197,218 188,854 394,073 376,683 
Other policyholder benefits7,074 7,286 14,124 14,545 
Total policyholder benefits715,326 694,611 1,468,574 1,407,330 
Amortization of deferred acquisition costs155,205 148,021 313,589 301,014 
Commissions, premium taxes, and non-deferred acquisition costs93,595 82,312 184,408 161,978 
Other operating expense89,658 79,155 174,010 160,365 
Interest expense21,828 21,769 41,772 42,947 
Total benefits and expenses1,075,612 1,025,868 2,182,353 2,073,634 
Income before income taxes216,996 245,243 418,611 464,037 
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.
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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 income22,259 645 18,229 (16,497)
Foreign exchange adjustment on fixed maturities recorded at fair value1,835 2,218 2,119 4,660 
Total unrealized investment gains (losses)(2,018,116)906,911 (4,314,784)(369,848)
Less applicable tax (expense) benefit423,810 (190,452)906,109 77,667 
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 costs6,079 408 6,455 767 
Less applicable tax (expense) benefit(1,276)(86)(1,355)(161)
Unrealized gains (losses) attributable to deferred acquisition costs, net of tax4,803 322 5,100 606 
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 adjustments3,441 5,200 6,878 10,400 
Less applicable tax (expense) benefit(723)(1,094)(1,445)(2,185)
Pension adjustments, net of tax2,718 4,106 5,433 8,215 
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.
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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)6,876 9,035 
Exercise of stock options— — — — (9,964)35,895 25,931 
Balance at March 31, 2022
— 109,218 523,068 869,495 6,315,609 (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)11,222 8,803 
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)— 1,168 18,142 7,888 
Exercise of stock options— — — — (12,807)45,531 32,724 
Balance at March 31, 2021
— 113,218 516,013 2,024,515 6,020,552 (841,961)7,832,337 
Comprehensive income (loss)— — — 725,764 199,618 — 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)47,637 33,604 
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.
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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—sold219,027 74,710 
Fixed maturities available for sale—matured or other redemptions305,656 108,815 
Other long-term investments48,334 4,490 
Total investments sold or matured573,017 188,015 
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 stock34,734 66,328 
Cash dividends paid to shareholders(40,208)(39,891)
Proceeds from issuance of debt250,492 325,000 
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 cash80,094 43,225 
Cash at beginning of year92,163 94,847 
Cash at end of period $172,257 $138,072 












See accompanying Notes to Condensed Consolidated Financial Statements.
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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.


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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.
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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.
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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
Assets
Deferred
Acquisition
Costs
Foreign
Exchange
Pension
Adjustments
Total
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 — — 2,718 20,303 
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
Assets
Deferred
Acquisition
Costs
Foreign
Exchange
Pension
Adjustments
Total
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 tax715,949 322 4,877 — 721,148 
Reclassifications, net of tax510 — — 4,106 4,616 
Other comprehensive income (loss)716,459 322 4,877 4,106 725,764 
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
Assets
Deferred
Acquisition
Costs
Foreign
Exchange
Pension
Adjustments
Total
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 — — 5,433 19,834 
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
Assets
Deferred
Acquisition
Costs
Foreign
Exchange
Pension
Adjustments
Total
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)606 4,395 — (274,147)
Reclassifications, net of tax(13,033)— — 8,215 (4,818)
Other comprehensive income (loss)(292,181)606 4,395 8,215 (278,965)
Balance at June 30, 2021
$2,883,391 $(4,098)$27,697 $(156,711)$2,750,279 

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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)1,511 744 3,159 Net investment income
Total before tax22,259 645 18,229 (16,497)
Tax(4,674)(135)(3,828)3,464 Income taxes
Total after-tax17,585 510 14,401 (13,033)
Pension adjustments:
Amortization of prior service cost158 158 316 316 Other operating expense
Amortization of actuarial (gain) loss3,283 5,042 6,562 10,084 Other operating expense
Total before tax3,441 5,200 6,878 10,400 
Tax(723)(1,094)(1,445)(2,185)Income taxes
Total after-tax2,718 4,106 5,433 8,215 
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
Cost
Allowance for Credit LossesGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
 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)$379,344 
States, municipalities, and political subdivisions2,614,124 — 54,087 (388,631)2,279,580 13 
Foreign governments55,302 — 144 (9,683)45,763 — 
Corporates, by sector:
Financial4,639,902 — 147,936 (322,283)4,465,555 26 
Utilities1,916,537 — 102,727 (69,418)1,949,846 11 
Energy1,497,600 — 53,410 (74,477)1,476,533 
Other corporate sectors6,759,669 — 169,924 (484,110)6,445,483 38 
Total corporates14,813,708 — 473,997 (950,288)14,337,417 84 
Collateralized debt obligations36,762 — 15,939 — 52,701 — 
Other asset-backed securities89,583 — (2,430)87,162 
Total fixed maturities
$17,996,386 $— $545,051 $(1,359,470)$17,181,967 100 
(1)Amount reported in the balance sheet.
(2)At fair value.
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Table of Contents
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
At December 31, 2021
Amortized
Cost
Allowance for Credit LossesGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
 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)$447,432 
States, municipalities, and political subdivisions2,252,997 — 239,135 (2,907)2,489,225 12 
Foreign governments59,861 — 900 (5,132)55,629 — 
Corporates, by sector:
Financial4,569,160 (387)907,741 (9,349)5,467,165 26 
Utilities1,931,391 — 490,119 (1,012)2,420,498 11 
Energy1,587,892 — 346,780 (1,683)1,932,989 
Other corporate sectors6,879,459 — 1,454,464 (13,362)8,320,561 39 
Total corporates14,967,902 (387)3,199,104 (25,406)18,141,213 85 
Collateralized debt obligations36,468 — 27,037 — 63,505 — 
Other asset-backed securities104,998 — 3,715 (430)108,283 
Total fixed maturities
$17,805,309 $(387)$3,534,404 $(34,039)$21,305,287 100 
(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, net
Fair
Value
Fixed maturities available for sale:
Due in one year or less$131,203 $132,177 
Due after one year through five years1,015,277 1,045,058 
Due after five years through ten years1,691,289 1,759,932 
Due after ten years through twenty years7,125,279 7,207,999 
Due after twenty years7,906,891 6,896,832 
Mortgage-backed and asset-backed securities126,447 139,969 
$17,996,386 $17,181,967 

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Table of Contents
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 $223,278 $452,037 $444,997 
Policy loans11,580 11,324 23,008 22,592 
Other long-term investments(1)
10,703 8,880 21 23,416 17,042 37 
Short-term investments122 1933 124 10 1140 
249,158 243,488 498,585 484,641 
Less investment expense(5,516)(5,180)(11,109)(10,513)
Net investment income
$243,642 $238,308 $487,476 $474,128 
(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— — 773 1,134 
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— — 387 3,346 
Fair value option—change in fair value947 2,543 (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).

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Table of Contents
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 — 4,338,871 126,684 4,465,555 
Utilities — 1,832,289 117,557 1,949,846 
Energy — 1,464,392 12,141 1,476,533 
Other corporate sectors — 6,171,890 273,593 6,445,483 
Total corporates — 13,807,442 529,975 14,337,417 
Collateralized debt obligations — — 52,701 52,701 
Other asset-backed securities — 87,162 — 87,162 
Total fixed maturities
$— $16,599,291 $582,676 $17,181,967 
Percentage of total— %97 %%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 — 5,303,547 163,618 5,467,165 
Utilities — 2,266,231 154,267 2,420,498 
Energy — 1,919,416 13,573 1,932,989 
Other corporate sectors — 8,010,331 310,230 8,320,561 
Total corporates — 17,499,525 641,688 18,141,213 
Collateralized debt obligations — — 63,505 63,505 
Other asset-backed securities — 108,283 — 108,283 
Total fixed maturities
$— $20,600,094 $705,193 $21,305,287 
Percentage of total— %97 %%100 %

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Table of Contents
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 Securities
Collateralized
Debt
Obligations
CorporatesTotal
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— 2,248 2,251 
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— %— %%%
(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 Securities
Collateralized
Debt
Obligations
CorporatesTotal
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 income63 13,528 (12,489)1,102 
Acquisitions— — — — 
Sales(12,851)(13,213)— (26,064)
Amortization— 2,270 2,274 
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)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.

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Table of Contents
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 Securities
Collateralized
Debt
Obligations
CorporatesTotal
At June 30, 2022
$— $(11,098)$(89,359)$(100,457)
At June 30, 2021
63 13,528 (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, 20221,581 53 1,634 
As of December 31, 2021138 42 180 
 
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.




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Table of Contents
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
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
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.

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Table of Contents
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
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
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)— 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)


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Table of Contents
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,
2022
December 31, 2021
Investment funds$740,006 $640,263 
Commercial mortgage loan participations141,696 141,843 
Other17,253 11,819 
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,
2022
December 31, 2021June 30,
2022
Redemption Term/Notice
Commercial mortgage loans$417,442 $423,776 $363,852 Fully redeemable and non-redeemable with varying terms.
Opportunistic credit168,287 178,215 — 
Initial 2 year lock on each new investment/semi-annual withdrawals thereafter/full redemption within 36 month period.
Other154,277 38,272 146,367 
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.


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Table of Contents
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$61,846 44 $57,996 41 
Hospitality20,783 15 23,186 16 
Retail19,399 14 19,811 14 
Industrial17,900 12 17,900 13 
Multi-family14,527 10 14,872 11 
Office8,350 8,905 
Total recorded investment142,805 101 142,670 101 
Less allowance for credit losses(1,109)(1)(827)(1)
Carrying value, net of allowance for credit losses
$141,696 100 $141,843 100 

June 30, 2022December 31, 2021
Carrying Value% of TotalCarrying Value% of Total
Geographic location:
California$70,245 50 $67,659 48 
New York19,133 14 18,373 13 
Pennsylvania11,672 11,673 
Indiana9,717 9,717 
Florida8,263 8,213 
Texas6,075 5,898 
Other17,700 12 21,137 15 
Total recorded investment142,805 101 142,670 101 
Less allowance for credit losses(1,109)(1)(827)(1)
Carrying value, net of allowance for credit losses
$141,696 100 $141,843 100 

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Table of Contents
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 
Moderate — — 1,195 15,161 — — 16,356 
High— — — 4,110 7,027 — 11,137 
Total commercial mortgage loans20 $— $— $27,598 $30,956 $48,251 $36,000 142,805 
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 
Moderate— 1,400 17,173 — — 18,573 
High— — 4,593 7,005 — 11,598 
Total commercial mortgage loans22 $— $25,036 $33,691 $48,214 $35,729 142,670 
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.

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Table of Contents
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.



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Table of Contents
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,
2022
December 31,
2021
Balance at beginning of period
$167,832 $162,261 
Incurred related to:
Current year345,294 638,054 
Prior year(14,208)(22,477)
Total incurred331,086 615,577 
Paid related to:
Current year210,170 487,096 
Prior year112,782 122,910 
Total paid322,952 610,006 
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,
2022
December 31,
2021
Policy claims and other benefits payable:
Life insurance$255,686 $245,108 
Health insurance175,966 167,832 
Total$431,652 $412,940 

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Table of Contents
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 $— $42,594 
Utilities— 36,132 — 36,132 
Energy— 18,653 — 18,653 
Other corporates— 65,233 — 65,233 13 
Total corporate bonds— 162,612 — 162,612 33 
Exchange traded fund(1)
251,687 — — 251,687 52 
Other bonds— 212 — 212 — 
Guaranteed annuity contract(2)
— 34,986 — 34,986 
Short-term investments17,436 — — 17,436 
Other5,539 — — 5,539 
$274,662 $197,810 $— 472,472 97 
Other long-term investments(3)
14,525 
Total pension assets
$486,997 100 
(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.

