Globe Life Inc Stock

Hello, and welcome to Globe Life Inc. Second Quarter Earnings Release Conference Call. My name is Jim, and I will be your coordinator for today's event. Please note today's conference is being recorded. And during our presentation [Operator Instructions]

It is now my pleasure to hand over to your host, Stephen Mota, Vice President of Investor Relations, to begin today's conference. Thank you.

Thank you. Good morning, everyone. Joining the call today are Frank Svoboda, and Matt Darden, our Co-Chief Executive Officer; Tom Kalmbach, our Chief Financial Officer; Mike Majors, our Chief Strategy Officer; and Brian Mitchell, our General Counsel. Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only.

Accordingly, please refer to our earnings release, 2025 10-K, and the subsequent Forms 10-Q on file with the SEC. Some of our comments may also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures.

I will now turn the call over to Frank.

Thank you, Stephen, and good morning, everyone. In the second quarter, net income was $288 million or $3.65 per share, an increase of 20% over the $3.05 per share a year ago.

Net operating income for the quarter was $285 million or $3.61 per share, an increase of 10% over the $3.27 per share a year ago. We are pleased to see continued strong results in our operations. As we have said many times over the years, our business model is resilient and able to generate earnings growth regardless of the economic environment.

As clearly demonstrated by Globe Life having produced double-digit net operating income per share growth in 8 of the last 9 quarters. On a GAAP reported basis, return on equity through June 30 is 18.4% and book value per share is $78.18.

Excluding accumulated other comprehensive income, or AOCI, return on equity is 14.3% and book value per share as of June 30 is $100.04, up 11% from a year ago.

Now on our insurance operations. Total premium revenue in the second quarter grew 7% over the year ago quarter. For the full year, we expect total premium revenue growth to be in the range of 6.5% to 7%. Life premium revenue for the second quarter increased 3% from the year ago quarter to $861 million. Life underwriting margin was $359 million, up 6% from a year ago. For the year, we expect life premium revenue to grow between 2.5% and 3%. As a percent of premium, life underwriting margin was 42%, up from 41% in the year ago quarter.

While we anticipate life underwriting margin to be between 43% and 45% for the full year 2026, we do expect it to be over 50% in the third quarter due to the anticipated impact of assumption updates and between 41% to 42% for the fourth quarter. Tom will discuss this more in his comments.

In health insurance, premium revenue grew 16% to $437 million, and health underwriting margin was up 1% to $99 million. For the year, we expect health premium revenue to grow in the range of 14% to 16%. This is due to premium rate increases on our Medicare supplement business as well as strong sales in both our United American and Family Heritage divisions. As a percent of premium, health underwriting margin was approximately 23% in the second quarter, down from 26% in the year ago quarter. For the full year, we anticipate health underwriting margins to be between 23% and 27%. Administrative expenses were $91 million for the quarter, an increase of approximately 6% over the second quarter of 2025.

As a percent of premium, administrative expenses were 7%. For the full year, we expect administrative expenses to be approximately 7.3% of premiums, consistent with 2025. As we mentioned last quarter, over the long-term, we anticipate that expanded implementation of AI applications across the company will help lower this ratio. We believe Globe Life is positively positioned to benefit from AI due to the high-volume nature of our business, including a number of applications received and policies issued, calls received by our customer service representatives and the number of claims reviewed and paid.

Of course, these AI-driven improvements will not be limited to administrative expenses. We also expect enterprise-wide benefits, including those that will drive sales growth by helping our distribution operate more efficiently and effectively and those that improve our underwriting and other sales support process.

I will now turn the call over to Matt for his comments on the second quarter marketing operations.

Thank you, Frank. Now I'll discuss the trends at each distribution starting with our exclusive agencies. At American Income Life, life premiums were up 5% over the year ago quarter to $466 million, and the life underwriting margin was up 4% to $214 million Net life sales were $95 million, down 2% from a year ago due primarily to a decline in the agent count. The average producing agent count for the second quarter was 11,391, down 7% from a year ago, but this is up 3% since the end of the first quarter. As a reminder, compensation adjustments designed to improve agent recruiting and new agent retention were implemented at the beginning of the second quarter.

As we indicated on the previous earnings call, these compensation changes are expected to have a positive impact on agent count in the second half of this year. I am pleased to see early signs of improvement with the sequential growth in agent count during the second quarter. As I've said many times, agent count growth is a precursor to sales growth. During the second half of the year, we expect to see mid-single-digit growth in both agent count and life sales at American Income. At Liberty National, the life premiums were up 3% over the year ago quarter to $101 million, and the life underwriting margin was up 10% to $37 million.

Net life sales were $26 million, up 6% from the year ago quarter due primarily to agent count growth. Net health sales were $7 million, down 15% from the year ago quarter as more emphasis has been placed on life business in recent periods. We are currently implementing changes to the sales presentation and place additional emphasis on health sales. The average producing agent count for the second quarter was 4,194, up 8% from a year ago. And I'm excited about the strong life sales and agent count growth we are seeing, and I'm confident that this momentum will carry forward.

At Family Heritage, here, the health premiums increased 9% of the year ago quarter to $126 million, and the health underwriting margin increased 10% to $45 million. Net health sales were up 4% to $31 million, driven by an increased agent count. The average producing agent count for the second quarter was 1,608, up 7% from a year ago. The ongoing emphasis on developing agency middle management has really solidified this division's performance. I believe Family Heritage is well positioned for sustainable growth going forward. Now in our direct-to-consumer division at Globe Life, the life premiums were down approximately 1% over the year ago quarter to $244 million. While life underwriting margin increased 10% to $76 million. Net life sales were $27 million, down 15% from the year ago quarter.

Now DTC is in a transition period due to a shift in the way consumers search online for goods and services, including life insurance. The increased utilization of AI by consumers has resulted in a reduction in paid search volume from Internet marketing. We have initiatives underway to adapt to this change and position digital content to be visible to and easily interpreted by AI assistance. This shift is similar in many ways to the initial move to digital marketing away from direct mail many years ago when consumers began to utilize the Internet and I'm confident that DTC will successfully make this transition as we continue to meet the consumer where they want to be met.

In addition, as we have discussed before, the value of this division extends well beyond DTC sales due to the support it provides to our agencies. And we still anticipate that we will meet agency demands by generating an excess of 1 million leads this year. We have seen improved conversion of the direct-to-consumer lead shared with our agencies, which has also led to margin improvement. And we will continue to optimize margin as we navigate changes in online advertising.

Now on to United American. Here, the health premiums increased 29% over the year ago quarter to $211 million, and the health underwriting margin was $11 million, down $1 million from the year ago quarter. Net health sales were $28 million, a 10% increase over the year ago quarter. Sales continued to be very strong in the Medicare Supplement business and due primarily to tailwinds from the high volume of people turning 65, movement of Medicare beneficiaries from Medicare Advantage to Medicare supplement and the rate increases implemented during the second quarter.

Once again, I would note that we do not market Medicare Advantage plans. As a reminder, the UA General Agency includes both individual and group business. The decline in health margin as a percent of premium from the year ago quarter at UA was primarily driven by the group business. As you may recall, we announced the acquisition of Evry Health a few years ago. Evry is included in the United American division as they market group health insurance through brokers. While Evry is immaterial to our overall financial results, they haven't generated enough recent sales activity to have an impact on UA Health margin trends.

For the full year 2026, we expect Evry sales to be approximately $50 million. As a start-up, they don't yet have the scale to meet our target margins, but we anticipate as they continue to grow sales and thus, premium, they will ultimately contribute to UA Health margins as they achieve scale and generate a credible block of business. Excluding the impact of Evry, the UA Health margin as a percent of premium would have been approximately 9% in the second quarter.

Now I'd like to move on to projections and based on what we've seen for the first half of 2026. As I mentioned earlier, we expect to see mid-single-digit growth at AIL during the second half of the year for both average producing agent count and life sales. For Liberty National and Family Heritage, we expect the average producing agent count growth to be low double digits for the full year 2026. Net life sales at Liberty National and direct-to-consumer for the full year 2026 are expected to be as follows: Liberty National, low double-digit growth; direct-to-consumer a single-digit decline. Net health sales for the full year 2026 are expected to be as follows: Liberty National, slightly down; Family Heritage, low double-digit growth and United American 30% to 35% growth.

I'll now turn the call back to Frank.

Thanks, Matt. We will now turn to the investment operations. Excess investment income, which we define as net investment income less only required interest was $38 million, up 10% from the year ago quarter. Net investment income was $294 million, up 4%, while average invested assets grew 2%. Required interest grew 3%, slightly lower than the 4% growth in average policy liabilities over the year ago quarter. For the full year, we expect both net investment income and required interest to grow around 4%, resulting in excess investment income growth of approximately 7%.

Now regarding our investment yield. In the second quarter, we invested $399 million in fixed maturities, primarily in the industrial and utility sectors. These investments were at an average yield of 6.27% and an average rating of A and an average life of 36 years. We also invested approximately $91 million in commercial mortgage loans and other long-term investments with debt-like characteristics. These non-fixed maturity investments are expected to produce additional cash yield over our fixed maturity investments while still being in line with our overall conservative investment philosophy.

In the second quarter, the earned yield on our total long-term invested assets, which include our fixed maturity, commercial mortgage loans and other long-term non-fixed maturity investments, was 5.51%. For the full year, we expect the average yield earned on our total long-term investments will be approximately 5.5%. For the fixed maturity portfolio, we anticipate the earned yield for 2026 will be around 5.31%. While we do own some floating rate investments, they are well matched with floating rate liabilities on the balance sheet.

