Piggy bank floating safely in a life ring
Globe Life (NYSE:GL) is a large, multi-line life, health and insurance and Medicare Supplement company that traces its roots back to 1900. Well-funded and well-ranked in the industries it participates in, the company also has displayed a consistent share price and stability. While these are positives for Globe Life’s policyholders, the consistency, industry like ratios and low dividend make Globe Life too “boring” to be a good investment. With the exception of a very short duration drop and then bounce back in April, the stock price has moved mostly sideways for the past year, and the dividend yield is less than one percent, making Globe Life a rather ho-hum stock with many more opportunities both inside the insurance industry and elsewhere that would be a better use of investor funds.
Like other forms of insurance, most famously Berkshire-Hathaway’s cornerstone of GEICO and re-insurance business, Globe Life’s business boils down to executing on the client acquisition and underwriting “intake” side of the business, paying claims when policyholders and beneficiary file them, and managing the intervening float and required and excess cash reserves. Globe Life does a respectable job in these areas, with one of the largest books of business in their markets. Per the company’s website (Globe Life Insurance – Life, Accident, & Supplemental Health Insurance | Globe Life) in 2023 the company paid $1,088,985,144 in life insurance claims and $675,517,943 in health insurance claims. Policies and premiums all have gone up slightly from year to year in the single digits but no eye-popping gains. One positive is a fairly large share buyback completed recently.
The largest part of Globe Life’s life insurance sales comes from American Income Life, or AIL. This subsidiary/marketing arm accounts for a substantial portion of Globe Life’s sales, nearly 40% of total premiums and half of underwriting profits per the company’s last two Quarterly Reports. One positive of their part-time agent recruiting focus, AILs model can expose people to working in financial services and bring new agents into the industry, which is a positive for Globe Life as many insurance companies are actually losing agents on a net basis while Globe Life is still growing their sales force. Globe Life is a regulated company in a very-regulated industry, and as pointed out above, paid out more than $1.7B in claims, fulfilling their obligations to policyholders regardless of the acquisition method.
Since the drop and fairly rapid recovery in April, the stock price has been generally flat, but has not stood out positively. This is the reason I do not recommend investing in Globe Life, and to look for better opportunities if currently holding it: There just isn’t much going on to provide much catalyst for future gains. The company recently announced a quarterly dividend payable in late October, but the yield is less than 1%. Since 2020, the share price has traded in a rough band from slightly below the current price to a one-year high of $132. With the yield being so low, waiting for a bounce that might only be $10 per share has a large opportunity cost. Any lower share price, even of only $1-$2, would wipe out any dividends. A quick check of the “Peers” tab on Seeking Alpha shows Globe Life trailing peers such as Primerica, Aegon Limited, Unum, Lincoln National, and F&G (Fidelity and Guaranty) Annuities in total return over most time periods, and only beating Lincoln National out of that group in the 3- and 5-year periods. As an even more stark comparison, an investment in Berkshire-Hathaway or the S&P 500 would absolutely crush investing in Globe Life, returning from 70% to over 100% more over the past five years and likely continuing to do so going forward. So whether staying in the insurance sector where there are better individual stocks, or considering a conglomerate like Berkshire that has a large foundational insurance component, or even choose a passive indexing strategy and likely do better than Globe Life has done and will likely do base on their trend lines.
The lack of likely capital gains and the less than 1% dividend make Globe Life an investment that likely will under-perform many other alternatives. While normally “boring” (other than one week last April) which is a good thing for an insurance client, the lack of growth and even volatility in the share price makes Globe Life a “pass” as a new investor, and a current investor may be better served looking elsewhere.
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