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Table of Contents
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 $— $52,522 
Utilities— 43,663 — 43,663 
Energy— 22,719 — 22,719 
Other corporates— 88,673 — 88,673 15 
Total corporate bonds— 207,577 — 207,577 35 
Exchange traded fund(1)
315,720 — — 315,720 52 
Other bonds— 239 — 239 — 
Guaranteed annuity contract(2)
— 34,743 — 34,743 
Short-term investments13,731 — — 13,731 
Other10,388 — — 10,388 
$339,839 $242,559 $— 582,398 97 
Other long-term investments(3)
15,149 
Total pension assets
$597,547 100 
(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,
2022
December 31,
2021
Total investments:
Company owned life insurance $53,982 $52,791 
Exchange traded funds72,401 87,133 
$126,383 $139,924 


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Table of Contents
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,
2022
December 31,
2021
Pension Plans$585,944 $686,917 
SERP91,861 92,017 
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 cost6,121 5,469 12,244 10,936 
Expected return on assets(8,885)(8,083)(17,770)(16,166)
Amortization:
Prior service cost158 158 316 316 
Actuarial (gain) loss3,208 4,984 6,417 9,969 
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 outstanding98,222,993 102,895,435 98,745,402 103,187,567 
Weighted average dilutive options outstanding717,686 1,337,911 841,940 1,331,047 
Diluted weighted average shares outstanding98,940,679 104,233,346 99,587,342 104,518,614 
Antidilutive shares3,882,884 31,269 2,232,662 1,326,599 

Antidilutive shares are excluded from the calculation of diluted earnings per share. 
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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,
2022
December 31,
2021
InstrumentIssue DateMaturity Date Coupon Rate Par
Value
Unamortized Discount & Issuance CostsBook
Value
Fair
Value
Book
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)149,926 150,251 149,752 
Senior notes9/27/20189/15/20284.550%550,000 (4,725)545,275 541,486 544,949 
Senior notes8/21/20208/15/20302.150%400,000 (4,001)395,999 327,492 395,778 
Senior notes(1)
5/19/20226/15/20324.800%250,000 (4,726)245,274 246,459 — 
Junior subordinated debentures11/17/201711/17/20575.275%125,000 (1,597)123,403 125,325 123,396 
Junior subordinated debentures6/14/20216/15/20614.250%325,000 (7,808)317,192 248,820 317,155 
1,965,612 (23,188)1,942,424 1,811,001 1,696,246 
Less current maturity of long-term debt(1)
315,612 (331)315,281 321,419 149,752 
Total long-term debt
1,650,000 (22,857)1,627,143 1,489,582 1,546,494 
Current maturity of long-term debt(1)
315,612 (331)315,281 321,419 149,752 
Commercial paper180,000 (155)179,845 179,845 329,892 
Total short-term debt
495,612 (486)495,126 501,264 479,644 
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.

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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
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
American Income$376,419 50 $29,392 $— — $405,811 38 
Direct to Consumer249,365 33 17,591 — — 266,956 25 
Liberty National81,451 11 46,655 15 — — 128,106 12 
United American2,014 — 134,793 42 — — 136,807 13 
Family Heritage1,370 — 90,758 28 — — 92,128 
Other49,305 — — — — 49,305 
$759,924 100 $319,189 100 $— — $1,079,113 100 




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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
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
American Income$347,696 48 $28,789 10 $— — $376,485 37 
Direct to Consumer249,440 34 18,450 — — 267,890 26 
Liberty National77,853 11 47,118 16 — — 124,971 12 
United American2,261 — 116,217 39 — — 118,478 12 
Family Heritage1,226 — 85,012 29 — — 86,238 
Other49,694 — — — — 49,694 
$728,170 100 $295,586 100 $— — $1,023,756 100 

Six Months Ended June 30, 2022
 LifeHealthAnnuityTotal
Distribution ChannelAmount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
American Income$746,406 49 $58,246 $— — $804,652 37 
Direct to Consumer500,491 33 36,347 — — 536,838 25 
Liberty National162,170 11 93,841 15 — — 256,011 12 
United American4,073 — 267,457 42 — — 271,530 13 
Family Heritage2,739 — 180,298 28 — — 183,037 
Other98,647 — — — — 98,647 
$1,514,526 100 $636,189 100 $— — $2,150,715 100 

 Six Months Ended June 30, 2021
 LifeHealthAnnuityTotal
Distribution ChannelAmount
% of
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
American Income$682,591 48 $56,140 $— — $738,731 37 
Direct to Consumer493,468 34 37,810 — — 531,278 26 
Liberty National153,590 11 94,158 16 — — 247,748 12 
United American4,538 — 233,304 40 100 237,843 12 
Family Heritage2,344 — 168,347 29 — — 170,691 
Other99,758 — — — — 99,758 
$1,436,289 100 $589,759 100 $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
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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.

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Table of Contents
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 revenue759,924 319,189 — 243,642 299 — 1,323,054 
Expenses:
Policy benefits511,034 197,218 7,074 — — — 715,326 
Required interest on reserves(191,722)(27,238)(9,670)228,630 — — — 
Required interest on DAC56,643 7,562 49 (64,254)— — — 
Amortization of acquisition costs122,532 32,221 452 — — — 155,205 
Commissions, premium taxes, and non-deferred acquisition costs63,887 29,703 — — — 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 expenses562,374 239,466 (2,090)186,204 85,041 4,617 1,075,612 
Subtotal197,550 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.



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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 revenue728,170 295,586 — 238,308 388 — 1,262,452 
Expenses:
Policy obligations498,471 188,854 7,286 — — — 694,611 
Required interest on reserves(182,495)(25,434)(10,016)217,945 — — — 
Required interest on DAC54,222 7,077 66 (61,365)— — — 
Amortization of acquisition costs120,407 27,132 482 — — — 148,021 
Commissions, premium taxes, and non-deferred acquisition costs58,810 23,496 — — — 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 expenses549,415 221,125 (2,176)178,349 78,894 261 1,025,868 
Subtotal178,755 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)—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
.





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Table of Contents
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 revenue1,514,526 636,189 — 487,476 463 — 2,638,654 
Expenses:
Policy obligations1,060,377 394,073 14,124 — — — 1,468,574 
Required interest on reserves(381,431)(54,103)(19,342)454,876 — — — 
Required interest on DAC112,875 15,025 102 (128,002)— — — 
Amortization of acquisition costs248,611 64,073 905 — — — 313,589 
Commissions, premium taxes, and non-deferred acquisition costs126,090 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 expenses1,166,522 477,373 (4,198)368,646 169,281 4,729 2,182,353 
Subtotal348,004 158,816 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.



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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 $$— $— $— $2,026,049 
Net investment income— — — 474,128 — — 474,128 
Other income— — — — 683 — 683 
Total revenue1,436,289 589,759 474,128 683 — 2,500,860 
Expenses:
Policy obligations1,016,102 376,683 14,545 — — — 1,407,330 
Required interest on reserves(362,420)(50,429)(20,021)432,870 — — — 
Required interest on DAC108,017 14,039 136 (122,192)— — — 
Amortization of acquisition costs243,711 56,339 964 — — — 301,014 
Commissions, premium taxes, and non-deferred acquisition costs115,478 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 expenses1,120,888 443,118 (4,362)353,625 155,276 5,089 2,073,634 
Subtotal315,401 146,641 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)—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.



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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.
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GLOBE LIFE INC.
Management's Discussion & Analysis

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion should be read in conjunction with Globe Life's Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this report. The following management discussion will only include comparison to prior year.

"Globe Life" and the "Company" refer to Globe Life Inc. and its subsidiaries and affiliates.


Results of Operations
gl-20220630_g1.jpg
How Globe Life Views Its Operations. Globe Life Inc. is the holding company for a group of insurance companies that market primarily individual life and supplemental health insurance to lower middle to middle-income households throughout the United States. We view our operations by segments, which are the insurance product lines of life, supplemental health, and annuities, and the investment segment that supports the product lines. Segments are aligned based on their common characteristics, comparability of the profit margins, and management techniques used to operate each segment.
gl-20220630_g2.jpg
Insurance Product Line Segments. The insurance product line segments involve the marketing, underwriting, and administration of policies. Each product line is further segmented by the various distribution channels that market the insurance policies. Each distribution channel operates in a niche market offering insurance products designed for that particular market. Whether analyzing profitability of a segment as a whole, or the individual distribution channels within the segment, the measure of profitability used by management is the underwriting margin, as seen below:

 Premium revenue
                                                           (Policy obligations)
                                                           (Policy acquisition costs and commissions)
                                                            Underwriting margin

gl-20220630_g3.jpg
Investment Segment. The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability for the investment segment is excess investment income, as seen below:
 Net investment income
(Required interest on net policy liabilities)
                                                           (Financing costs)
                                                            Excess investment income


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GLOBE LIFE INC.
Management's Discussion & Analysis
As discussed in further detail within Note 2—New Accounting Standards, the Company will adopt ASU 2018-12, Financial Services–Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), effective on January 1, 2023. The Company has selected the modified retrospective transition method upon adoption as of the transition date (the “Transition Date”) of January 1, 2021. The accounting adoption will have no economic impact on the cash flows of our business nor influence our business model of providing basic protection-oriented products to the underserved and lower middle to middle-income market. In addition, the adoption will not impact our statutory earnings, statutory capital, nor our capital management philosophies.

It will, however, modify the timing of when profits emerge on our insurance policies and result in the restatement of 2021 and 2022 key figures in the consolidated financial statements. We are anticipating GAAP net income and net operating income to increase significantly under the new standard primarily due to a reduction in DAC amortization in the near or intermediate term. Additionally, future policy benefits on our life insurance business for 2021 and 2022, as restated to reflect the new standard, are expected to be lower than originally reported reflecting the treatment of adverse claims experience incurred in 2021 and 2022, which gets spread out over future periods from transition, including those relating to COVID-19. The expected decrease in future policy benefits related to this item in 2021 is expected to be within $160 million and $200 million, and the impact on 2022 has not yet been quantified. This will result in slightly higher future policy benefits, as a percentage of premium, in future years than what would have been expected under existing guidance. Finally, we expect some modest decreases to future policy benefits, as a percentage of premium, in our health business on some of our limited benefit plans under the new standard.

With respect to future policy benefits, we anticipate an increase of between $9.5 billion and $11.0 billion on the Transition Date, which will be reflected in other comprehensive income. This change reflects an unrealized interest rate loss at transition and is a result of several primary factors:
a.Life insurance future policy benefit cash flows tend to be long as death benefits, which are greater than premium amounts, are typically paid to beneficiaries many years after a policy is issued. This results in a generally longer overall liability duration than the overall asset duration.
b.The new methodology requires the use of current discount rates (upper-medium grade) rather than locked-in discount rates, which are determined when a policy is issued. Current discount rates are generally lower than the locked-in discount rates used to determine net income. The required current discount rate is inconsistent with historical practices, the current asset portfolio and current investment strategy.
c.The methodology requires the net premium ratio1 used to determine future policy benefits be based on locked-in rates rather than permitting the redetermination of the net premium ratio using current discount rates. This restricts the level of gross premiums allowed in the calculation, as well as the level of gross premiums available to offset the impact of current discount rates to the extent these rates are realized in future years. Because of this requirement, the change in future policy benefits, at transition, results in a measure of unrealized gain (loss) due to differences in discount rates only.

For Globe Life, discount rates lower than the locked-in discount rate under LDTI have the effect of significantly increasing the level of reserves carried due to the use of net premiums in the calculation as compared to current GAAP, which in the loss recognition test, uses the total gross premium cash flows. Once implemented, future policy benefits will be sensitive to changes in current discount rates for the reasons stated above. To demonstrate this sensitivity to discount rates, to the extent current discount rates were consistent with rates as of June 30, 2022, we estimate future policy benefits would have only increased between $3.0 billion and $4.0 billion. For every 50 basis-point movement in the average discount rate, we estimate the impact on future policy benefits is $1.5 billion to $2.5 billion.