Now regarding the investment portfolio. Invested assets are $22.1 billion, including $19.3 billion of fixed maturities and amortized costs. Of the fixed maturities, $18.8 billion are investment grade with an average rating of A. Overall, the total fixed maturity portfolio is rated A-, same as a year ago. Of our total investment portfolio, only 1% is in senior direct lending and asset-based finance combined and another approximately 1% is in traditional private placements. Our fixed maturity investment portfolio has a net unrealized loss position of $1.4 billion due to current market rates being higher than the book yield on our holdings. As we have historically noted, we are not concerned by the unrealized loss position and it is mostly interest rate-driven and currently relates entirely to bonds with maturities that extend beyond 10 years.

We have the intent and more importantly, the ability to hold our investments to maturity. Bonds rated BBB comprised 41% of the fixed maturity portfolio compared to 44% from the year ago quarter. This percentage is at its lowest level since 2003. As we have discussed on prior calls, the BBB securities we acquired generally provide the best risk-adjusted, capital-adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets.

That said, our allocation of BBB rated bonds has declined over the past few years as we have found better risk-adjusted, capital-adjusted value in higher-rated bonds given the narrowing of corporate spreads. While the concentration of our BBB bonds might still be a little higher than some of our peers, remember that we have little or no exposure to other higher-risk assets. The low investment-grade bonds remained near historical lows at $516 million compared to $503 million a year ago. The percentage of below investment-grade bonds of total fixed securities is just 2.7% consistent with year-end 2025. The total exposure to both BBB and below investment-grade securities as a percent of our total equity, excluding AOCI, is at its lowest level in over 25 years.

Due to the long duration of our fixed maturity liabilities, we predominantly invest in long-dated assets. As such, a critical and foundational part of our investment philosophy is to invest in entities that can survive through multiple economic cycles. While there may be uncertainty as to where the U.S. economy is headed, we are well positioned to withstand a significant economic downturn due to holding historically low percentages of invested assets in BBB and below investment-grade bonds as a percentage of equity.

In addition, we have very strong underwriting profits and long-dated liabilities, so we will not be forced to sell bonds in order to pay claims. With respect to our anticipated investment acquisitions for the remainder of the year, at the midpoint of our guidance, we assume investment of approximately $550 million to $600 million of fixed maturities at an average yield between 6% and 6.1%. Including the expected investments in commercial mortgage loans and other long-term investments with debt-like characteristics, we expect to invest approximately $700 million to $800 million across all asset classes at an average yield of 6.3% to 6.5%.

Now I will turn the call over to Tom for his comments on capital and liquidity.

Thanks, Frank. First, I'll spend a few minutes discussing our share repurchase program, available liquidity and capital position. During the quarter, the company repurchased approximately 1.1 million shares of Globe Life Inc. common stock for a total cost of $175 million at an average share price of $154.28 including shareholder dividend payments of $25 million, the company returned approximately $200 million to shareholders during the second quarter of 2026.

At the end of the second quarter, the company amended its term loan, increasing the principal balance from $250 million to $450 million, an increase of $200 million and extended the maturity date to June 2029. Additionally, the company's credit facility was amended at the end of the second quarter to extend its maturity date to June 2031. The term loan and the credit facility provide additional sources of parent liquidity. We intend to use the excess proceeds from the term loan for general corporate purposes, including reducing commercial paper balances, increasing share repurchases and other parent needs. The parent ended the quarter with liquid assets of approximately $110 million.

We anticipate ending the year with liquid assets in the top end of our target range of $50 million to $60 million. The parent will also generate excess cash flows over the remainder of 2026. The parent company's excess cash flow, as we define primarily -- results primarily from dividends received by the parent from its subsidiaries, less the interest paid on debt and is available to return to its shareholders in the form of dividends and through share repurchases.

Utilizing a portion of the parent's liquid assets at the end of the quarter, the excess proceeds from our increased term loan and excess cash flow expected to be generated for the second half of the year, we anticipate the parent will return to shareholders over the remainder of the year, approximately $250 million to $270 million in the form of dividends and share repurchases after meeting the anticipated needs of the parent. We continue to invest in our growth through making investments in new business, technology and the insurance operations. It should be noted that the cash received by the parent company from our insurance operations is after our subsidiaries have made these substantial investments and acquired new long-duration assets to fund their future cash needs.

We will continue to use our cash as efficiently as possible. We still believe that share repurchases provide the best return or yield to our shareholders over other available alternatives. Thus, we anticipate share repurchases will continue to be the primary use of parent's excess cash flow after the payment of shareholder dividends. For the full year, we anticipate distributing approximately $95 million to our shareholders in the form of dividend payments. In addition, we anticipate share repurchases will be in the range of $670 million to $700 million. This reflects a $100 million increase at the midpoint of our range from what we indicated on our last call, given the additional term loan proceeds.

As a reminder, our current excess cash flow estimates for 2026 do not anticipate any additional cash flows to the parent resulting from the establishment of the new Bermuda entity in 2025.

Now with regards to capital levels at our insurance subsidiaries. Our goal is to maintain capital within our insurance operations at levels necessary to support our current ratings. Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. Although this target range is lower than many of our peers, it is appropriate given the stable premium revenue from the large number of in-force policies, the nature of our protection products with benefits that are not sensitive to interest rates or equity markets, our conservative investment portfolio and strong, consistent underwriting margins, which result in consistent statutory earnings at our insurance companies.

As of the end of 2025, our consolidated RBC ratio for our U.S. subsidiaries was 316% and which provides approximately $95 million of excess capital above what is needed to be our minimum capital target level of 300%. For 2026, we intend to maintain our consolidated RBC within targeted range of 300% to 320%.

Now I would like to update you on the progress we are making with our Bermuda subsidiary. We are pleased with our progress so far as our lead regulator Nebraska approved reciprocal jurisdiction in the second quarter for Globe Life Re, the company's Bermuda reinsurance affiliate. Given this approval, we are now in the process of seeking reciprocal jurisdiction approval from Indiana, American Income's state of domicile, and will provide you with an update on our next call. In addition, consistent with our business plan, we expect to complete the new reinsurance cession in the third quarter, which will reinsure a portion of new business and in-force policies issued by our subsidiaries to Globe Life Re.

Now with regards to our policy obligations for the current quarter. For the second quarter, life policy obligations as a percent of premium improved from 36.7% in the year-ago quarter to 34.3%, favorable to management's estimates and consistent with the continued favorable trends in mortality. Health obligations as a percent of premium were 56.8% compared with 53.3% from the year ago quarter. This was higher than our estimates. The higher health obligation ratio was driven by a number of factors, including Medicare supplement claims related to prior periods, including an industry-wide correction that CMS made to physician reimbursement rates, higher loss ratios at Evry due to an adverse fluctuation in high severity claims and an adverse fluctuation in the quarter related to cancer claims at Liberty National division.

We expect the claims experience to moderate during the remainder of the year. As a reminder, we intend to update our life and health assumptions annually in the third quarter, and thus, we have made no changes to our long-term assumptions this quarter.

Now with respect to our 2026 guidance. For the full year 2026, we estimate net operating earnings per diluted share will be in the range of $15.55 to $15.95 representing 8.5% earnings per share growth at the midpoint of the range. This increase from our prior guidance is primarily due to improved life underwriting margins and excess investment income offset by higher financing costs and the reduced impact of share repurchases due to the higher share price. The guidance range reflects potential remeasurement gains from the third quarter life and health assumption updates in the range of $110 million to $130 million with the life assumption range update -- sorry, with the life assumption update in the range of $90 million to $100 million and the health assumption update in the range of $20 million to $30 million.

The midpoint of the range is higher than last quarter's call due to continued refinements and estimates with the increase primarily related to the health assumption update, which was previously anticipated to be relatively small. Given the estimated benefit from assumption updates in the third quarter, we anticipate third quarter life underwriting margin as a percent of premium will be in the range of 52% to 53% and the third quarter health underwriting margin as a percent of premium will be in the range of 29% to 32%.

We anticipate recent favorable trends will continue through 2026 for the full year. Normalized life underwriting margin as a percent of premium, which excludes the impact of the third quarter assumption update between 41% and 42% at the midpoint of our guidance. As Frank previously noted, we expect health premium to grow in the range of 14% to 16% for the full year. As mentioned on the previous call, this Health premium growth is benefiting not only from strong growth in Medicare Supplement sales in 2025 and anticipated in 2026, but also from approximately $65 million additional premium of approved rate increases on individual Medicare supplement policies that will be received throughout 2026, primarily in the last 3 quarters of the year.

In our full year guidance, we anticipate United American premium growth to be in the range of 25% to 35% and the health margin as a percent of premium to be approximately 7% for the second half of the year. As Matt previously discussed, United American health margin includes our group health business, including Evry. When excluding Evry, United American health margin as a percent of premium for the second half of the year will be in the range of 8% to 9%.

Finally, I do want to point out that the midpoint of our guidance, normalized EPS growth, which removes the impact of assumption updates to both 2025 and 2026, is estimated to be between 9% and 10%. At the midpoint of our guidance, the projected 3-year compound annual growth rate of normalized EPS is approximately 11%. Those are my comments.

I will now turn the call back to Matt.

Thanks, Tom. Those are our comments, and we will now open up the call for questions.

[Operator Instructions] We will hear first from the line of Wilma Burdis at Raymond James.

Could you just give us a little bit more color on how you see it playing out as far as adjusting the sales and advertising environment in DTC to AI? What are some of the options? Just maybe how long you see it playing out?

Yes. There's been a lot discussed recently about just the quantity of search going down in the volume of paid search. And so what's happening is, is that it's really just bidding up the price for paid search. And so -- as we've discussed before, we're going to be disciplined on our spend and make sure that we maintain our margin, and we're not just going to chase sales that don't meet our profitability targets.

And so what we're seeing out there is that is the paid search has moved to AI-generated search. You're also seeing other platforms such as Instagram and Facebook coming on stronger with advertising. So as I've mentioned in my prepared remarks, that's just something that we're navigating of just going to different avenues for advertising that is online.

And that's not something unique to Globe Life or frankly, even the life insurance industry. It's just the overall dynamics that are happening on online advertising.

And can you just talk a little bit more about the share repurchases? Because I think the pace in the first half has been pretty high. Just talk a little bit about that and how you see that continuing and playing out for the rest of the year.

Yes. Thanks, Wilma, it's Tom. I did want to correct the statement that I made is we would anticipate the parent will return to shareholders over the remainder of the year, approximately $350 million to $370 million. I think I said $250 million to $270 million, but that should be $350 million to $370 million.

Over the course of the year, we do expect to have share repurchases in that $670 million to $700 million range. For the full year, we would expect to pay share repurchases pretty much pro rata during the third quarter and the fourth quarter.

Yes. And Wilma, I think the only thing that I would -- obviously, as Tom mentioned in his comments, that it's higher than what we had anticipated as of the -- in our last call and we're using a portion of the proceeds from the increase in the term loan to increase the amount of the buybacks over the course of the year.

We really wanted to kind of lean in, in the first half of the year given some of the favorable pricing in our share price that we had. One -- so we were a little bit over 50% in the first half of the year, and this will bring us to -- we'll be just a little bit more in the first half than we'll have in the second half.

Our next question comes from Ryan Krueger at KBW.

Can you quantify the potential capital impact of the planned cession to Bermuda in the third quarter? And then I guess, at what point would you expect to get that capital up to the holding company, would that be more next year?

Yes. On this next reinsurance cession, the real benefit of increasing -- of reinsuring some of the in-force businesses to balance our ability to reinsured new business in the Bermuda entity. So we don't really expect any capital benefit in '26 million from that transaction, and we'd expect to see some benefit in 2027, but not likely the full benefit that we've communicated on prior calls in '27 that would emerge over a longer period of time of the business plan for the next 3 to 5 years.

Got it. And then I guess on the health side. I guess I'm a little surprised that you've increased the expectation for remeasurement gains and the assumption review given I guess, so the weaker claims experience this quarter. Can you give some more color on where that's coming from, maybe it's a different area than you had the claims weakness?

Yes. The assumption update on health is primarily driven by American Income Life, Family Heritage and Liberty National. And on the Liberty National claims, we did see some higher cancer claims this quarter, but we really see that as a fluctuation and not a continuing trend, morbidity trend for Liberty National. So as we look at those assumptions, the predominant driver for assumption updates is improved morbidity that we've seen over the past few years.

Our next question will come from Wes Carmichael at Wells Fargo.

So I had a question on -- back to the buybacks or capital management. But the stock has done better recently, maybe outside of this morning. But does that change the outlook for capital deployment looking forward to 2027? I guess does it impact your willingness at all to look towards M&A? And are there any interesting acquisition opportunities out there?

Yes. I would say, Wes, that I think as we think about buybacks as a strategy as a whole, it does not -- the higher share price doesn't deter us from being willing to continue to buy back our shares, and we'll continue to have that being a predominant use of that excess cash flows that we have absent some better alternatives. I mean we will look at and we'll continue to look at M&A opportunities. We are, again, very committed to growing and confident in our ability to grow our organization organically. But if we could find the right opportunity that fits in with our strategy, fits with our marketplace and the products and has a distribution that we can grow.

That's really critical for us is to be able to having some ability to grow the business. We would definitely look at those opportunities, and we continue to explore those. But in the meantime, we'll continue -- we feel very comfortable that the current share price is still below what we think is the intrinsic value of the organization and so is a good use of the shareholder money.

And my follow-up was on American Income. Just looking at lapses there, I think the first year lapses ticked down sequentially, but renewal lapses maybe remain a little bit elevated relative to historical trends. So wondering if you think maybe that's a better run rate going forward or maybe just a couple of quarters of deviation from the longer-term trends.

Yes. We were really pleased to see those first year lapses at American Income come down back to kind of where they have been. And renewal lapses are a little bit higher than they were pre-pandemic, and we do kind of see that as continuing to be in that range, right around that range. So I think that's a good baseline.

Our next question will come from Joel Hurwitz at Dowling & Partners.

I wanted to start on the life sales trends and particularly American Income. The growth has been coming in below sort of your outlook. Do you think that's cost of living pressures emerging there with your targeted consumer? Is it largely just the agent count and sort of the ramp of new agents?

Yes. No, I don't think it's economy driven. I do think it is agent count driven. And we've mentioned before, the agent count has not been where we wanted it to be from a growth perspective over the last few quarters, but we are seeing that turn around here in Q2. And we anticipate that Q3 and Q4, as I said in my comments, to be in that mid-single-digit growth rate. But what we see from an overall productivity perspective on a per sale basis, the premium on a per sale basis at American Income continues to tick up over the last several quarters. And to me, that's an indicator of consumer health as consumers are willing to spend a little bit more for a little bit more coverage.

And what we see in the field and hear from the field is that -- we're not having to present more our conversion rates are going down from just an overall consumer presentation to sales perspective. So really, I do think it's an agent count story, and I'm pleased to see that we've got sequential growth from Q1 to Q2, and we anticipate that coming around further. It's just -- it's interesting, some of the work that we've done as you go back and look over the last 20 and 25 years is the agent count and sales count is very much momentum driven.

So we're going to get fluctuations on a per quarter basis. And it's not uncommon that we'll have 2 or 3 quarters of fairly stagnant or maybe even slight declines in our agent count, but then that's usually followed by several quarters, 3, 4 or 5 of very strong sales growth and agent count growth. And so that's why we really encourage folks to look at it more on an annual basis. It's pretty rare over the last 25 years. It's only happened 1 or 2 times that overall from an annual basis, our agent count is down, but we definitely get more fluctuations on a per quarter basis when you just look at it on a very short-term.

Got it. That's helpful. And then for my second one, just on the United American margin. So it sounds like Evry was like a 4-point drag in the quarter. How much of a drag has that business been in the past quarters? And then I guess, what's the expectation in the near-term? I think you guys said ex Evry, the margin is expected to be 8% to 9% in the back half. Should we expect that business to have a 4-point drag going forward, though?

No, I don't think on a go-forward basis, it was just kind of a high claims quarter. It was really concentrated in a handful of claims. What's interesting to know with Evry is that you've just had a pretty significant increase in the sales and the premiums starting to come through in 2026. And so from a prior period perspective, the margin side has not had much of an impact. It just did in this quarter because unfortunately, with the significant ramp-up in premium, the premium comes in throughout the plan year, but the claims don't come in evenly every quarter.

Yes. And Joel, I think for the first half of the year, the total underwriting losses in that is around $10 million and about $7 million of that was in the second quarter. And we only anticipate $3 million or $4 million in the second half of the year. So we don't anticipate the drag for the full year might be about 2% on the underwriting margin percentage. I think something to note is that even despite some of the drags we had, as Tom mentioned, we had some adjustments to some prior periods and some claims in the second quarter related to some of the prior periods as well as with Evry and even with that, for the full year, we still see the underwriting dollars for United American increasing 24% year-over-year. So it's still going to be a very good year.

Our next question will come from Randy Binner at Texas Capital.

I have a couple of follow-ups. I guess the first is on your adapting to AI search and direct-to-consumer. Are you planning to use performance marketing intermediaries? Or are you looking -- and maybe you can remind us if that's something you utilize. But as far as reaching social media and AI search better, is it -- can you just dig into a little bit more kind of tactically what you're doing and if you -- if kind of expanding your tool set there is part of what you're contemplating?

Yes. The amount of advertising that we spend online is we're usually working directly with the platforms themselves for optimization. Historically, Google obviously has been one of those big partners, but we do operate on the other platforms, Facebook, et cetera. And so as I've mentioned, what we're seeing is just, I'll call it, traditional paid search is changing a little bit, just the volume of paid search is down. So the basic economics, the cost is up. But you are seeing Google and others move into AI-generated ads and those type of things. And so we're working alongside with those programs as those new advertising methods of getting in front of consumers are happening.

So we'll continue to work with the platform. But from our volume perspective, we really do most of that internally working directly with the various platforms.

Okay. That's helpful. And then a follow-up on just the agent initiatives on the life side, mostly at American Income. Can you share a little bit more just about maybe like the dynamic with the sales force there, the comp -- I'm not sure what you're able to share about the comp changes, but just maybe a little bit more detail on how that's changed? Is it in line with when you've made these adjustments in the past, as was alluded to in one of the prior answers you had? And just trying to understand kind of the dynamic on the ground there with the sales force and how they're viewing some of these compensation changes.

Sure. So simplistically, the way to think about overall agent compensation is there's a base level of commission paid on sales. And then there's also incentive compensation. And the incentive compensation is something that we regularly adjust. We typically adjust that at least once a year. And we're really designing that to move certain KPIs that we're managing. And those transition between years depending on what we're seeing in the field of incentivizing maybe more sales growth or maybe incentivizing more recruiting and retention and training of new agents. And so we're always trying to make that delicate balance because at the manager level, they're splitting their time between direct sales and focusing on sales to shifting their time to focusing on recruiting and training and onboarding new agents.

And so it's always a balance there. And so the change that we implemented at the beginning of Q2 from that incentive compensation perspective was really focused a little bit more on agent onboarding and retention of those new agents in their first year. And so we're seeing that come to fruition as our middle management out there spending a little bit more time recruiting and training agents. And so it's as expected, and I just pointed to our long history of American Income has been our division that has had the essentially same model for decades.

So when I talk about the last 25 years, it's a very consistent business model. And so these short-term fluctuations are not unexpected. And the other thing I like is that we have 3 different agencies that all recruit and train and onboard agents in a very similar manner. And you can see that it's not an environment issue, so to speak, because we've got strong agent count growth in Liberty and Family Heritage with 7% and 8%. And so that's why we're confident that American Income will change here a little bit in the last half of this year, which bodes very well for where we want to set that agency up for growth in 2027.