With respect to shareholders’ equity, as of the end of 2020, reported shareholders’ equity on the Consolidated Balance Sheets was $8.8 billion. We anticipate a decrease in the range of $7.5 billion to $8.5 billion, net of tax, as a result of the requirement to use current discount rates to remeasure the future policy benefits and record the offset through AOCI at adoption. If we hold all else equal as of the Transition Date but use current discount rates as of June 30, 2022, the after-tax decrease in AOCI due solely to the increase in future policy benefits would have been in the range of $2.4 billion to $3.2 billion. AOCI would also be impacted by fluctuations in the valuation of the fixed maturity bond portfolio in this situation.
__________________________
1 The net premium ratio is the ratio between the present value of benefits and the present value of gross premium.
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GLOBE LIFE INC.
Management's Discussion & Analysis
Another item impacting shareholders’ equity relates to increases in the liability for future policy benefits on smaller, older blocks of business with a minimum floor or net premium ratios capped at 100%. The Company uses the net premium ratio as of the Transition Date (using locked-discount rates) to calculate the liability for future policy benefits using two different discount rates: 1) the discount rate used immediately before the Transition Date (locked-in discount rates), and 2) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit risk) fixed income instruments. For blocks of business that require increases in future policy benefits to minimum levels, or a net premium ratio capped at 100% on the Transition Date, any difference between the future policy benefits calculated using the discount rate immediately before the Transition Date, and the existing carrying value as of the Transition Date is recorded as an adjustment (decrease) to opening retained earnings. At the Transition Date, we expect a $15 million to $50 million, net of tax, decrease to opening retained earnings related to these items.

As noted above, we expect GAAP net income and net operating income to increase under the new standard due to a significant decrease in the annual amortization of DAC in the near and intermediate term. This is a result of changes to the calculation of amortization rate, including use of only deferred costs through the valuation date. 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 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 increase in net income due to the decrease in amortization to fall within a range of $120 million and $145 million, net of tax. As time progresses, we expect this impact to diminish as the deferral of future renewal commissions increases amortization amounts.

Regarding our measure of excess investment income, we expect a significant decrease in the figure as a result of the updated standard. This is driven by the removal of interest discounting in the computation of amortization of DAC. Further, it is important to note that this change also influences the decrease in DAC amortization previously noted. Although non-GAAP measures, the review of underwriting margin and excess investment income will remain an important part of the Company’s measurement of performance.

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GLOBE LIFE INC.
Management's Discussion & Analysis
Current Highlights, comparing year-to-date 2022 with 2021.
Net income as a return on equity (ROE) for the six months ended June 30, 2022 was 9.8% and net operating income as an ROE, excluding net unrealized gains or losses on the fixed maturity portfolio(1) was 12.6%.
Total premium increased 6% over the prior year. Life premium increased 5% for the period from $1.4 billion in 2021 to $1.5 billion in 2022. Life underwriting margin increased 10% from $315 million in 2021 to $348 million in 2022.
Net investment income increased 3% over the same period in the prior year. Excess investment income declined 1% below the prior year.
Total net sales increased 5% over the same period in the prior year from $347 million in 2021 to $366 million in 2022.
Book value per share declined 35% below the same period in the prior year from $83.59 to $54.18. Book value per share, excluding net unrealized gains or losses on the fixed maturity portfolio(1), increased 9% over the prior year from $55.66 in 2021 to $60.71 in 2022.
The Company incurred $45 million of COVID-19 net life claims (net of reserves released upon death) for the six months ended June 30, 2022 compared with $49 million during the same period last year.
For the six months ended June 30, 2022, the Company repurchased 2.3 million shares of Globe Life Inc. common stock at a total cost of $223 million for an average share price of $98.22.
The following graphs represent net income and net operating income for the six month periods ended June 30, 2022 and 2021.
gl-20220630_g4.jpg gl-20220630_g5.jpg
(1)As shown in the charts above, net operating income is the consolidated total of segment profits after tax and as such is considered a non-GAAP measure. It has been used consistently by Globe Life's management for many years to evaluate the operating performance of the Company. It differs from net income primarily because it excludes certain non-operating items such as realized gains and losses and certain significant and unusual items included in net income. Net income is the most directly comparable GAAP measure.
Net operating income as an ROE, excluding net unrealized gains or losses on the fixed maturity portfolio, is considered a non-GAAP measure. Management utilizes this measure to view the business without the effect of the net unrealized gains or losses, which are primarily attributable to fluctuation in interest rates on the available-for-sale portfolio. The impact of the adjustment to exclude net unrealized gains or losses on fixed maturities, net of tax is $(642) million and $2.9 billion for the six months ended June 30, 2022 and 2021, respectively.
Book value per share, excluding net unrealized gains or losses on the fixed maturity portfolio, is also considered a non-GAAP measure. Management utilizes this measure to view the book value of the business without the effect of net unrealized gains or losses, which are primarily attributable to fluctuation in interest rates on the available-for-sale portfolio. The impact of the adjustment to exclude net unrealized gains or losses on fixed maturities is $(6.53) and $27.93 for the six months ended June 30, 2022 and 2021, respectively.
Refer to Analysis of Profitability by Segment for non-GAAP reconciliation to GAAP.

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GLOBE LIFE INC.
Management's Discussion & Analysis

Summary of Operations. Net income declined 10% to $341 million during the six months ended June 30, 2022, compared with $378 million in the same period in 2021. This decrease was primarily attributed to $30 million of after-tax realized losses on investments in the current period, as compared to $29 million of after tax realized gains on investments in the year-ago period. See further discussion under the caption Investments. On a diluted per common share basis, net income per common share for the six months ended June 30, 2022 declined 5% from $3.62 to $3.43.

Net operating income is the consolidated total of segment profits after tax and as such is considered a non-GAAP measure. Net income is the most directly comparable GAAP measure. We do not consider realized gains and losses to be a component of our core insurance operations or operating segments. Additionally, net income was affected by certain significant and unusual non-operating items in 2021 and through the six months ended June 30, 2022. We do not view these items as components of core operating results because they are not indicative of past performance or future prospects of the insurance operations. We remove items such as these that relate to prior periods or are non-operating items when evaluating the results of current operations, and therefore exclude such items from our segment analysis for current periods. Net operating income increased 6% to $375 million for the six months ended June 30, 2022, compared with $353 million for the same period in 2021, primarily due to a 10% increase in life underwriting margin. On a diluted per common share basis, net operating income per common share for the six months ended June 30, 2022 increased from $3.38 to $3.76.

Despite headwinds with COVID-19, the Company continues to see positive signs in its core operations, including strong sales and premium growth, favorable persistency and a strong ROE, excluding net unrealized gains or losses on the fixed maturity portfolio.

COVID-19. For the six months ended June 30, 2022, the Company incurred $45 million of COVID-19 net life claims (net of reserves released upon death), compared with $49 million for the same period in 2021. Per the Centers for Disease Control and Prevention (CDC), there were approximately 185 thousand U.S. COVID-19 deaths for the six months ended June 30, 2022 including 30 thousand deaths in the current quarter. For the full year 2022, we expect total U.S. COVID deaths to fall within a range of 215,000 to 275,000.

At the midpoint of our 2022 guidance, we expect to incur approximately $62 million of COVID life claims for the full year based on an estimated range of $2.4 million to $2.6 million of COVID life claims per 10,000 U.S. deaths. The projected life claims are dependent on this estimate and many other variables, including, but not limited to, projected U.S. deaths from COVID-19, the timing and availability of effective treatments for the disease, vaccination rates and effectiveness of vaccines, impact from potential variants, and the ages and geographic areas in which infections and deaths occur.

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GLOBE LIFE INC.
Management's Discussion & Analysis
Globe Life's operations on a segment-by-segment basis are discussed in depth below. Net operating income has been used consistently by management for many years to evaluate the operating performance of the Company and is a measure commonly used in the life insurance industry. It differs from GAAP net income primarily because it excludes certain non-operating items such as realized gains and losses and other significant and unusual items included in net income. Management believes an analysis of net operating income is important in understanding the profitability and operating trends of the Company’s business. Net income is the most directly comparable GAAP measure.

Analysis of Profitability by Segment
(Dollar amounts in thousands)
Six Months Ended June 30,
20222021Change%
Life insurance underwriting margin$348,004 $315,401 $32,603 10 
Health insurance underwriting margin158,816 146,641 12,175 
Annuity underwriting margin4,198 4,363 (165)(4)
Excess investment income118,830 120,503 (1,673)(1)
Other insurance:
Other income463 683 (220)(32)
Administrative expense(146,265)(133,679)(12,586)
Corporate and other(23,016)(21,597)(1,419)
Pre-tax total461,030 432,315 28,715 
Applicable taxes(86,154)(79,241)(6,913)
Net operating income
374,876 353,074 21,802 
Reconciling items, net of tax:
Realized gain (loss)—investments(29,775)29,081 (58,856)
Non-operating expenses(3,736)— (3,736)
Legal proceedings— (4,020)4,020 
Net income
$341,365 $378,135 $(36,770)(10)

The life insurance segment is our primary segment and is the largest contributor to earnings in each period presented. The life insurance segment underwriting margin increased $33 million compared with the prior year six month period due to growth in premiums. The health segment contributed to the growth in income as well, contributing $159 million of underwriting margin in the first six months of 2022 compared with $147 million in the first six months of 2021.
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GLOBE LIFE INC.
Management's Discussion & Analysis
In 2022, the largest contributor of total underwriting margin was the life insurance segment and the primary distribution channel was American Income Life Division. The following charts represent the breakdown of total underwriting margin by operating segment and distribution channel for the six months ended June 30, 2022.
gl-20220630_g6.jpggl-20220630_g7.jpg

Total premium income rose 6% for the six months ended June 30, 2022 to $2.2 billion. Total net sales increased 5% to $366 million, when compared with 2021. Total first-year collected premium (defined in the following section) was $293 million for 2022, compared with $288 million for 2021.

Life insurance premium income increased 5% to $1.5 billion over the prior-year total of $1.4 billion. Life net sales rose 5% to $279 million for the first six months of 2022. First-year collected life premium was flat at $211 million. Life underwriting margins, as a percent of premium, increased to 23% in 2022 from 22%. Underwriting margin increased to $348 million in 2022, 10% over the same period in 2021.

Health insurance premium income increased 8% to $636 million over the prior-year total of $590 million. Health net sales rose 6% to $87 million for the first six months of 2022. First-year collected health premium rose 6% to $82 million. Health underwriting margins, as a percent of premium, were 25% in 2022 and 2021. Health underwriting margin increased to $159 million for the first six months of 2022, 8% over the same period in 2021.

Excess investment income, the measure of profitability of our investment segment, declined 1% during 2022 to $118.8 million from $120.5 million in the same period in 2021. Excess investment income per common share, reflecting the impact of our share repurchase program, increased 3% to $1.19 from $1.15 when compared with the same period in 2021.

Insurance administrative expenses increased 9% in 2022 when compared with the prior-year period. These expenses were 6.8% as a percent of premium during 2022 compared with 6.6% a year earlier.

For the six months ended June 30, 2022, the Company repurchased 2.3 million Globe Life Inc. shares at a total cost of $223 million for an average share price of $98.22.

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GLOBE LIFE INC.
Management's Discussion & Analysis
The discussions of our segments are presented in the manner we view our operations, as described in Note 10—Business Segments.
 
We use three statistical measures as indicators of premium growth and sales over the near term: “annualized premium in force,” “net sales,” and “first-year collected premium.”
Annualized premium in force is defined as the premium income that would be received over the following twelve months at any given date on all active policies if those policies remain in force throughout the twelve-month period. Annualized premium in force is an indicator of potential growth in premium revenue.
Net sales, a statistical performance measure, is calculated as annualized premium issued, net of cancellations in the first thirty days after issue, except in the case of Direct to Consumer, where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. Management considers net sales to be a better indicator of the rate of premium growth than annualized premium issued.
First-year collected premium is defined as the premium collected during the reporting period for all policies in their first policy year. First-year collected premium takes lapses into account in the first year when lapses are more likely to occur, and thus is a useful indicator of how much new premium is expected to be added to premium income in the future.

See further discussion of the distribution channels below for Life and Health.