Randy, I would just add that on a longer-term basis, that we're really working on how do we think about some of the AI opportunities within that sales process. And what can we do to improve sales training for our agents. We're in the process of implementing training bots to give our agents, I'm going to say, various personas that they might encounter as they're working with potential customers and really enabling them to work on their skill sets before they're doing sales live.

So we're in the process of doing that. And then we're also really taking a look at what are we thinking about that whole sales productivity, working -- how do we improve that overall agent experience, which should help with retention and ultimately sales, eliminate frictions in the sales process whether it be from just the lead generation to the time involved in getting in front of a customer and then ultimately helping them to get a sale and improving on that sales process all around. So there's a lot of things that we've got in place that we're really working on that we're really excited about, I think, especially at American Income, given the size of that agency and the fact that they're so virtual and so using a lot of technology in their processes today. It won't be in the next quarter or 2, but I think over time, we'll start to really see that come to fruition.

[Operator Instructions] We'll hear next from Pablo Singzon at JPMorgan.

On Evry, I was hoping you could unpack your comments on higher severity. Is there something different about the products there? Or was the comment more about the unique nature of the claims that showed up this quarter? And it also doesn't sound like they're having to put through any repricing or reunderwriting actions, but I just want to confirm that.

Yes, it is a different product than what's sold by the other agency. It's a health plan. I will say, in 2025, we just had a handful of groups and the sales in '26 have been good. There is, on an annual basis, an opportunity, obviously, to reprice groups. And so what we did with our 25 groups -- we had good price increases through there for just making sure we've got the right amount from an experience perspective. Overall, we think long-term, this business is really going to be an 83% to 85% loss ratio kind of business. But you -- in the early stages, as I mentioned, it's a start-up. We've got to get scale first to be able to get the credibility of experience from an overall perspective.

Yes. And then we do have reinsurance coverages to protect ourselves from any of the real severe claims that might otherwise be incurred just to manage our risk on that line.

Got it. And then my second question on cancer claims at L&L. I think you might have an even bigger cancer book at Family Heritage. And I was wondering if you saw anything there or the fact that nothing should have in Family Heritage just gives you more confidence that what happened in L&L was more of an aberration?

I think that's exactly right, Pablo. We have not seen that at Family Heritage. We've seen very consistent and favorable underwriting results at Family Heritage. And the products are a little bit different, but -- and we do see a little bit more fluctuations at Liberty from time to time, and that's really why we think it's really just a fluctuation at this point for the quarter.

Our next question today will come from Suneet Kamath at Jefferies.

Just on the assumption update that you're guiding to for the third quarter. Post that change, I guess, should we be thinking about that as really a onetime sort of benefit? Or do you think you're still going to have these ongoing quarterly remeasurement gains? I guess I'm trying to get a sense of, is this assumption update going to true up everything and we're kind of back to normal? Or will we still have these ongoing remeasurement benefits?

Yes. So from a -- it's primarily on the life side, the way I think about this is that we look at mortality results over a long period of time to inform our long-term assumptions. And so we've been seeing a very good mortality experience recently. So I would not expect our assumptions to be adjusted all the way down to our current experience that we're seeing. So I would expect some remeasurement gains continue to come through. And we'll always see remeasurement gains and losses. It's every quarter because things won't exactly emerge as we intend to. But I do think that there will be some continued favorable remeasurement gains as we even post assumption update.

And that's what -- I think it's -- as time goes on, as Tom said, the -- our current experience is clearly emerging better than those long-term assumptions. And to the extent that, that continues, which right now, we're not seeing anything in our numbers that say that it won't, but then we'll continue to evaluate that in future periods. And if we're continuing to see positive experience from those longer-term assumptions, then in the future, it would be possible that we might have some future assumption updates again in the future.

As you have those assumption updates, remember that it does kind of lock in then a lower policy obligation percentage for that book of business going forward. So it ends up you needing less of that premium to fund those future claims. And so it does impact and benefit the margins on a going-forward basis.

One thing I'd look at additionally emphasize is that we had indicated normalized life underwriting margins in that 41% to 42% range. And that, to me, is kind of a starting point for how experience will emerge in the coming years. So that's really the all-in underwriting margin. We will see a little bit of amortization increase in the future as well, just as we've seen that trend over the past few years due to continued capitalization and amortization of renewal commissions, primarily at AIL.

Okay. That's helpful. And then I guess just on Bermuda, just based on my conversations with some investors, I think some were hoping that maybe there would be an acceleration in the timing relative to the sort of 3- to 5-year range that you've given. It doesn't sound like that's going to happen. But maybe could you just walk us through how you see the next kind of couple of years developing? Like what are the things that we need to -- what are the things that need to happen in order to get you to a position where you can regularly take cash out of Bermuda?

Yes. So the next step is getting Indiana approval for reciprocal jurisdiction. And so we've been in active discussions with them, and those discussions have been going well. Once we get Indiana reciprocal jurisdiction, to the extent that we want to have dividends come out of the Bermuda subsidiary, the Bermuda Monetary Authority would need to approve those distributions to the parent.

We would expect that we seek some subsidiary dividends to the parent in 2027. However, not at the magnitude of kind of where we think our long-term run rate is. But we are looking to have dividend distributions each year. So a consistent set of dividend distributions each year from the entity. And I think as we put more new business in, we continue to create some capacity to actually provide dividend distributions from that entity.

Yes. One thing I would add to what Tom said, but I think that's really important is that we've been structuring our business plan and how we're doing the new reinsurance transactions not to be just a onetime capital release but the ability to more efficiently manage the emergence of the profits from the block of business over time, which will then continue to provide an ongoing annual cash flows -- additional cash flows up to the parent. I do think with respect to -- I think we've been pretty consistent to say that it's -- the anticipated time frame would be that we would have some additional dividends beginning in 2027.

A little bit optimistic that maybe we could get some earlier in late 2026. But again, it's all subject to regulatory approval and the time frames that we're working on today are right in line. So if we did anything, it'd be really late in the year in any instance. But I do think that as we think about the amount of earnings, we don't want to get ahead of still regulatory approval for those dividends, and we don't want to put out an expectation of kind of getting to that maximum amount sooner than what we've really laid out for the regulators and getting ahead of their approval.

And I was going to say in the next quarter call, we typically discuss our estimates for 2027. And this would be, of course, one of those items as we think about dividends and free cash flow up to the parent. So I would anticipate we discuss that on the next call of our 2027 plans.

Our next question will come from Tom Gallagher at Evercore ISI.

Where do you expect the health margin to come in, in 4Q outside of the actuarial review?

It normalized, it should come in around that 24-ish percent. So let's just say 23% to 25% in the fourth quarter.

Got it. So 23% to 25%. So a little -- potentially a little better than 2Q?

Yes. I think -- yes, we would anticipate it being better than Q2. And Q4 is always a little bit seasonally high from an overall health because you do have some -- the MedSup does tend to have a little bit lower margins in the fourth quarter versus third quarter. So we would anticipate, absent any of the assumption update, probably being around that 25% in the third quarter and then about that 24% in the fourth.

Got you on an underlying basis?

Yes.

Okay. That makes sense. And then just wanted to come back to the comment you made about the direct-to-consumer business and what's happening. So I just want to be clear as I know what's happening. So is there increased online competition? Do you think some direct sales are going away from you? Is that right now what you're seeing? And then if you do pivot to, let's say, a Google portal sales model, what would the margin look like? Would you have to give up some of the economics relative to where you are currently based on how you think this pivot may happen? Any sort of color on that would be appreciated.

Yes. I wouldn't characterize it as competition from other carriers from a life insurance direct-to-consumer perspective. It's really the volume of paid search is down, and therefore, it costs more on a per click basis or to have your results appear towards the top of the page than it used to. And so we're being disciplined about we're not going to spend past our target margins for sales in certain advertising campaigns. And that's consistent with what we've done in the past.

The pivot is that there's more testing that's starting to roll out where, as an example, Google is starting to run ads in their AI search mode and some of those kind of things. So the -- it's really an advertising dynamic with the platforms that's moving out of traditional paid search more into the AI realm. And so we'll participate in that as well. I don't anticipate we have to give up margin to be able to do that. We will do it again to optimize sales and to maintain our margins.

So I'm pleased to see and we reported that our margin has been improving in our direct-to-consumer channel, and that's what we're really trying to optimize because -- and that's the nice benefit of our organization is that it's not a single source sales of they're all direct-to-consumer. But a lot of this advertising spend, we're sending those leads over to our agency business, which is able to convert them at a much higher rate than a passive direct-to-consumer channel. So ultimately, I think as things shake out, we can be a winner because our conversion ratio should be better than just a DTC-only conversion ratio because we look at it as an entire organization rather than just one channel.

Our next question will come from Maxwell Fritscher at Truist.

I'm calling in for Mark Hughes. Just a quick one for me. Could we get your broader thoughts around the recruiting environment and then maybe current experience around agent retention? I know you mentioned the compensation adjustment implemented at the beginning of the quarter. But yes, just your broader thoughts there would be great.

Yes. We see our pipeline being strong. We track that all the way through the recruiting process into what we would call hire, and that's where folks start getting into training. And then ultimately, they're producing agent when they start selling policies. And so we feel good about our pipeline and the numbers that are in there that will ultimately convert into new agents that are producing business for us.

And that's again, where I would just reflect back on Liberty National and Family Heritage simplistically don't go to market differently on the agent recruiting side. And you can see that we've got agent count growth there that is both on a recruiting and agent retention perspective. And so that's why I'm confident American Income will have a better second half of 2026 than we've had in the first half here.

And lastly, we'll hear from Andrew Kligerman at TD Cowen.

Okay. Last but not least, thank you.

Good color on the prior questions. I have just some very basic follow-ups. Just going back to the American Income with recruiting down in the first half. And Matt, I understand your point that the good read-throughs from Liberty National and Family Heritage. But I just want to understand that you're confident in the second half of the year that you'll see mid-single-digit sales growth, even though recruiting is down in the first half. Maybe just something you're seeing. What's giving you that confidence as you look to the second half of the year?

Sure. So Andrew, like I just mentioned, the pipeline is one of the things we look at. And I think also, we're comparing this quarter to the same quarter last year. But sequentially, we've got growth in our agent count. We got 3% growth. And so that, to me, is an indicator that things are starting to turn around.

The other thing I would point to is that our pipeline, so our agents that have agreed to join the organization that are in school and in the process of getting licensed, that is up 8% from Q1. And so that's another early indicator that our pipeline is strong. And like I said, it's just kind of a momentum game. And so when we're comparing quarter-over-quarter, we're going to get a little bit different answer than when we've got recent turnaround and improvement. And so it's all a momentum of we've got people in the pipeline. Those are getting converted into producing agents. We're starting to see that. And so that's why I was very specific on the second half of the year, we anticipate that to be that mid-single-digit growth on the agent side, just seeing the momentum of where we're at right now.

That's great. And with direct-to-consumer, you're guiding to sales down single digits. Is this one just too difficult to kind of get a feel for as we get to 2027? I mean is there a lot of unknown there that's just going to take a lot of trial and error before you can kind of get confident that you'll be back into a growth mode?

Yes. It's just kind of recognizing because that's an annual number, what happened in Q2. And so we have a long history of running hundreds of campaigns and testing. And as you know, we're spending money upfront with the anticipation of what interest inquiries and leads and ultimately sales that generates. So as digital advertising is pivoting to the AI world, how consumers are online and the decrease of organic traffic that I believe will be picked up by more of the, I'll call it, the AI embedded advertising.

As we pivot into and test into that and optimize that, I think in the short-term, us along with everybody else over the next couple of quarters, that's going to be a transition period. But from a longer-term perspective, I do think that we can continue to grow. Because keep in mind, overall, that's not really any discussion about the demand from a consumer perspective of the product. So the product still is out there. We just need to be able to be sure that we get in front of the consumer in the way that they're looking and behaving online. And so we'll be right there as the transition happens from an online advertising perspective.

So that's kind of what gives me comfort from a long-term perspective is that it's not a consumer behavior issue from a desire of the product. It's just more of how people are interacting online these days.

Got it. And just one last quick one. So as I kind of wrap up on your commentary, and I think about -- and thank you for the guidance today on '26. As I kind of think out to 2027. The health margin was a blip this quarter. And obviously, in this business, that happens. American Income sales seem like they're on track. And then the good thing about direct-to-consumer is that you protect the margins and maybe the growth is a little bit more subdued, but hopefully you get back. That seems to me like the wildcard.

So as I look to '27, would it be fair for me as an analyst without asking for your guidance to think that Globe Life is kind of tracking to historical EPS growth rates. Like it doesn't seem like there's anything getting in the way of that. Is that like the high single-digit EPS to low double-digit EPS. Does that seem like a fair observation coming out of 2Q without asking for guidance.

Yes. And I think, Andrew, and obviously, we'll give more input next quarter, but I think that's fair. The one little wildcard probably is you look at the assumption updates and where mortality comes in. And when you look at the year-over-year and net operating income, we'll have -- as Tom said, we're going to have $90 million to $100 million of assumption update on the life side. So depending on where mortality kind of trends and they can still trend favorably. But to the extent that, that you end up having a $50 million adjustment, I'm just throwing numbers out there, right? But if it's a lesser number, then that will impact some of that year-over-year growth rate just a little bit.

But that's not to say that especially when you think about normalized margins, those normalized margins will still be very good. I think we're optimistic as we're getting some of the premium growth back up a little bit more from where we're at, especially on the health side, continuing, I think, on the health margins, we would anticipate those health margins, I would say, right now, I would anticipate them being a little bit better next year just because of some of the unique things that we've had in the second quarter as well as we'll be putting together new premium adjustments with respect to the MedSup that will reflect some of the higher -- these higher costs that we saw here in the first and second quarter.

And so that will come through in -- for next year as well. So I think -- I still think there's some positives I would say. And then investment income, we're starting to see that growing on a sequentially basis. We would look at that continuing to grow with the current yields on our new purchases where they're at.

Yes. And Frank, I was going to add is just there's been a lot of dialogue related to the margin percent on the health business, but you look at the margin dollars and the growth that we've had there due to all the rate increases as well as the very strong sales. And so that makes me feel very good that the underlying business is performing very strong from an earnings perspective that I think bodes very well in the future.

And even DTC is that current year sales, only a small amount of that drops to the bottom line in the current year. That's earnings in the future. And so our margin is up in the quarter for DTC. So I think that bodes well in the future. And we should still have over $100 million of sales in the DTC channel. So that's still a good volume that is something that I do think we can continue to optimize as we talked about the spend before. And we want to be disciplined about growing our underwriting margin dollars ultimately at the end of the day.

And that concludes our Q&A session for today. We thank you all for your signals and your questions. I'm happy to turn it back to Mr. Stephen Mota for any additional or closing remarks.

All right. Thank you for joining us this morning. Those are our comments, and we'll talk to you again next quarter.

Ladies and gentlemen, this does conclude today's Globe Life Inc. conference call. Thank you all for your presentation.

Hello, and welcome to Globe Life Inc. First Quarter Earnings Release Call. My name is Morgan, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions]

I will now hand you over to your host, Stephen Mota, Vice President of Investor Relations, to begin today's conference. Thank you.

Thank you. Good morning, everyone. Joining the call today are Frank Svoboda and Matt Darden, our Co-Chief Executive Officers; Tom Kalmbach, our Chief Financial Officer; Mike Majors, our Chief Strategy Officer; and Brian Mitchell, our General Counsel.

Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our earnings release and 2025 10-K on file with the SEC. Some of our comments may also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures.

I will now turn the call over to Frank.

Thank you, Stephen, and good morning, everyone. In the first quarter, net income was $271 million or $3.39 per share compared to $255 million or $3.01 per share a year ago. Net operating income for the quarter was $274 million or $3.43 per share, an increase of 12% over the $3.07 per share from a year ago. We are very pleased with the results of our operations this quarter. Despite the challenges faced by working class Americans in the current economic environment, Globe Life has now produced double-digit growth in net operating income per share in 7 of the last 8 quarters and the 1 quarter that didn't have double-digit growth was close at 8%.

On a GAAP reported basis, return on equity through March 31 is 17.9%, and book value per share is $77.3. Excluding accumulated other comprehensive income, or AOCI, return on equity of 14%, and the book value per share as of March 31 is $98.56, up 12% from a year ago.

Now in our insurance operations. Total premium revenue in the first quarter grew 6% over the year ago quarter. For the full year, we expect total premium revenue to grow approximately 7%. Life premium revenue for the first quarter increased 3% from the year ago quarter to $853 million. Life underwriting margin was $349 million, also up 3% from a year ago. For the year, we expect life premium revenue to grow between 3% and 3.5%. As a percent of premium, life underwriting margin was 41%, same as the year ago quarter. While we anticipate life underwriting margin to be between 42% and 45% for the full year 2026, we do expect it to be around 41% for both the second and fourth quarters and higher in the third quarter due to the anticipated remeasurement gain from assumption updates that will take place in the third quarter, as Tom will discuss in his comments.

In health insurance, premium revenue grew 13% to $417 million, and health underwriting margin was up 12% to $95 million. For the year, we expect health premium revenue to grow in the range of 14% to 17%. This is due to premium rate increases in our Medicare supplement business as well as strong sales activity in both our United American and Family Heritage divisions. As a percent of premium, health underwriting margin was approximately 23% in the first quarter, same as the year ago quarter. For the full year, we anticipate health underwriting margins to be between 23% and 27%.

Administrative expenses were $94 million for the quarter, an increase of approximately 8% over the first quarter of 2025. As a percent of premium, administrative expenses were 7.4%. For the year, we expect administrative expenses to be approximately 7.3% of premium. Over the long term, we anticipate that expanded implementation of AI applications across the company will help drive this ratio lower. We believe Globe Life is positively positioned to benefit from AI due to the high-volume nature of our business, including the number of applications received and policies issued calls received by our customer service representatives and number of claims reviewed in pay. Of course, these AI-driven improvements would not be limited to administrative expenses, we expect enterprise-wide benefits including significant benefits to our distribution and underwriting activity in particular.

I will now turn the call over to Matt for his comments on the first quarter marketing operations.

Thank you, Frank. We had strong first quarter sales results as the total Life net sales grew 6%, and the total health net sales grew 58%. I'm pleased to point out that we have seen growth in net life sales in each division for the last 2 quarters. Given the current economic environment, these results are indicative of the resiliency of our business model.

Now I'll discuss the trends at each distribution starting with our exclusive agencies. At American Income Life, life premiums were up 5% over the year ago quarter to $459 million and the life underwriting margin was up 7% to $209 million. Net life sales were $101 million, up 3% from a year ago due to improved agent productivity. The average producing agent count for the first quarter was 11,064 down 4% from a year ago due primarily to a decline in new agent retention. Short-term declines in agent count are not necessarily a problem as we can see improved sales productivity among our veteran agents when they have more time to focus on sales. Now that being said, long-term growth is dependent on agent count growth.

As we discussed in the last call, at the beginning of the second quarter, we have implemented compensation adjustments for our middle management team that is designed to emphasize new agent recruiting and retention of new agents. We expect these adjustments to have a positive impact on our overall agent count during the second half of this year. Despite these short-term challenges, I am very pleased with the improvement in agent productivity we have seen over the last several quarters. Our investments in branding, lead generation and technology are paying off. And overall, I'm very optimistic regarding the long-term prospects for American Income.

At Liberty National, the life premiums were up 4% over the year ago quarter to $100 million, and the life underwriting margin was up 11% to $35 million. Net life sales were $25 million, up 13% from the year ago quarter due primarily to agent count growth. Net health sales were $7 million, down 3% from the year ago quarter as more emphasis has been placed on life business. The average producing agent count for the first quarter was 4,031, up 9% from a year ago. I'm excited about the strong life sales and agent count growth we are seeing and confident we will continue to see growth at this agency as we move forward.