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GLOBE LIFE INC.
Management's Discussion & Analysis
LIFE INSURANCE

Life insurance is the Company's predominant segment. During 2022, life premium represented 70% of total premium and life underwriting margin represented 68% of the total underwriting margin. Additionally, investments supporting the reserves for life products produce the majority of excess investment income attributable to the investment segment.
 
The following table presents the summary of results of life insurance. Further discussion of the results by distribution channel is included below.

Life Insurance
Summary of Results
(Dollar amounts in thousands)
Six Months Ended June 30,Change
20222021
Amount% of PremiumAmount% of PremiumAmount%
Premium and policy charges$1,514,526 100 $1,436,289 100 $78,237 
Policy obligations1,060,377 70 1,016,102 71 44,275 
Required interest on reserves(381,431)(25)(362,420)(25)(19,011)
Net policy obligations678,946 45 653,682 46 25,264 
Commissions, premium taxes, and non-deferred acquisition expenses126,090 115,478 10,612 
Amortization of acquisition costs361,486 24 351,728 24 9,758 
Total expense1,166,522 77 1,120,888 78 45,634 
Insurance underwriting margin
$348,004 23 $315,401 22 $32,603 10 

The higher life insurance underwriting margins, as well as the higher underwriting margins as a percentage of premium, for the six months ended June 30, 2022 are largely due to the increase in premium growth.

The following table presents Globe Life's life insurance premium by distribution channel.

Life Insurance
Premium by Distribution Channel
(Dollar amounts in thousands)
Six Months Ended June 30,Increase
(Decrease)
20222021
Amount% of TotalAmount% of TotalAmount%
American Income$746,406 49 $682,591 48 $63,815 
Direct to Consumer500,491 33 493,468 34 7,023 
Liberty National162,170 11 153,590 11 8,580 
Other105,459 106,640 (1,181)(1)
Total
$1,514,526 100 $1,436,289 100 $78,237 

Annualized life premium in force was $3.02 billion at June 30, 2022, an increase of 6% over $2.86 billion a year earlier.

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Globe Life Inc.
Management's Discussion & Analysis

An analysis of life net sales, an indicator of new business production, by distribution channel is presented below. 

Life Insurance
Net Sales by Distribution Channel
(Dollar amounts in thousands)
Six Months Ended June 30,Increase
(Decrease)
20222021
Amount% of TotalAmount% of TotalAmount%
American Income$170,514 61 $142,856 54 $27,658 19 
Direct to Consumer66,529 24 81,972 31 (15,443)(19)
Liberty National36,625 13 34,148 13 2,477 
Other4,955 5,635 (680)(12)
Total
$278,623 100 $264,611 100 $14,012 

First-year collected life premium by distribution channel is presented in the table below. 

Life Insurance
First-Year Collected Premium by Distribution Channel
(Dollar amounts in thousands)
Six Months Ended June 30,Increase
(Decrease)
20222021
Amount% of TotalAmount% of TotalAmount%
American Income$131,908 63 $121,432 58 $10,476 
Direct to Consumer46,656 22 60,878 29 (14,222)(23)
Liberty National28,001 13 23,747 11 4,254 18 
Other4,731 4,763 (32)(1)
Total
$211,296 100 $210,820 100 $476 — 

A discussion of life operations by distribution channel follows.

The American Income Life Division markets to members of labor unions and continues to diversify its lead sources by building relationships with other affinity groups, utilizing third-party internet vendor leads, and obtaining referrals to facilitate sustainable growth. This division is Globe Life's largest contributor to life premium of any distribution channel at 49% of the Company's June 30, 2022 total. Net sales increased 19% to $171 million during the first six months of 2022 compared with $143 million in 2021 for the same period. The underwriting margin, as a percent of premium, was 32% for the six months ended June 30, 2022, up from 30% in the year-ago period.

This division incurred $14 million in COVID-19 net life claims, representing approximately 2% of premium, for the six months ended June 30, 2022 compared with $13 million in COVID-19 net life claims during the year-ago period.


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This division is anticipating an increase in net sales for the full year 2022 as compared with 2021 due in part to increased productivity plus an improvement in issue rates as some challenges in underwriting, such as staffing and speed of obtaining medical records and other information, are resolving. The average producing agent count is based on the actual count at the end of each week during the year. Recruiting challenges in a difficult job market led to a reduction in the number of producing agents in the second half of 2021. The division is seeing improvements in the job market and its ability to recruit both virtually and in-person and currently expects growth in the producing agent count in the second half of 2022. Sales growth in this division, as well as within our other exclusive agencies, is generally dependent on growth in the size of the agency force.

Below is the average producing agent count year-to-date for the American Income Life Division.
At June 30,
Change
20222021Amount%
American Income9,528 10,198 (670)(7)

American Income Life continues to focus on growing and strengthening the agency force, specifically through emphasis on agency middle-management growth and additional agency office openings. In addition to offering financial incentives and training opportunities, the agency has made considerable investments in information technology, including launching a customer relationship management (CRM) tool for the agency force. This tool is designed to drive productivity in lead distribution, conservation of business, manager dash boards and new agent recruiting. Additionally, this division has invested in and successfully implemented technology that allows the agency force to engage in virtual recruiting, training and sales activity. Over the course of the pandemic, the agents have shifted to primarily a virtual experience with the customers and have generated a vast majority of its sales through virtual presentations. We find this flexibility to be enticing for new recruits as well as a driver of sustainability for our agency force.

The Direct to Consumer Division (DTC) offers adult and juvenile life insurance through a variety of marketing approaches, including direct mailings, insert media, and electronic media. In recent years, production from electronic media, which is comprised of sales through both the internet and inbound phone calls to our call center, has grown faster than direct mail response as customer demand increased marketing activity to internet and mobile technology. The proportion of sales from the internet and inbound phone calls had been steadily increasing prior to COVID-19, but accelerated after the start of the pandemic. The different approaches support and complement one another in the division's efforts to reach the consumer. The DTC's long-term growth has been fueled by constant innovation and name recognition. We continually introduce new initiatives in this division in an attempt to increase response rates.

While the juvenile market is an important source of sales, it is also a vehicle to reach the parents and grandparents of juvenile policyholders, who are more likely to respond favorably to a DTC solicitation for life coverage on themselves in comparison to the general adult population. Also, future offerings to juvenile policyholders and their parents are sources of low acquisition-cost life insurance sales in the future.

DTC net sales declined 19% to $67 million for the six months ended June 30, 2022 compared with $82 million for the same period in the prior year, due to the record high net life sales in the prior year. The decline is also due in part to the impact of recent record inflation on the cost of our direct mailings and on our customers, who generally have less discretionary income to purchase and retain life insurance. DTC incurred $23 million of COVID-19 net life claims, representing approximately 5% of premium, for the six months ended June 30, 2022 compared with $25 million for the same period in 2021. DTC’s underwriting margin, as a percent of premium, was 8% for the six months ended June 30, 2022 and 9% for the same period in 2021.

The Liberty National Division markets individual life insurance to middle-income household and worksite customers. Recent investments in new sales technologies as well as recent growth in middle management within the agency are expected to help continue this growth. The underwriting margin as a percent of premium was 19% for the six months ended June 30, 2022, up from 17% during the same period a year ago. This increase is primarily attributable to lower net policy obligations in relation to premium during the six months ended June 30, 2022 compared with the same period a year ago. This division incurred $6 million of COVID-19 net life claims, representing approximately 4% of premium, for the six months ended June 30, 2022 compared with $9 million, or 6% of premium for the same period in 2021.
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Management's Discussion & Analysis


Net sales rose 7% in the six months ended June 30, 2022 over the same period in 2021. With the division's ability to return to face-to-face customer interaction and the option of virtual sales, the Company continues to project total net life sales to increase for the remainder of 2022 as compared to the prior year.

Below is the average producing agent count year-to-date for the Liberty National Division.
At June 30,
Change
20222021Amount%
Liberty National2,685 2,717 (32)(1)

The Liberty National Division average producing agent count decreased 1% compared with the prior-year comparable period. We continue to execute our long-term plan to grow this agency through expansion from small-town markets in the Southeast to more densely populated areas with larger pools of potential agent recruits and customers. Continued expansion of this agency’s presence into more heavily populated, less-penetrated areas will help create long-term agency growth. Additionally, the agency continues to help improve the ability of agents to develop new worksite marketing business. Systems that have been put in place, including the addition of a CRM platform and enhanced analytical capabilities, have helped the agents develop additional worksite marketing opportunities as well as improve the productivity of agents selling in the individual life market. As the division continues to gain momentum in its sales and recruiting initiatives and advances its technology and CRM platform, the agency anticipates an increase in recruiting of new agents and an increase in the average producing agent count.

The Other Agencies distribution channels primarily include non-exclusive independent agencies selling predominantly life insurance. The Other Agencies contributed $105 million of life premium income, or 7% of Globe Life's total premium income in the six months ended June 30, 2022, and contributed 2% of net sales for the period.

HEALTH INSURANCE

Health insurance sold by the Company primarily includes Medicare Supplement insurance, accident coverage, and other limited-benefit supplemental health products including cancer, critical illness, heart, and intensive care coverage.

Health premium accounted for 30% of our total premium in 2022, while the health underwriting margin accounted for 31% of total underwriting margin. Health underwriting margin increased 8% to $159 million primarily due to higher premium growth. The Company continues to emphasize life insurance sales relative to health due to life’s superior long-term profitability and its greater contribution to excess investment income.
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Globe Life Inc.
Management's Discussion & Analysis


The following table presents underwriting margin data for health insurance.

Health Insurance
Summary of Results
(Dollar amounts in thousands)
 Six Months Ended June 30,Change
 20222021
 Amount% of
Premium
Amount% of
Premium
Amount%
Premium$636,189 100 $589,759 100 $46,430 
Policy obligations394,073 62 376,683 64 17,390 
Required interest on reserves(54,103)(9)(50,429)(9)(3,674)
Net policy obligations339,970 53 326,254 55 13,716 
Commissions, premium taxes, and non-deferred acquisition expenses58,305 46,486 11,819 25 
Amortization of acquisition costs79,098 13 70,378 12 8,720 12 
Total expense477,373 75 443,118 75 34,255 
Insurance underwriting margin
$158,816 25 $146,641 25 $12,175 

Globe Life markets supplemental health insurance products through a number of distribution channels. The following table is an analysis of our health premium by distribution channel.

Health Insurance
Premium by Distribution Channel
(Dollar amounts in thousands)
 Six Months Ended June 30,Increase
(Decrease)
 20222021
Amount% of TotalAmount% of TotalAmount%
United American$267,457 42 $233,304 40 $34,153 15 
Family Heritage180,298 28 168,347 29 11,951 
Liberty National93,841 15 94,158 16 (317)— 
American Income58,246 56,140 2,106 
Direct to Consumer36,347 37,810 (1,463)(4)
Total
$636,189 100 $589,759 100 $46,430 

Premium related to limited-benefit plans comprise $347 million, or 55%, of the total health premiums for 2022 compared with $308 million in the same period in the prior year. Premium from Medicare Supplement products comprises the remaining $289 million, or 45%, for 2022 compared with $282 million, or 48%, in the same period in the prior year.

Annualized health premium in force was $1.3 billion at June 30, 2022, an increase of 8% over $1.2 billion a year earlier.

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Management's Discussion & Analysis

Presented below is a table of health net sales by distribution channel.
 
Health Insurance
Net Sales by Distribution Channel
(Dollar amounts in thousands)
 Six Months Ended June 30,Increase
(Decrease)
 20222021
Amount% of TotalAmount% of TotalAmount%
United American$25,347 29 $25,027 30 $320 
Family Heritage38,007 44 34,744 42 3,263 
Liberty National13,037 15 12,053 15 984 
American Income9,428 11 9,277 11 151 
Direct to Consumer1,063 1,226 (163)(13)
Total
$86,882 100 $82,327 100 $4,555 

Health net sales related to limited-benefit plans comprise $64 million, or 73%, of the total health net sales for 2022 compared with $56 million, or 68%, in the same period in the prior year. Medicare Supplement sales make up the remaining $23 million, or 27%, for 2022 compared with $26 million, or 32%, in the same period in the prior year.

The following table presents health insurance first-year collected premium by distribution channel.

 Health Insurance
First-Year Collected Premium by Distribution Channel
(Dollar amounts in thousands)
 Six Months Ended June 30,Increase
(Decrease)
 20222021
Amount% of TotalAmount% of TotalAmount%
United American$31,003 38 $28,702 37 $2,301 
Family Heritage29,596 36 28,165 36 1,431 
Liberty National11,126 13 9,847 13 1,279 13 
American Income8,711 11 9,334 12 (623)(7)
Direct to Consumer1,467 1,581 (114)(7)
Total
$81,903 100 $77,629 100 $4,274 
 
First-year collected premium related to limited-benefit plans comprise $53 million, or 64%, of total first-year collected premium for 2022 compared with $47 million, or 61%, in the same period in the prior year. First-year collected premium from Medicare Supplement policies makes up the remaining $29 million, or 36%, for 2022 compared with $30 million, or 39%, in the same period in the prior year.

A discussion of health operations by distribution channel follows.
The United American Division consists of non-exclusive independent agencies who may also sell for other companies. The United American Division was Globe Life's largest health agency in terms of health premium income.
This division is also Globe Life's largest producer of Medicare Supplement insurance. The United American Division represents 83% of all Medicare Supplement premium and 95% of Medicare Supplement net sales. For the six months ended June 30, 2022, Medicare Supplement premium in this agency rose 5% to $240 million in 2022 over the prior period total of $229 million. Medicare Supplement net sales declined 11% to $22 million in 2022 from the prior-year period, primarily as a result of a decrease in individual sales. Underwriting margin as a percent of premium was 15% for the six months ended June 30, 2022, down from 16% in 2021.
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Management's Discussion & Analysis

The Family Heritage Division primarily markets limited-benefit supplemental health insurance in non-urban areas. Most of its policies include a cash-back feature, such as a return of premium, where any excess of premiums over claims paid is returned to the policyholder at the end of a specified period stated within the insurance policy. Underwriting margin as a percent of premium was 27% for the six months ended June 30, 2022, up from 26% in the year-ago period.
The division experienced a 9% increase in net health sales as compared with the six-month period a year ago, primarily due to an increase in agent productivity and training. The division will continue to launch incentive programs to help drive an increase in productivity and the number of producing agents.

Below is the average producing agent count year-to-date for the Family Heritage Division. While the agency has seen a decrease in agent count as compared with 2021, the division did have an increase in agent count during the second quarter. We anticipate that as COVID-19 and the job market stabilizes, agent recruitment opportunities should increase.
At June 30,
Change
20222021Amount%
Family Heritage Division1,137 1,253 (116)(9)
The Liberty National Division represented 15% of all Globe Life health premium income for the six-month period ended June 30, 2022. The Liberty National Division markets limited-benefit supplemental health products, consisting primarily of critical illness insurance. Much of Liberty National's health business is generated through worksite marketing targeting small businesses. Health premium at Liberty National Division was $94 million for the six months ended June 30, 2022, and 2021. Liberty National's first-year collected premium rose 13% to $11.1 million in the six months ended June 30, 2022 compared with $9.8 million for the same period in 2021. Health net sales for the six months ended June 30, 2022 rose 8% from the comparable period in 2021. We anticipate an increase in net health sales going forward as this division becomes more able to interact face-to-face with customers.

Other Distribution. The Company's other distribution channels, while primarily focused on selling life insurance, also market health products. The American Income Life Division primarily markets accident plans. The Direct to Consumer Division primarily markets Medicare Supplements to employer or union-sponsored groups. On a combined basis, these other channels accounted for 15% of health premium for the six months ended June 30, 2022 and 2021.

ANNUITIES

Annuities represent an insignificant part of our business. We do not currently market stand-alone fixed or deferred annuity products, favoring instead protection-oriented life and supplemental health insurance products.

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Management's Discussion & Analysis

INVESTMENTS

We manage our capital resources including investments, debt, and cash flow through the investment segment. Excess investment income represents the profit margin attributable to investment operations and is the measure that we use to evaluate the performance of the investment segment as described in Note 10—Business Segments. It is defined as net investment income less both the required interest on net insurance policy liabilities and the interest cost associated with capital funding or “financing costs.”

Management also views excess investment income per diluted common share as an important and useful measure to evaluate the performance of the investment segment. It is defined as excess investment income divided by the total diluted weighted average shares outstanding, representing the contribution by the investment segment to the consolidated earnings per share of the Company. Since implementing our share repurchase program in 1986, we have used $8.9 billion of excess cash flow at the Parent Company to repurchase Globe Life Inc. common shares after determining that the repurchases provided a greater risk adjusted after-tax return than other investment alternatives. If we had not used this excess cash to repurchase shares, but had instead invested it in interest-bearing assets, we would have earned more investment income and had more shares outstanding. As excess investment income per diluted common share incorporates all capital resources, we view excess investment income per diluted common share as a useful measure to evaluate the investment segment.

Excess Investment Income. The following table summarizes Globe Life's investment income, excess investment income, and excess investment income per diluted common share.

Analysis of Excess Investment Income
(Dollar amounts in thousands, except for per share data) 
 
Six Months Ended
June 30,
Change
20222021Amount%
Net investment income$487,476 $474,128 $13,348 
Interest on net insurance policy liabilities:
Interest on reserves(454,876)(432,870)(22,006)
Interest on deferred acquisition costs128,002 122,192 5,810 
Net required interest(326,874)(310,678)(16,196)
Financing costs(41,772)(42,947)1,175 (3)
Excess investment income
$118,830 $120,503 $(1,673)(1)
Excess investment income per diluted share
$1.19 $1.15 $0.04 
Mean invested assets (at amortized cost)$19,540,396 $18,748,877 $791,519 
Average net insurance policy liabilities(1)
11,284,565 10,838,913 445,652 
Average debt and preferred securities (at amortized cost)2,173,444 1,966,285 207,159 11 
(1)Net of deferred acquisition costs, excluding the associated unrealized gains and losses thereon.

Excess investment income declined $1.7 million, or 1%, compared with the year-ago period. Excess investment income per diluted common share was $1.19 for the six months ended June 30, 2022 an increase of 3% over the prior year period. Excess investment income per diluted common share generally increases at a faster pace than excess investment income because the number of diluted shares outstanding generally decreases from year to year as a result of our share repurchase program.

Net investment income for the six months ended June 30, 2022 was $487 million or 3% greater than the year-ago period. Mean invested assets increased 4% during the first six months of 2022 over the same period last year. The effective annual yield rate earned on the fixed maturity portfolio was 5.16% in the first six months of 2022, compared with 5.24% a year earlier. Growth in net investment income has been negatively impacted in recent years by the low
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Globe Life Inc.
Management's Discussion & Analysis

interest rate environment. Generally, investment income grows at a slower rate than the assets when the yield on new investments is lower than the yield on dispositions or the average portfolio yield. It also increases at a faster rate than the assets when new investment yields exceed the yield on dispositions or the average portfolio yield. We currently expect that the average annual turnover rate of fixed maturity assets will be less than 2% over the next five years and will not have a material negative impact on net investment income. In addition to fixed maturities, the Company has also invested in limited partnerships with debt like characteristics that diversify risk and enhance risk-adjusted, capital-adjusted returns on the portfolio. The earned yield on the investment funds for the six months ended June 30, 2022 was 5.56%. See additional information in Note 4—Investments. For the full year 2022, we currently anticipate the average new money rate on our fixed maturity acquisitions to be approximately 150 basis points higher than the yield achieved on our 2021 acquisitions. This expected increase in yields should result in the investment income growth rate being closer to the growth of our invested assets.

Globe Life's net investment income benefits from higher interest rates on new investments. While increasing interest rates have resulted in a net unrealized loss on the fixed maturities portfolio as of June 30, 2022, we are not concerned because we do not generally intend to sell, nor is it likely that we will be required to sell, the fixed maturities prior to their anticipated recovery.

Required interest on net insurance policy liabilities reduces net investment income, as it is the amount of net investment income considered by management necessary to “fund” required interest on net insurance policy liabilities, which is the net of the benefit reserve liability and the deferred acquisition cost asset. As such, it is removed from the investment segment and applied to the insurance segments to offset the effect of the required interest from the insurance segments. As discussed in Note 10—Business Segments, management regards this as a more meaningful analysis of the investment and insurance segments. Required interest is based on the actuarial interest assumptions used in discounting the benefit reserve liability and the amortization of deferred acquisition costs for our insurance policies in force.

The great majority of our life and health insurance policies are fixed interest rate protection policies, not investment products, and are accounted for under current GAAP accounting guidance for long-duration insurance products which mandate that interest rate assumptions for a particular block of business be “locked in” for the life of that block of business. Each calendar year, we set the discount rate to be used to calculate the benefit reserve liability and the amortization of the deferred acquisition cost asset for all insurance policies issued that year. That rate is based on the new money yields that we expect to earn on cash flow received in the future from policies of that issue year and cannot be changed. The discount rate used for policies issued in the current year has no impact on the in force policies issued in prior years as the rates of all prior issue years are also locked in. As such, the overall discount rate for the entire in force block of 5.8% is a weighted average of the discount rates being used from all issue years. Changes in the overall weighted-average discount rate over time are caused by changes in the mix of the reserves and the deferred acquisition cost asset by issue year on the entire block of in force business. Business issued in the current year has very little impact on the overall weighted-average discount rate due to the size of our in force business. In 2023, new guidance will become effective that will significantly impact the accounting for our long duration contracts including the determination of required interest. Please see Note 2New Accounting Standards for additional information.

Since actuarial discount rates are locked in for life on essentially all of our business, benefit reserves and deferred acquisition costs are not affected by interest rate fluctuations unless a loss recognition event occurs. Due to the strength of our underwriting margins, we do not expect an extended low interest rate environment will cause a loss recognition event.

In comparison to the year-ago period, required interest on net insurance policy liabilities increased $16 million, or 5%, to $327 million, compared with the 4% growth in average net interest-bearing insurance policy liabilities.

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Management's Discussion & Analysis

Financing costs for the investment segment consist primarily of interest on our various debt instruments. The table below presents the components of financing costs and reconciles interest expense per the Consolidated Statements of Operations.

Analysis of Financing Costs
(Dollar amounts in thousands)
Six Months Ended
June 30,
Increase
(Decrease)
20222021Amount%
Interest on funded debt$38,745 $40,126 $(1,381)(3)
Interest on short-term debt3,027 2,821 206 
Financing costs
$41,772 $42,947 $(1,175)(3)

During the first six months of 2022, financing costs decreased 3% compared with the prior year primarily due to lower overall rates on the funded debt. More information on our debt transactions is disclosed in the Financial Condition section of this report.

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Globe Life Inc.
Management's Discussion & Analysis


Realized Gains and Losses. Our life and health insurance companies collect premium income from policyholders for the eventual payment of policyholder benefits, sometimes paid many years or even decades in the future. Since benefits are expected to be paid in future periods, premium receipts in excess of current expenses are invested to provide for these obligations. For this reason, we hold a significant investment portfolio as a part of our core insurance operations. This portfolio consists primarily of high-quality fixed maturities containing an adequate yield to provide for the cost of carrying these long-term insurance product obligations. As a result, fixed maturities are generally held for long periods to support these obligations. Expected yields on these investments are taken into account when setting insurance premium rates and product profitability expectations.

Despite our intent to hold fixed maturity investments for a long period of time, investments are occasionally sold, exchanged, called, or experience a credit loss event, resulting in a realized gain or loss. Gains or losses are only secondary to our core insurance operations of providing insurance coverage to policyholders. In a bond exchange offer, bondholders may consent to exchange their existing bonds for another class of debt securities. The Company also has investments in certain limited partnerships, held under the fair value option, with fair value changes recognized in Realized gains (losses) in the Consolidated Statements of Operations.