In Family Heritage, the health premiums increased 10% over the year ago quarter to $123 million, and the health underwriting margin increased 11% to $44 million. Net health sales were up 22% to $33 million, and this is due to increases in agent count and productivity. The average producing agent count for the first quarter was 1,561, up 10% from a year ago. We continue to see strong agent count growth at Family Heritage. This is resulting from the continued focus on our recruiting and growing agency middle management.

Now in our direct-to-consumer division, the life premiums were down approximately 1% over the year ago quarter to $244 million, while the life underwriting margin increased 15% and to $74 million. Net life sales were $27 million, up 8% from the year ago quarter.

Now as we've discussed before, the value of this division extends well beyond DTC sales and due to the support it provides to our agencies. We've seen improved conversion of the direct-to-consumer leads shared with our agencies, which has also led to margin improvement. This allows us to invest more heavily in advertising and other lead generation activities, further increasing lead volume, which in turn leads to additional sales in both our direct-to-consumer and agency channels. We expect this division to increase leads generated for our 3 exclusive agencies during 2026 by approximately 5% to 10%.

At the United American General Agency, here, the health premiums increased 22% over the year ago quarter to $194 million, and the health underwriting margin was $5 million, up approximately $4 million from the year ago quarter. Net health sales were $62 million, and this is an increase of approximately $34 million over the year ago quarter.

Sales were strong across the division in both the Medicare supplement and the [indiscernible] business due primarily to tailwinds from the continued movement of Medicare beneficiaries for Medicare Advantage to Medicare supplement and the further development of our group worksite business. As an additional note, I would remind everyone that we do not market Medicare Advantage plans.

Now I'd like to discuss projections. And based on these recent trends and our experience with the business, we expect the average producing agent count trends for the full year of 2026 to be as follows: at American Income, low single-digit growth; and then at both Liberty National and Family Heritage, low double-digit growth.

Our life sales for 2026 we expect the following: at American Income, mid-single-digit growth; Liberty National, low double-digit growth; direct-to-consumer, low single-digit growth. For health sales for 2026, we expect to be as follows: Liberty National, mid-single-digit growth; Family Heritage, low double-digit growth, and United American high teens growth.

I'll now turn the call back to Frank.

Thanks, Matt. We'll now turn to the investment operations. Excess investment income, which we define as net investment income less required interest was $37 million, up approximately $1 million from the year ago quarter. Net investment income was $290 million, up 3%, while average invested assets grew 2%. Required interest grew 3%, slightly lower than the 4% growth in average policy liabilities over the year ago quarter. Net investment income also increased 3% from the fourth quarter as we had higher returns from our limited partnerships. As a reminder, the income reported from these investments is based on income earned by the partnerships in the quarter and will vary from quarter-to-quarter. For the full year, we expect both net investment income and required interest to grow around 4%, resulting in excess investment income growth between 4% and 4.5%.

In the first quarter, we invested $419 million in fixed maturities, primarily in the industrial and financial sectors. These investments were at an average yield of 6.23% and an average rating of A and an average life of 42 years. We also invested approximately $147 million in commercial mortgage loans and other long-term investments with debt-like characteristics. These non-fixed maturity investments are expected to produce additional cash yield over our fixed maturity investments while still being in line with our overall conservative investment philosophy.

In the first quarter, the earned yield on our total long-term invested assets, which includes our fixed maturity, commercial mortgage loans and other long-term nonfixed matured investments, was 5.5%. For the full year, we expect the average yield earned on our long-term investments will be between 5.45% and 5.5%. For just the fixed maturity portfolio, we anticipate the earned yield for 2026 will be around 5.3%. While we do own some floating rate investments, they are well matched with floating rate liabilities on the balance sheet.

Now regarding the investment portfolio, invested assets are $22 billion including $19.1 billion of fixed maturities and amortized cost. Of the fixed maturities, $18.6 billion are investment grade with an average rating of A. Overall, the total fixed maturity portfolio is rated A-, same as a year ago. Of our total investment portfolio, only 1% is in senior direct lending and asset-based finance [indiscernible] and another approximately 1% is in traditional private placements.

Our fixed maturity investment portfolio has a net underlying loss position of $1.6 billion due to current market rates being higher than the book yield on our holdings. As we have historically noted, we are not concerned by the unrealized loss position and is mostly the interest rate driven and currently relates entirely to bonds with maturities that extend beyond 10 years. We have the intent and, more importantly, the ability to hold our investments to maturity. Bonds rated BBB comprised 41% of the fixed maturity portfolio compared to 45% from the year ago quarter. This percentage is at its lowest level since 2003.

As we have discussed on prior calls, the BBB securities we acquired generally provide the best risk-adjusted capital-adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets. That said, our allocation of BBB-rated bonds has decreased over the past few years as we have found better risk-adjusted, capital-adjusted value in higher-rated bonds given the narrowing of corporate spreads. While the concentration of our BBB bonds might still be a little higher than some of our peers, remember that we have little or no exposure to other higher risk assets.

Low investment-grade bonds remained near historical lows at $511 million compared to $506 million a year ago. The percentage of below investment-grade bonds to total fixed maturity is just 2.7%, consistent with year-end 2025. The total exposure to both BBB and below investment-grade securities as a percent of our total equity, excluding AOCI, is at its lowest level in over 25 years and is among the lowest of our peers due to our low overall leverage.

Due to the long duration of our fixed maturity liabilities, we predominantly invest in long-dated assets. As such, a critical and foundational part of our investment philosophy is to invest in entities that can survive through multiple economic cycles. While there may be uncertainty as to where the U.S. economy is headed, we are well positioned to withstand a significant economic downturn due to holding historically low percentages of invested assets in BBB and below investment-grade bonds as a percentage of equity. In addition, we have very strong underwriting profits and the long-dated liabilities, so we will not be forced to sell bonds in order to pay clients.

With respect to our anticipated investment acquisitions for the remainder of the year, at the midpoint of our guidance, we assume investment of approximately $800 million to $900 million of fixed maturities at an average yield of between 5.9% and 6.1%. Including the expected investments in commercial mortgage loans and other long-term investments with deadline characteristics, we expect to invest approximately $1.1 billion to $1.2 billion across all asset classes at an average yield of 6.3% to 6.5%.

Now I will turn the call over to Tom for his comments on capital and liquidity.

Thanks, Frank. First, let me spend a few minutes discussing our available liquidity, share repurchase program and capital position. The parent began the year with liquid assets of approximately $80 million and ended the quarter with liquid assets of approximately $85 million. We anticipate ending the year with liquid assets within our target range of $50 million to $60 million. During the quarter, the company purchased approximately 1.4 million shares of Global Life Inc. common stock for a total cost of approximately $205 million at an average share price of $141.24.

We accelerated a portion of our 2026 anticipated share repurchases given favorable market conditions in the first quarter. Including shareholder dividend payments of approximately $20 million, the company returned approximately $225 million to shareholders during the first quarter of 2026.

In addition to liquid assets held by the parent, the parent will generate excess cash flows during 2026. The parent's excess cash flow, as we define it, primarily results from the dividends received by the parent from its subsidiaries less interest paid on debt and is available to return to shareholders and the return in the form of dividends or through share repurchases. We continue to in the growth of our -- invest in our growth through making investments in new business, technology and insurance operations.

It should be noted that the cash received by the parent company from our insurance operations is after our subsidiaries have made these substantial investments and acquire new long-duration assets to fund their future cash needs. We will continue to use our cash as efficiently as possible. We believe that share repurchases provide the best return yield to our shareholders over other available options. Thus, we anticipate share repurchases will continue to be the primary use of the parent's excess cash flow after the payment of shareholder dividends.

In our guidance, we anticipate distributing approximately $90 million to our shareholders in the form of dividend payments over the course of the year, which reflects the recently announced 22% increase in the annual dividend rate per share. In addition, we have increased the range for anticipated share repurchases to $560 million to $610 million for the full year. As a reminder, our excess cash flow estimates for 2026 do not anticipate any additional cash flows to the parent resulting from the establishment of our new Bermuda entity in 2025. As discussed in our last call, we anticipate filing for a simple jurisdiction in the second quarter and we'll provide an update on our next call.

With regards to the capital levels at our insurance subsidiaries, our goal is to maintain capital within our insurance operation at levels necessary to support our current ratings. Globe Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. Although this target range is lower than many of our peers, it is appropriate given the stable premium revenue from a large number of in-force policies, the nature of our protection products with benefits that are not sensitive to interest rates or equity markets, our conservative investment portfolio and strong consistent underwriting margins, which result in consistent statutory earnings at our insurance companies.

As of year-end 2025, our consolidated RBC ratios of our U.S. subsidiaries was 316%, which provides approximately $95 million of excess capital above what is needed to meet our minimum target capital level of 300%. For 2026, we intend to maintain our consolidated RBC within the targeted range of 300% to 320%.

Now with regards to policy obligations for the current quarter. For the first quarter, life policy obligations as a percent of premium declined from 36.3% in the year ago quarter to 35.4%, slightly favorable to management estimates and is consistent with the continued favorable trends in mortality. Health policy obligations as a percent of premium were 56.3% compared to 55.6% from the year ago quarter. This was consistent with management estimates for the quarter, reflecting first quarter claims seasonality at United American.

As a reminder, we intend to update our life and health assumptions annually in the third quarter. And thus, we have -- there have been no changes to our long-term assumptions this quarter.