Realized gains and losses can be significant in relation to the earnings from core insurance operations, and as a result, can have a material positive or negative impact on net income. The significant fluctuations caused by gains and losses can cause period-to-period trends of net income that are not indicative of historical core operating results or predictive of the future trends of core operations. Accordingly, they have no bearing on core insurance operations or segment results as we view operations. For these reasons, and in line with industry practice, we remove the effects of realized gains and losses when evaluating overall insurance operating results.

The following table summarizes our tax-effected realized gains (losses) by component.

Analysis of Realized Gains (Losses), Net of Tax
(Dollar amounts in thousands, except for per share data)
 Six Months Ended June 30,
 20222021
 AmountPer ShareAmountPer Share
Fixed maturities:
Sales$(34,818)$(0.35)$(8,664)$(0.08)
Matured or other redemptions(1)
20,699 0.21 21,548 0.21 
Provision for credit losses306 — 2,643 0.02 
Fair value option—change in fair value(3,469)(0.03)9,818 0.09 
Other(12,493)(0.13)3,736 0.04 
Total realized gains (losses)$(29,775)$(0.30)$29,081 $0.28 
(1)During the six months ended June 30, 2022 and 2021, the Company recorded $1.9 million and $108.3 million of exchanges of fixed maturity securities (noncash transactions) that resulted in $0 and $19.9 million, respectively, in realized gains, net of tax.

As investment yields increased in the first six months of 2022, the Company disposed of certain fixed maturity investments to reinvest in higher-grade fixed maturities and to improve the risk-adjusted, capital-adjusted returns on the portfolio. These sales resulted in realized losses for the six months ended June 30, 2022.

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Management's Discussion & Analysis


Investment Acquisitions. Globe Life's investment policy calls for investing primarily in investment grade fixed maturities that meet our quality and yield objectives. We generally invest in securities with longer maturities because they more closely match the long-term nature of our policy liabilities. We believe this strategy is appropriate since our expected future cash flows are generally stable and predictable and the likelihood that we will need to sell invested assets to raise cash is low.

The following table summarizes selected information for fixed maturity investments. The effective annual yield shown is based on the acquisition price and call features, if any, of the securities. For non-callable bonds, the yield is calculated to maturity date. For callable bonds acquired at a premium, the yield is calculated to the earliest known call date and call price after acquisition ("first call date"). For all other callable bonds, the yield is calculated to maturity date.

Fixed Maturity Acquisitions Selected Information
(Dollar amounts in thousands)
Six Months Ended
June 30,
 20222021
Cost of acquisitions:
Investment-grade corporate securities$329,059 $339,711 
Investment-grade municipal securities416,737 65,068 
Other investment-grade securities5,000 10,355 
Total fixed maturity acquisitions(1)
$750,796 $415,134 
Effective annual yield (one year compounded)(2)
4.67 %3.49 %
Average life (in years, to next call)13.4 29.5 
Average life (in years, to maturity)26.3 34.2 
Average ratingA+A
(1)Fixed maturity acquisitions included unsettled trades of $36 million in 2022 and $0 in 2021.
(2)Tax-equivalent basis, where the yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.

For investments in callable bonds, the actual life of the investment will depend on whether the issuer calls the investment prior to the maturity date. Given our investments in callable bonds, the actual average life of our investments cannot be known at the time of the investment. Absent sales and "make-whole calls", however, the average life will not be less than the average life to next call and will not exceed the average life to maturity. Data for both of these average life measures is provided in the above chart.

Acquisitions in both periods consisted primarily of corporate and municipal bonds with securities spanning a diversified range of issuers, industry sectors, and geographical regions. In the first six months of 2022, we invested primarily in the municipal, financial and industrial sectors. For the entire portfolio, the taxable equivalent effective yield earned was 5.16%, down approximately 8 basis points from the yield in the first six months of 2021. As previously noted in the discussion of net investment income, the decrease was primarily due to the combination of lower interest rates applicable to new purchases and fixed maturity dispositions. For the remainder of 2022, the Company will continue to execute on its existing strategy by seeking to invest in assets that satisfy our quality and other objectives, while maximizing the highest risk-adjusted capital-adjusted return.

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Management's Discussion & Analysis

Since fixed maturities represent such a significant portion of our investment portfolio, the remainder of the discussion of portfolio composition will focus on fixed maturities. See a breakdown of the Company's Other long-term investments in Note 4—Investments.

Selected information concerning the fixed maturity portfolio is as follows:

Fixed Maturity Portfolio Selected Information
At
June 30,
2022
December 31, 2021June 30,
2021
Average annual effective yield(1)
5.16%5.17%5.23%
Average life, in years, to:
Next call(2)
15.115.716.0
Maturity(2)
18.819.018.9
Effective duration to:
Next call(2,3)
9.210.610.8
Maturity(2,3)
10.812.212.1
(1)Tax-equivalent basis. The yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.
(2)Globe Life calculates the average life and duration of the fixed maturity portfolio two ways:
(a) based on the next call date which is the next call date for callable bonds and the maturity date for noncallable bonds, and
(b) based on the maturity date of all bonds, whether callable or not.
(3)Effective duration is a measure of the price sensitivity of a fixed-income security to a 1% change in interest rates.

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Management's Discussion & Analysis

Credit Risk Sensitivity. The following tables summarize certain information about the major corporate sectors and security types held in our fixed maturity portfolio at June 30, 2022 and December 31, 2021.

Fixed Maturities by Sector
June 30, 2022
(Dollar amounts in thousands)
Below Investment GradeTotal Fixed Maturities% of Total Fixed Maturities
 Amortized
Cost, net
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost, net
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
At Amortized Cost, netAt Fair Value
Corporates:
Financial
Insurance - life, health, P&C$107,519 $1,408 $(8,396)$100,531 $2,370,169 $103,100 $(134,828)$2,338,441 13 14 
Banks26,962 1,171 — 28,133 1,061,482 30,075 (46,758)1,044,799 
Other financial74,963 — (14,416)60,547 1,208,251 14,761 (140,697)1,082,315 
Total financial209,444 2,579 (22,812)189,211 4,639,902 147,936 (322,283)4,465,555 26 26 
Utilities
Electric35,501 427 (2,350)33,578 1,373,270 88,900 (31,591)1,430,579 
Gas and water— — — — 543,267 13,827 (37,827)519,267 
Total utilities35,501 427 (2,350)33,578 1,916,537 102,727 (69,418)1,949,846 11 11 
Industrial - Energy
Pipelines85,166 — (17,324)67,842 910,287 27,066 (55,210)882,143 
Exploration and production— — — — 448,691 18,014 (16,643)450,062 
Oil field services— — — — 49,767 2,084 (1,010)50,841 — — 
Refinery— — — — 88,855 6,246 (1,614)93,487 — 
Total energy85,166 — (17,324)67,842 1,497,600 53,410 (74,477)1,476,533 
Industrial - Basic materials
Chemicals— — — — 665,177 6,815 (48,626)623,366 
Metals and mining— — — — 364,244 25,929 (2,868)387,305 
Forestry products and paper— — — — 65,539 1,697 (2,125)65,111 — — 
Total basic materials— — — — 1,094,960 34,441 (53,619)1,075,782 
Industrial - Consumer, non-cyclical— — — — 2,202,571 43,407 (144,615)2,101,363 12 12 
Other industrials25,514 — (290)25,224 1,258,131 39,805 (79,190)1,218,746 
Industrial - Transportation— — — — 538,895 25,344 (20,506)543,733 
Other corporate sectors179,029 14 (23,271)155,772 1,665,112 26,927 (186,180)1,505,859 
Total corporates
534,654 3,020 (66,047)471,627 14,813,708 473,997 (950,288)14,337,417 82 83 
Other fixed maturities:
Government (U.S., municipal, and foreign)— — — — 3,056,231 55,102 (406,752)2,704,581 17 16 
Collateralized debt obligations36,762 15,939 — 52,701 36,762 15,939 — 52,701 — — 
Other asset-backed securities13,110 — (617)12,493 89,502 — (2,430)87,072 
Mortgage-backed securities(1)
— — — — 183 13 — 196 — — 
Total fixed maturities
$584,526 $18,959 $(66,664)$536,821 $17,996,386 $545,051 $(1,359,470)$17,181,967 100 100 
(1)Includes Government National Mortgage Association (GNMA).



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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

Fixed Maturities by Sector
December 31, 2021
(Dollar amounts in thousands)
Below Investment GradeTotal Fixed Maturities% of Total Fixed Maturities
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
At Amortized Cost, netAt Fair Value
Corporates:
Financial
Insurance - life, health, P&C$57,470 $3,825 $(4,807)$56,488 $2,345,116 $513,844 $(5,553)$2,853,407 13 13 
Banks26,980 614 — 27,594 983,317 207,466 (1,635)1,189,148 
Other financial97,800 547 (1,103)97,244 1,240,340 186,431 (2,161)1,424,610 
Total financial182,250 4,986 (5,910)181,326 4,568,773 907,741 (9,349)5,467,165 26 26 
Utilities
Electric36,284 3,888 — 40,172 1,388,094 382,892 (395)1,770,591 
Gas and water— — — — 543,297 107,227 (617)649,907 
Total utilities36,284 3,888 — 40,172 1,931,391 490,119 (1,012)2,420,498 11 11 
Industrial - Energy
Pipelines85,222 11,051 (1,445)94,828 918,746 203,324 (1,445)1,120,625 
Exploration and production33,316 4,890 — 38,206 530,336 105,604 (238)635,702 
Oil field services— — — — 49,778 13,653 — 63,431 — — 
Refinery— — — — 89,032 24,199 — 113,231 
Total energy118,538 15,941 (1,445)133,034 1,587,892 346,780 (1,683)1,932,989 
Industrial - Basic materials
Chemicals— — — — 673,699 145,114 (50)818,763 
Metals and mining— — — — 405,915 118,115 — 524,030 
Forestry products and paper— — — — 65,608 15,946 — 81,554 — — 
Total basic materials— — — — 1,145,222 279,175 (50)1,424,347 
Industrial - Consumer, non-cyclical84,106 13,059 (2,697)94,468 2,256,802 475,012 (3,397)2,728,417 13 13 
Other industrials25,565 3,182 — 28,747 1,254,243 286,889 (589)1,540,543 
Industrial - Transportation25,555 5,588 — 31,143 559,399 135,581 (38)694,942 
Other corporate sectors179,323 21,807 (3,429)197,701 1,663,793 277,807 (9,288)1,932,312 
Total corporates651,621 68,451 (13,481)706,591 14,967,515 3,199,104 (25,406)18,141,213 84 85 
Other fixed maturities:
Government (U.S., municipal, and foreign)— — — — 2,695,796 304,537 (8,203)2,992,130 15 14 
Collateralized debt obligations36,468 27,037 — 63,505 36,468 27,037 — 63,505 — — 
Other asset-backed securities13,457 — (414)13,043 104,905 3,701 (430)108,176 
Mortgage-backed securities(1)
— — — — 238 25 — 263 — — 
Total fixed maturities$701,546 $95,488 $(13,895)$783,139 $17,804,922 $3,534,404 $(34,039)$21,305,287 100 100 
(1)Includes GNMAs.


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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

Corporate securities, which consist of bonds and redeemable preferred stocks, were the largest component of the June 30, 2022 fixed maturity portfolio, representing 82% of amortized cost, net and 83% of fair value. The remainder of the portfolio is invested primarily in securities issued by the U.S. government and U.S. municipalities. The Company holds insignificant amounts in foreign government bonds, collateralized debt obligations, asset-backed securities, and mortgage-backed securities. Corporate securities are diversified over a variety of industry sectors and issuers. At June 30, 2022, the total fixed maturity portfolio consisted of 923 issuers.

Fixed maturities had a fair value of $17.2 billion at June 30, 2022, compared with $21.3 billion at December 31, 2021. The net unrealized gain (loss) position in the fixed-maturity portfolio decreased from a $3.5 billion gain position at December 31, 2021 to a loss position of $814 million at June 30, 2022 due to an increase in market rates during the period.

For more information about our fixed maturity portfolio by component at June 30, 2022 and December 31, 2021, including a discussion of allowance for credit losses, an analysis of unrealized investment losses and a schedule of maturities, see Note 4—Investments.

An analysis of the fixed maturity portfolio by a composite quality rating at June 30, 2022 and December 31, 2021, is shown in the following tables. The composite rating for each security, other than private-placement securities managed by third parties, is the average of the security’s ratings as assigned by Moody’s Investor Service, Standard & Poor’s, Fitch Ratings, and Dominion Bond Rating Service, LTD. The ratings assigned by these four nationally recognized statistical rating organizations are evenly weighted when calculating the average. The composite quality rating is created utilizing a methodology developed by Globe Life using ratings from the various rating agencies noted above. The composite quality rating is not a Standard & Poor's credit rating. Standard & Poor's does not sponsor, endorse or promote the composite quality rating and shall not be liable for any use of the composite quality rating. Included in the following chart are private placement fixed maturity holdings of $516 million at amortized cost, net of allowance for credit losses ($493 million at fair value) for which the ratings were assigned by the third-party managers.

Fixed Maturities by Rating
At June 30, 2022
(Dollar amounts in thousands)
Amortized Cost, net % of TotalFair
Value
% of TotalAverage Composite Quality Rating on Amortized Cost, net
Investment grade:
AAA$806,259 $762,931 
AA2,537,015 14 2,167,157 13 
A4,577,530 25 4,534,852 26 
BBB+3,871,075 22 3,784,533 22 
BBB4,268,971 24 4,101,690 24 
BBB-1,351,010 1,293,983 
Total investment grade
17,411,860 97 16,645,146 97 A-
Below investment grade:
BB476,378 417,948 
B71,386 — 66,172 — 
Below B36,762 — 52,701 — 
Total below investment grade
584,526 536,821 BB+
$17,996,386 100 $17,181,967 100 
Weighted average composite quality rating
A-

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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis


Fixed Maturities by Rating
At December 31, 2021
(Dollar amounts in thousands)
Amortized
Cost
% of Total
Fair
Value
% of TotalAverage Composite Quality Rating on Amortized Cost
Investment grade:
AAA$761,526 $867,728 
AA2,215,179 13 2,412,947 11 
A4,487,607 25 5,584,588 26 
BBB+3,779,051 21 4,616,977 22 
BBB4,289,044 24 5,174,667 24 
BBB-1,570,969 1,865,241 
Total investment grade
17,103,376 96 20,522,148 96 A-
Below investment grade:
BB537,064 583,608 
B128,402 136,026 
Below B36,080 — 63,505 — 
Total below investment grade
701,546 783,139 BB-
$17,804,922 100 $21,305,287 100 
Weighted average composite quality rating
A-

The overall quality rating of the portfolio is A-, the same as year-end 2021. Fixed maturities rated BBB are 53% of the total portfolio at June 30, 2022 compared with 54% at year-end 2021, and the percentage of BBB bonds to the overall portfolio has been declining since the end of 2018. While this ratio is high relative to our peers, we have limited exposure to higher-risk assets such as derivatives, equities, and asset-backed securities. Additionally, the Company does not participate in securities lending and has no off-balance sheet investments as of June 30, 2022. Of our fixed maturity purchases, BBB securities generally provide the Company with the best risk-adjusted, capital-adjusted returns largely due to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets.

An analysis of changes in our portfolio of below-investment grade fixed maturities at amortized cost, net of allowance for credit losses is as follows:

Below-Investment Grade Fixed Maturities
(Dollar amounts in thousands)
Six Months Ended
June 30,
20222021
Balance at beginning of period
$701,546 $840,739 
Downgrades by rating agencies50,178 — 
Upgrades by rating agencies(95,220)(36,311)
Dispositions(75,297)(45,450)
Provision for credit losses(31)3,346 
Amortization and other3,350 1,616 
Balance at end of period
$584,526 $763,940 

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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

Our investment policy calls for investing primarily in fixed maturities that are investment grade and meet our quality and yield objectives. Thus, any increases in below-investment grade issues are typically a result of ratings downgrades of existing holdings. Below-investment grade bonds at amortized cost, net of allowance for credit losses, were 10% of our shareholders’ equity, excluding the effect of unrealized gains or losses on fixed maturities as of June 30, 2022. Globe Life invests long term and as such, one of our key criterion in our investment process is to select issuers that have the ability to weather multiple financial cycles.

OPERATING EXPENSES

Operating expenses are included in the "Corporate and Other" segment and are classified into two categories: insurance administrative expenses and expenses of the Parent Company. Insurance administrative expenses generally include expenses incurred after a policy has been issued. As these expenses relate to premium for a given period, management measures the expenses as a percentage of premium income. The Company also views stock-based compensation expense as a Parent Company expense. Expenses associated with the issuance of our insurance policies are reflected as acquisition expenses and included in the determination of underwriting margin.

An analysis of operating expenses is shown below.

Operating Expenses Selected Information
(Dollar amounts in thousands)
 Six Months Ended June 30,Increase
 20222021(Decrease)
Amount% of
Premium
Amount% of
Premium
Amount%
Insurance administrative expenses:
Salaries$61,808 2.9 $56,572 2.8 $5,236 
Other employee costs21,289 1.0 22,241 1.1 (952)(4)
Information technology costs26,907 1.2 23,455 1.1 3,452 15 
Legal costs7,035 0.3 7,355 0.4 (320)(4)
Other administrative costs29,226 1.4 24,056 1.2 5,170 21 
Total insurance administrative expenses146,265 6.8 133,679 6.6 12,586 
Parent company expense5,533 5,075 458 
Stock compensation expense17,483 16,522 961 
Legal proceedings— 5,089 (5,089)
Non-operating expenses4,729 — 4,729 
$174,010 $160,365 $13,645 

Total operating expenses for the first six months increased 9% over the prior year period reflecting higher insurance administrative expenses. Insurance administrative expenses increased $13 million primarily due to higher information technology costs, including associated information technology salaries, higher employee costs in general, and higher costs due to the addition of Globe Life Benefits. Insurance administrative expenses as a percent of premium were 6.8%, compared to 6.6% for the same period in 2021. The non-operating expenses relate to a lease termination that occurred during the quarter.

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Globe Life Inc.
Management's Discussion & Analysis


SHARE REPURCHASES

Globe Life has an ongoing share repurchase program that began in 1986, and is reviewed with the Board of Directors by management quarterly and annually reaffirmed by the Board of Directors. With no specified authorization amount, we determine the amount of repurchases based on the amount of the excess cash flows after the payment of dividends to the Parent Company shareholders, general market conditions, and other alternative uses. Excess cash flow at the Parent Company is primarily comprised of dividends received from the insurance subsidiaries less interest expense paid on its debt and other limited operating activities. The majority of our share repurchases are made from excess cash flow after the payment of shareholder dividends. Additionally, when stock options are exercised, proceeds from these exercises and the resulting tax benefit are used to repurchase additional shares on the open market to minimize dilution as a result of the option exercises. On August 4, 2021, the Board of Directors reauthorized the Parent Company’s share repurchase program in amounts and with timing that management, in consultation with the Board, determines to be in the best interest of the Company and its shareholders.
The following chart summarizes share repurchases for the six month periods ended June 30, 2022 and 2021.

Analysis of Share Repurchases
(Amounts in thousands, except per share data) 
 Six Months Ended June 30,
 20222021
 SharesAmountAverage
Price
SharesAmountAverage
Price
Purchases with:
Excess cash flow at the Parent Company2,268 $222,785 $98.22 2,165 $213,503 $98.61 
Option exercise proceeds397 40,636 102.47 812 82,081 101.14 
Total2,665 $263,421 $98.85 2,977 $295,584 $99.30 
Throughout the remainder of this discussion, share repurchases will only refer to those made from excess cash flow at the Parent Company.

FINANCIAL CONDITION
 
Liquidity. Liquidity provides Globe Life with the ability to meet on demand the cash commitments required to support our business operations and meet our financial obligations. Our liquidity is primarily derived from multiple sources: positive cash flow from operations, a portfolio of marketable securities, a revolving credit facility, commercial paper and the Federal Home Loan Bank (FHLB).

Insurance Subsidiary Liquidity. The operations of our insurance subsidiaries have historically generated substantial cash inflows in excess of immediate cash needs. Cash inflows for the insurance subsidiaries primarily include premium and investment income. In addition to investment income, maturities and scheduled repayments in the investment portfolio are cash inflows. Cash outflows from operations include policy benefit payments, commissions, administrative expenses, and taxes. A portion of the excess cash inflows in the current year will provide for the payment of future policy benefits and are invested primarily in long-term fixed maturities as they better match the long-term nature of these obligations. Excess cash available from the insurance subsidiaries’ operations is generally distributed as a dividend to the Parent Company, subject to regulatory restrictions. The dividends are generally paid in amounts equal to the subsidiaries’ prior year statutory net income excluding realized capital gains. While the leading source of the excess cash is investment income, a significant portion of the excess cash also comes from underwriting income due to our high underwriting margins and effective expense control. While the insurance subsidiaries annually generate more operating cash inflows than cash outflows, the companies also have the entire available-for-sale fixed maturity investment portfolio available to create additional cash flows if required.

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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

Four of our insurance subsidiaries are members of the FHLB of Dallas. FHLB membership provides the insurance subsidiaries with access to various low-cost collateralized borrowings and funding agreements. While not the only source of liquidity, the FHLB could provide the insurance subsidiaries with an additional source of liquidity, if needed. Refer to Note 9—Debt for further details.

Parent Company Liquidity. An important source of Parent Company liquidity is the dividends from its insurance subsidiaries. These dividends are received throughout the year and are used by the Parent Company to pay dividends on common and preferred stock, interest and principal repayment requirements on Parent Company debt, and operating expenses of the Parent Company.
Six Months Ended
June 30,
Twelve Months Ended December 31,
20222021Projected 20222021
Liquidity Sources:
Dividends from Subsidiaries$233,936 $240,120 $410,000 $478,535 
Excess Cash Flows174,610 179,684 280,000 370,120 

Dividends from subsidiaries and excess cash flows are projected to be lower in 2022 primarily due to higher COVID life losses and the growth in our exclusive agency sales in 2021, both of which resulted in lower cash flows generated by the affiliates to the Parent. Additional sources of liquidity for the Parent Company are cash, intercompany receivables, intercompany borrowings, public debt markets, term loans, and a revolving credit facility. At June 30, 2022, the Parent Company had access to $318 million of invested cash, net intercompany receivables and other liquid assets.

Short-Term Borrowings. An additional source of Parent Company liquidity is a credit facility with a group of lenders allowing for unsecured borrowings and stand-by letters of credit up to $750 million, which could be extended up to $1 billion. While the Parent Company may request the extension, it is not guaranteed. Up to $250 million in letters of credit can be issued against the facility. The facility serves as a back-up line of credit for a commercial paper program under which commercial paper may be issued at any time, with total commercial paper outstanding not to exceed the facility maximum, less any letters of credit issued. Interest charged on the commercial paper program resembles variable rate debt due to its short term nature. On September 30, 2021, Globe Life amended the credit agreement dated August 24, 2020. The five-year credit agreement will now mature on September 30, 2026. As of June 30, 2022, the Parent Company was in full compliance with all covenants related to the aforementioned debt.

As a part of the credit facility, Globe Life has stand-by letters of credits. These letters of credit are issued on behalf of our insurance subsidiaries.

The following table presents certain information about our commercial paper borrowings.