Finally, with respect to our 2026 guidance. For the full year of 2026, we estimate net operating earnings per diluted share will be in the range of $15.40 to $15.90, represent 8% earnings growth per share at the midpoint of the range. The increase in our prior guidance is probably primarily due to the impact and timing of anticipated repurchases for the share, refined estimates of potential positive impacts of third quarter life assumption updates and increased estimates of full year investment income. The guidance range reflects the estimated before tax benefit from anticipated assumption updates of $70 million to $110 million expected in the third quarter. This range is higher and narrower than last quarter's call due to continued refinement to estimates.

Given the estimated benefit from assumption updates in the third quarter, we anticipate the third quarter life margin as a percent of premium will be in the range of 49% to 54%. We anticipate recent favorable mortality trends will continue through 2026 with full year normalized life underwriting margin as a percent of premium, which excludes the impact of the third quarter assumption update, of approximately 41% at the midpoint of our guidance.

As previously mentioned, we expect health premium to grow in the range of 14% to 17% for the full year. This health premium growth is benefiting not only from strong growth in Medicare Supplement sales in 2020 by -- and anticipated in 2026, but also from approximately $65 million of additional premium from approved rate increases on individual Medicare supplement policies that will be received in 2026, primarily in the last 3 quarters of the year.

Our full year guidance, we anticipate United of Americans health margin as a percentage of premium to be in the range of 8% to 9%. However, we anticipate the average underwriting margin as a percent of premium to be approximately 10% over the last 3 quarters of the year as the impact of premium rate increases are realized.

Finally, I do want to point out that at the midpoint of our guidance, normalized EPS growth, which removes the impact of assumption updates in both '25 and '26 is approximately 11%. At the midpoint of our guidance, the projected 3-year compound annual growth rate of normalized EPS is 11.5%.

Those are my comments. I'll turn the call back to Matt.

Thank you, Tom. Now those are our comments, and we will now open up the call for questions.

[Operator Instructions] Your first question comes from Jack Matten with BMO Capital Markets.

I said one on lapse rate trends, which takes higher. I think especially for first year lapses at American Income. I guess can you talk about what you're seeing in terms of consumer behavior? Is this more kind of macro-driven affordability issues or anything related to distribution? And any thoughts on your outlook for lapse rate trends from here?

Yes. Thanks for the question. Yes, we do expect lapse rates to remain elevated for '26 versus the pre-pandemic. And we've seen that over the past few years as well. And I think the experience we expect is going to be more consistent with last year, given the economic stress that is on our policyholders from the current economic environment and overall price inflation. With regards to AIL, first quarter lapse rate, they definitely were high relative to recent experience. We consider this more of a fluctuation at this point, and we'll continue to monitor it. But no -- really just considered a fluctuation.

I think as we've indicated before, is that we do have impacts from macroeconomic environments. The resiliency of the business, though, is that I would say what we're seeing now is consistent with historical norms and other economic cycles. So we'll get a little bit of fluctuations based on what's going on in the economy. But overall, fairly resilient as that moderates between a fairly narrow band of our experience.

Yes. And Jack, the other thing I was just going to add is that I think when you kind of look at some of the trends at Liberty and even DTC a little bit, some of that is just mix of business. So we do know that the worksite as L&L has continued to grow that site, that worksite business as it's growing some of the lapse rates in the early issue years are always higher than the later issue years. And so is that -- as you continue to grow the sales there, then you -- those renewal lax rates just tend to drift up a little bit. So we do think that we're seeing that a little bit.

And then we talked a little bit just -- some of the lapse rates at DTC on the internet business are just historically higher than what they are. So as that becomes a greater proportion of our total sales, that probably moved that up a little bit. But it is interesting. I think when you look at some of the economic forces, the renewal rates at DTC are continuing to be right in line with prepandemic experience. And so we're not seeing it consistently across the board on all the agencies. [ So that to us ] while the economy has some impact, surely, there's some other factors that are going on with the business that's being written today.

Got it. That's helpful. And maybe just follow up on some of the AI benefits that you referenced in your prepared remarks. I mean any way you could maybe unpack or quantify some of those benefits you expect over time, whether it's on the expense ratio or for productivity? I guess to what extent are you kind of seeing those already? I think you talked about higher productivity at American Income along with agent count trends there. I just wonder if you could talk about how you're seeing that play out so far?

Sure. On the administrative side, what we anticipate is over time as those things get implemented, that we should be able to moderate our expense growth commensurate with our premium earnings growth. And so we would expect a little bit of margin expansion over time as those things get implemented as we're able to grow our revenue faster than our expenses. And so as we implement those right now, we've got a variety of different in addition to what we've deployed pilots going on. So we're very optimistic on the future, as Frank had mentioned in his prepared remarks on where we're headed.

On the sales side, we do anticipate that there will be a benefit. And it kind of shows up in a variety of different areas. We've talked about in the past, our investments in technology, and we have seen improvements in that. So we know that to the extent that we can deploy technology that improves our agent experience and that can be in multiple facets from the fact to the extent that we can onboard and train agents quicker and more effectively and get them producing and more effective sooner. We know our agent productivity will go up, but we also know our agent retention will go up as well. And so anything that we can do there to deploy technology that helps on that agent recruiting and onboarding as well as just overall efficiency, we'll have longer-term gains. And we anticipate that to be a tailwind as we think about what our overall sales growth is going to be in the future. So those are embedded for '26 in our projections, and I anticipate that '27 will be -- continue to benefit from those technologies as we get those rolled out.

Yes. I would just add from an admin expense perspective, we're really looking at the margin improvement, bringing that 7.3% of admin expenses as a percent of premium down closer to 7% a bit over the next few years. And so that's kind of really how we're talking about some of those improvements to be reflected in admin expenses.

Your next question comes from Wilma Burdis with Raymond James.

Could you provide some clarity on what's driving the higher buyback for '26? Just maybe a little bit more color there. Is it related to higher capital generation and other source? Maybe just get into a little bit more detail.

Yes, Wilma, we were able to finalize our 2025 statutory earnings. And as we looked at excess cash flows, it still within the range that I provided on the last call, $600 million to $700 million, but it was just a little bit higher and that allowed us to the opportunity to have some additional share repurchases.

Yes. And then Wilma, I'd just add as far as the kind of the timing was concerned, we really did take a look at the opportunities that kind of presented itself during the first quarter, and there was a period of time where the shares had dropped below $140 per share and really saw that as a good opportunity for us and the shareholders. And so we did take that opportunity to accelerate, do a little bit more in the first quarter than what we had anticipated originally in that quarter.

And then it seems like the life sales agent count and even premium growth are coming in a little bit lower than your prior expectations. Could you just give us a little bit more color on what's driving that, whether it's macro, just something in that kind of [indiscernible] process? Just a little bit of color would help.

Sure. I'd say we need to break it down between the components of our distribution. Liberty is growing both the agent count and the sales growth and consistent with earlier expectations, and we're really pleased with the trend that we're seeing there. From an American income perspective, I've mentioned this before, but our -- when we talk about our incentive compensation at the agent level, we're always trying to strike a balance between incentivizing and rewarding for recruiting and onboarding and training of new agents versus sales. And so what we're seeing is that we're -- the compensation structure is driving a little bit more sales than the sales productivity. And so that's why we have some sales growth, but it's the agent cap growth is behind a little bit of where we had originally anticipated.

We do, as I've mentioned in my prepared remarks, believe that some of the changes that we've made that will be -- that are implemented here at the beginning of the second quarter, those don't turn around things that immediately the day you put them in, takes a little bit of time for that to get into the agency operations and change behavior because when we talk about recruiting new agents, there's a time line and a pipeline associated with that. So we anticipate over the second half of the year, we'll start getting that agent count growth we're looking for.

And then if I talk about the life sales at our direct-to-consumer channel, what's going on there is just we looked at what happened in Q1, we're pleased with the continued sales growth that started the last half of last year. But we just looked at really our comparables of how strong the growth was in Q3 and then into Q4 for 2025. And so we just tempered, I'll say, slightly our sales projections there. Overall, we're still very pleased with the sales growth that we're getting at our direct-to-consumer channel.

And so the nice thing about having the 3 different agencies, particularly if you look at recruiting, is we go to market very similarly on agent recruiting between the 3 agencies. And so when I see growth at 2 of our agencies and strong growth, I know that it's really not a macroeconomic environment concern or issue. It's much more specific to the particular agency growth aspects that we have there. And so that's why I feel very confident about the overall environment provides a good environment for us to continue to grow our agent count across the agencies. So a little bit of tweaks in our compensation system, we think, will play out well because the overall macroeconomic environment, we believe will still be strong for growth going forward.

Your next question comes from Wes Carmichael with Wells Fargo.

I had a question on United American. I think the guidance there. I think your guide for health sales was in the high teens, but you had, I think, 122% growth in the first quarter. Are you thinking that sales growth might be a little bit negative over strong growth last year? How are you thinking about the remaining quarters of 2026?

Yes. You may recall that on the last call, we guided to kind of flat sales, just considering the significant growth that we have in 2025. And really the dynamics that are going on there looked at our strong growth in sales during the first quarter of '26. And that, as a reminder, is a elevated premium levels because our price increases went in for new sales in the first quarter, even though a lot of the in-force premium increases come in primarily in the second quarter. And so we really want to see how the market played out. And so very pleased with that. So we upped our guidance related to our overall year for 2026 sales.

But we are cognizant that when you start looking at our fourth quarter, in particular, sales for the General Agency division, we nearly -- where we over -- we doubled our sales last year. And so really, the sales growth above that is just cognizant that we've got a real high level to continue to grow. And it will be interesting to see is the continued tailwinds that we're seeing right now of the Medicare Advantage market and the benefit that we're getting from Medicare supplement sales, how that plays out for the rest of the year. So it's really not, in our view, a softening over the remainder of the year, just recognizing the high hurdle to overcome to continue to grow on top of that significant growth we had last year.

Yes. I would just say, Q2 and Q3 are probably still slight improvements over last year, but Q4, as Matt said, is what's just a little bit -- right now, we anticipate not quite at that same level.