Credit Facility—Commercial Paper
(Dollar amounts in thousands)
At
June 30,
2022
December 31, 2021June 30,
2021
Balance of commercial paper at end of period (par value)$180,000 $330,033 $260,000 
Annualized interest rate1.73 %0.29 %0.22 %
Letters of credit outstanding$125,000 $125,000 $135,000 
Remaining amount available under credit line445,000 294,967 355,000 

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Globe Life Inc.
Management's Discussion & Analysis

Credit Facility—Commercial Paper Activity
(Dollar amounts in thousands)
 Six Months Ended June 30,
 20222021
Average balance of commercial paper outstanding during period (par value)$369,468 $297,901 
Daily-weighted average interest rate (annualized)0.69 %0.24 %
Maximum daily amount outstanding during period (par value)$500,529 $355,000 

The Company reduced the commercial paper borrowings by $150 million since year-end, utilizing a portion of the proceeds from the issuance of a new senior debt offering. See Note 9Debt for more information regarding this offering. We had no difficulties in accessing the commercial paper market under this facility during the six months ended June 30, 2022 and 2021.

Globe Life expects to have readily available funds for 2022 and the foreseeable future to conduct its operations and to maintain target capital ratios in the insurance subsidiaries through liquid assets currently available, internally-generated cash flow and the credit facility. In the unlikely event that more liquidity is needed, the Parent Company could generate additional funds through multiple sources including, but not limited to, the issuance of debt, an additional short-term credit facility or term loan, and intercompany borrowing.

Consolidated Liquidity. Consolidated net cash inflows from operations were $693 million in the first six months of 2022, compared with $702 million in the same period of 2021. The decrease is primarily attributable to fluctuations in the settlement of certain amounts included in other liabilities. In addition to cash inflows from operations, our insurance companies received proceeds from dispositions of fixed maturities available for sale in the amount of $306 million during the 2022 period. As previously noted under the caption Credit Facility, the Parent Company has in place a revolving credit facility. The insurance companies have no additional outstanding credit facilities.

Cash and short-term investments were $288 million at June 30, 2022, compared with $161 million at December 31, 2021. In addition to these liquid assets, the entire $17.2 billion (fair value at June 30, 2022) portfolio of fixed income securities is available for sale in the event of an unexpected need. Approximately 97% of our fixed income securities are publicly traded, freely tradable under SEC Rule 144, or qualified for resale under SEC Rule 144A. We generally expect to hold fixed income securities to maturity, and even though these securities are classified as available for sale, we have the ability and general intent to hold any securities to recovery. Our strong cash flows from operations, on-going investment maturities, and available liquidity under our credit facility make any need to sell securities for liquidity highly unlikely.

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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis


Capital Resources. The Parent Company's capital structure consists of short-term debt (the commercial paper facility and current maturities of long-term debt), long-term debt, and shareholders’ equity.

Long-Term Borrowings. The outstanding long-term debt at book value was $1.6 billion at June 30, 2022 and $1.5 billion at December 31, 2021. Refer to Note 9—Debt for a complete analysis and description of long-term debt issues outstanding.

Selected Information about Debt Issues
As of June 30, 2022
(Dollar amounts in thousands)
InstrumentIssue DateMaturity Date Coupon Rate  Interest Payment Dates Par
Value
Book
Value
Fair
Value
Senior notes05/27/199305/15/20237.875%semiannual$165,612 $165,355 $171,168 
Senior notes(1)
09/24/201209/15/20223.800%semiannual150,000 149,926 150,251 
Senior notes09/27/201809/15/20284.550%semiannual550,000 545,275 541,486 
Senior notes08/21/202008/15/20302.150%semiannual400,000 395,999 327,492 
Senior notes(1)
05/19/202206/15/20324.800%semiannual250,000 245,274 246,459 
Junior subordinated debentures11/17/201711/17/20575.275% semiannual 125,000 123,403 125,325 
Junior subordinated debentures06/14/202106/15/20614.250%quarterly325,000 317,192 248,820 
1,965,612 1,942,424 1,811,001 
Less current maturity of long-term debt(1)
315,612 315,281 321,419 
Total long-term debt
1,650,000 1,627,143 1,489,582 
Current maturity of long-term debt(1)
315,612 315,281 321,419 
Commercial paper180,000 179,845 179,845 
Total short-term debt
495,612 495,126 501,264 
Total debt
$2,145,612 $2,122,269 $1,990,846 
(1)An additional $150 million par value and book value is held by insurance subsidiaries that eliminates in consolidation.

Subsidiary Capital: The National Association of Insurance Commissioners (NAIC) has established a risk-based factor approach for determining threshold risk-based capital levels for all insurance companies. This approach was designed to assist the regulatory bodies in identifying companies that may require regulatory attention. A Risk-Based Capital (RBC) ratio is typically determined by dividing adjusted total statutory capital by the amount of risk-based capital determined using the NAIC’s factors. If a company’s RBC ratio approaches two times the RBC amount, the company must file a plan with the NAIC for improving its capital levels (this level is commonly referred to as “Company Action Level” RBC). Companies typically hold a multiple of the Company Action Level RBC depending on their particular business needs and risk profile.

Our goal is to maintain statutory capital within our insurance subsidiaries at levels necessary to support our current ratings. For 2022, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300% to 320%. The Company concludes that this capital level is more than adequate and sufficient to support its current ratings, given the nature of its business and its risk profile. As of December 31, 2021, our consolidated Company Action Level RBC ratio was 315%. The Parent Company is committed to maintaining the targeted consolidated RBC ratio at its insurance subsidiaries and has sufficient liquidity available to provide additional capital if necessary.

Shareholders' Equity: On May 17, 2022, the Parent Company announced that it had declared a quarterly dividend of $0.2075 per share. This dividend was paid on August 1, 2022.

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GLOBE LIFE INC.
Management's Discussion & Analysis

Shareholders’ equity was $5.3 billion at June 30, 2022. This compares with $8.6 billion at December 31, 2021 and $8.6 billion at June 30, 2021. During the six months since December 31, 2021, shareholders’ equity decreased primarily due to $3.4 billion of after-tax unrealized losses in the fixed-maturity portfolio as interest rates have increased over the period. In addition, shareholders' equity increased by net income of $341 million during the first six months of 2022, but was offset by share repurchases of $223 million and an additional $41 million in share purchases to offset the dilution from stock option exercises.

We plan to use excess cash available at the Parent Company as efficiently as possible in the future. Possible uses of excess cash flow include, but are not limited to, share repurchases, acquisitions, shareholder dividend payments, investments in securities, or repayment of short-term debt. We will determine the best use of excess cash after ensuring that targeted capital levels are maintained in our insurance subsidiaries. If market conditions are favorable, we currently expect that share repurchases will continue to be a primary use of those funds.

Globe Life is required under GAAP to revalue its available for sale fixed maturity portfolio to fair market value at the end of each accounting period. These changes, net of their associated impact on deferred acquisition costs and income tax, are reflected directly in shareholders’ equity. Fluctuations in interest rates cause undue volatility in the period-to-period presentation of our shareholders’ equity, capital structure, and financial ratios. Due to the long-term nature of our fixed maturity investments and policy liabilities and the strong cash flows consistently generated by our insurance subsidiaries, we have the ability to hold our securities to maturity. As such, we do not expect to incur losses due to fluctuations in market value of fixed maturities caused by market rate changes and temporarily illiquid markets. Accordingly, our management, credit rating agencies, lenders, many industry analysts, and certain other financial statement users prefer to remove the effect of this accounting rule when analyzing our balance sheet, capital structure, and financial ratios.

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GLOBE LIFE INC.
Management's Discussion & Analysis

The following table presents selected data related to our capital resources. Additionally, the table presents the effect of this accounting guidance on relevant line items, so that investors and other financial statement users may determine its impact on Globe Life's capital structure. Excluding the effect of unrealized gains or losses on the fixed maturity portfolio from shareholders' equity is considered non-GAAP. Below we include the reconciliation to GAAP.

Selected Financial Data
(Dollar amounts in thousands, except per share data)
At
 June 30, 2022December 31, 2021June 30, 2021
GAAP
Effect of
Accounting
Rule
Requiring
Revaluation(1)
GAAP
Effect of
Accounting
Rule
Requiring
Revaluation(1)
GAAP
Effect of
Accounting
Rule
Requiring
Revaluation(1)
Fixed maturities$17,181,967 $(814,419)$21,305,287 $3,500,365 $21,101,780 $3,649,862 
Deferred acquisition costs(2)
5,084,878 2,128 4,914,728 (4,327)4,743,032 (5,188)
Total assets26,043,167 (812,291)29,768,048 3,496,038 29,580,057 3,644,674 
Short-term debt495,126 — 479,644 — 259,946 — 
Long-term debt1,627,143 — 1,546,494 — 1,986,116 — 
Shareholders' equity5,323,110 (641,710)8,642,806 2,761,870 8,616,922 2,879,292 
Book value per diluted share54.18 (6.53)85.97 27.47 83.59 27.93 
Debt to capitalization(3)
28.5 %2.3 %19.0 %(6.6)%20.7 %(7.5)%
Diluted shares outstanding98,245 100,535 103,081 
Actual shares outstanding97,515 99,567 102,163 
(1)Amount added to (deducted from) comprehensive income to produce the stated GAAP item, per accounting rule ASC 320-10-35-1.
(2)Includes the value of business acquired (VOBA).
(3)Globe Life's debt covenants require that the effect of this accounting rule be removed to determine this ratio. This ratio is computed by dividing total debt by the sum of total debt and shareholders’ equity.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
There have been no quantitative or qualitative changes with respect to market risk exposure during the six months ended June 30, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures: Globe Life, under the direction of the Co-Chairmen and Chief Executive Officers and the Senior Executive Vice President and Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by Globe Life in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to Globe Life's management, including the Co-Chairmen and Chief Executive Officers and the Senior Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
 
As of the end of the fiscal period completed June 30, 2022, an evaluation was performed under the supervision and with the participation of Globe Life management, including the Co-Chairmen and Chief Executive Officers and the Senior Executive Vice President and Chief Financial Officer, of the disclosure controls and procedures (as those terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon their evaluation, the Co-Chairmen and Chief Executive Officers and the Senior Executive Vice President and Chief Financial Officer have concluded that disclosure controls and procedures are effective as of the date of this Form 10-Q. In compliance with Section 302 of the Sarbanes Oxley Act of 2002 (18 U.S.C. § 1350), each of these officers executed a Certification included as an exhibit to this Form 10-Q.

Changes in Internal Control over Financial Reporting: As of the period ended June 30, 2022, there have not been any changes in Globe Life Inc.'s internal control over financial reporting or in other factors that could significantly affect this control over financial reporting subsequent to the date of their evaluation which have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
 
Part II—Other Information

Item 1. Legal Proceedings

Discussion regarding litigation and unclaimed property audits is provided in Note 5—Commitments and Contingencies.

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Item 1A. Risk Factors
 
The Company had no material changes to its risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Certain Equity Securities by the Issuer and Others for the Second Quarter of 2022
Period
(a) Total Number
of Shares
Purchased
(b) Average
Price Paid
Per Share
(c) Total Number of
Shares Purchased as 
Part of Publicly Announced
Plans or Programs
(d) Maximum Number
of Shares (or
Approximate Dollar
Amount) that May
Yet Be Purchased
Under the Plans or
Programs
April 1-30, 2022462,687 $101.01 462,687 
May 1-31, 2022484,107 96.40 484,107 
June 1-30, 2022538,610 93.82 538,610 

On August 4, 2021, the Globe Life Board of Directors reaffirmed its continued authorization of the Company's stock repurchase program in amounts and with timing that management, in consultation with the Board, determined to be in the best interest of the Company. The program has no defined expiration date or maximum shares to be repurchased.
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Item 6. Exhibits
 
Exhibit No.Description
31.1
31.2
31.3
32.1
101.INSXBRL Instance Document- the instance document does not appear in the Interactive Data file because the XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
GLOBE LIFE INC.
Date: August 5, 2022/s/ Gary L. Coleman
Gary L. Coleman
Co-Chairman and Chief Executive Officer
Date: August 5, 2022/s/ Larry M. Hutchison
Larry M. Hutchison
Co-Chairman and Chief Executive Officer
Date: August 5, 2022/s/ Frank M. Svoboda
Frank M. Svoboda
Senior Executive Vice President and Chief Financial Officer

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