All right. That's very helpful. And then my follow-up on Bermuda, I know in the prepared remarks, you mentioned that you're working to file reciprocal jurisdiction in the second quarter. But I just want to see, have there been any other developments around that initiative since the last earnings call, either with regulators or expectations around cash flow or near-term reinsurance sessions?

There are really no other developments. We're working through getting our financial statements. The audits complete on those. And so really no changes to kind of our thoughts around the business plan and our expected capital generation.

And I think on the next call, we should have a more significant update based on the activity plan for here in the second quarter.

Your next question comes from Andrew Kligerman with TD. Cowen.

My first question is around the assumption updates, just fantastic to see that come through. You talked about an estimate of 49% to 54% life margin third quarter versus the full year at 41%. So I'm wondering, is this the gift that's going to keep on giving? What should we be thinking about assumption update potentials in 2027, '28, '29? Just it sounds like things have gone really well in terms of your assumptions. And I would like to know how you're thinking longer term about it.

I think, Andrew, first of all, we take a really disciplined approach as far as how we update assumptions and want to actually see the results emerge before we actually make some of those changes to our long-term assumptions. So I think this year is, we are seeing some continued mortality trends that multiple quarters of favorable mortality trends that are informing our assumption update this year. I think if we continue to see those current mortality at these current levels, I think there's always the opportunity or the potential for additional assumption updates as we move forward. So no real quantification of those at this point, but I think there is potential for those.

Well, I think the other thing that is important, past just the third quarter assumption updates and the benefits that we're getting there, which most likely will moderate over time. But that means that we're setting our new long-term assumption at a higher margin, right? So we should have earnings on the book of business overall at a little bit higher level on a go-forward basis because it's just indicative that we don't need as much reserves as we originally thought on that book of business. So that's how I kind of think about it as just the long-term stability and the growth of that underwriting margin, those are kind of indicators that we're resetting to a new higher level since they're positives in the last several -- in Q3 as we've looked at the last several years.

And I think you can really see that, Matt, and looking at normalized underwriting margins over the past few years by moving the impact of the assumption update, you can really see the trend in the overall improvement in underwriting margins.

That's right. The one thing -- Andrew, I was just going -- on your Q3 comments, and as Tom noted, the range on that is in that 49% to 54%. And so if we kind of take that assumption update of 70 to 110 that Tom had in his comments, so you have in that one quarter and 8% to 13% kind of bump, if you will, in that underwriting margin in that quarter, which off of the 41% kind of normalized margin that we're really expecting over the rest of -- in each of the quarters.

Yes, I just -- if we continue to see the current mortality levels that we're seeing today as we continue to see that come in over time, that will work its way into those longer-term assumptions.

That was very helpful. And my follow-up is around the health underwriting margin, 23% in the first quarter. And then you guided to 23% to 27%, which is kind of wide. Agent's wise, could you kind of walk us through the next few quarters? Would it be more likely closer to 23% in the second and then we could see a significant bump in the last 2 quarters? How do you think about the cadence?

No. I think, Andrew, that actually in the remaining 3 quarters, as you would expect that full health margin to be north of 25%, at least we anticipate to be north of 25%. And in fact, you're probably a little bit lower out of those 3 in the fourth quarter just because that's, again, a little bit higher seasonality. So you have a little bit higher claims in that fourth quarter. So that's probably more closer to that 25% range. But then over the -- so that kind of brings up where we were at around 23% up to, again, the midpoint of that range that we give is around 25%. And so I think you'll see -- we expect to see pretty good margins over the next 3 quarters.

Your next question comes from Pablo Singzon with JPMorgan.

First question is with insurance moving in larger volumes from [indiscernible], is there a greater risk of anti-selection from your end? I know most cases, you can underwrite, but I was just wondering if higher sales might have contributed to some of the margin compression you experienced in the health business?

Yes. I don't think it's a function of selection that's impacting the margins in the first quarter. I think it really is some seasonality of claims in the first quarter as well as the fact that the rate increases that we filed last year will largely come into effect in the second, third and fourth quarter. As I mentioned on our last call, the premium increases that we filed for was $80 million to $90 million on a 12-month run rate. And we expect about $65 million to be received over the course of 2026 and then the remainder being received in 2027.

And so we didn't receive very much of that in the first quarter. We'd expect to be on average about $20 million of additional premium in each of the next 3 quarters, which will help improve overall margins. But I don't think it's any selection at this point. So I don't think that's one of the drivers.

Well, yes, there was higher utilization across the entire industry for Medicare supplement over the last couple of years. What is unique to us...

And we have been seeing medical trends really stabilize and be relatively flat over the last couple of quarters. So that actually bodes well as well.

Got it. That makes sense. And then for my second question, so mortality has been a net contributor to your assumption updates in your quarterly [indiscernible] gains. I was wondering if you could speak about the lapse component of your [indiscernible] gains as well as the morbidity side for the health business. Have those factors been generally positive or negative? But clearly, [indiscernible] has been good, but I was just curious about how those other assumptions have been playing out for you?

Yes. On the Life remeasurement gains, it's largely mortality claims, mortality claims that are driving the remeasurement gains. I think it's about kind of in our in our work, we look at kind of how much is mortality and how much is all there, and it's about 70% mortality and 30%, all other things from a remeasurement gain on a quarterly basis. And on the health side, it's -- I think a lot of that is being driven by kind of what the future rate increases are doing to result in remeasurement gains. So that's -- it's more on the impacts to premium -- future premiums than it is on claims, although claims are positive as well overall, providing some health remeasurement gains.

Your next question comes from Randy Binner with Texas Capital.

It's a follow-up to Andrew Kligerman discussion with you on the -- I think you kind of answered more of the quantitative changes with the mortality assumptions. But I was wondering if you could share kind of more like qualitative assessment of like lifestyle behavior. It's just it's a significant shift. It's obviously very positive. But is there something changing with the cohort of insureds that's kind of worth noting in this change in the numbers?

I don't think it's really a function of the cohort changing. I think it is just continued trends and we see continued favorable mortality and part of circulatory [indiscernible]. We see continued trends and favorable cancer death, nonlung cancer gets, which are really favorable. And then the other thing that's maybe happening on a macro basis is the non-medical deaths are actually really seem to be improving, and that would include suicide and homicide and the drug and alcohol abuse. So I think that's probably one area where we're seeing a little bit more improvement from a [indiscernible] purpose that actually impacted the overall mortality.

Yes, I was going to note that on the nonmedical side because in the late teens and then especially in the early days of COVID, we had really seen a spike a lot of the opioid and just some of the other suicides and that type of a thing. And so we really did see a large increase there. It's probably been 7, 8 years ago now and had that for a few years, and that's been really good to see that temper here the last couple of years. And we've seen really -- even though the nonmedical accounts for only about 20% of our claims, we're seeing some really significant changes in that. And I think that does have some impact, as Tom mentioned, they're a result of some of the societal impacts and that type of thing. And maybe some of the battles against the opioid crisis and that type of thing has maybe been a benefit there as well.

That's great color. And then one more, if I could, as a follow-up to the discussion on the American Income agent count. I guess I heard about the initiatives, and I think it was going to describe more of an issue of getting agents in the door. But is there is the retention of folks they are changing at all kind of after year one? Are you kind of keeping the same percentage? Or has that changed as well?

The -- it's a little bit of both. It's a little bit of just recruiting activity, and it's more of the agent retention in the first 6 months. And we really focus on our agent retention in the early days because we are recruiting folks that are new to the industry, some are new to direct sales. And so we know that the extent of people getting onboarded, trained and producing and having a sustainable income really drives that long-term agent retention. So we really focused on the early days. And so again, it's not our -- from a corporate perspective, we're doing all that activity. That is our middle managers out in the field that are spending time, recruiting agents, training them and the whole onboarding process and in addition to they're doing their own direct sales.

And so that's what I'm describing when I say we're trying to make sure that our incentive compensation system appropriately rewards between those 2 activities because it is a balance. There's only a certain number of hours in a day as they would say. And so when I talk about we're tweaking that a little bit, what I really like to see, as I've mentioned, is we've got 3 quarters in a row where we've got improvements in our agent productivity, just that agent count and a little bit higher turnover in that first year than what we've historically seen. So we know we need to move the pendulum. We want to pin on a swing back a little bit and move the incentive a little bit more on focusing on getting those agents trained and onboarded.

So that's kind of the overall dynamics of what's going on with American Income. But like I said, if you look at the growth and the retention at the other 2 agencies that tells us that it's really specific to this particular distribution versus a more macro view.

Randy, I was going to add one more thing to our discussion around some of the mortality trends that we're seeing and that just before we leave that. I think a question that we get fairly often to when we are talking to folks, do we think that the new drugs that are coming out and weight loss treatment and those type of things are, is that being -- having an impact -- and we really do think that's probably a little bit too early, especially for our insured population, just getting access to those drugs and affordability over time.

I mean we're really optimistic that over time that, that -- that could have some really positive benefits to our mortality experience especially some of the side effects from diabetes and those type of things, if they're able to kind of delay death from some of those [indiscernible] health benefits and causes.

And then I kind of look at 2, and I don't think we have this empirically, but you look at the higher utilization that we've been seeing on the [indiscernible] subside and so you have a lot of more senior folks that are going to the doctor more often, they're getting with the doctors. I think people post-COVID -- there's been an increase in just taking care of themselves and getting some of that. I see that in just some of the utilization numbers. And so I tend to think that maybe that has a little bit of some impact on that as well.

Okay. And thanks for the clarification on American Income.

Your next question comes from Suneet Kamath with Jefferies.

I wanted to come back to this idea of the resiliency of your customer base. Clearly, showing up in the first quarter results, but if I just think about what's going on macro-wise with the war, a lot of those developments on things like gas prices sort of happened later in the quarter. So I guess the question is, are you seeing anything as we start traveling through 2Q that suggest that maybe there's incremental pressure? Is it too early to see the pressure from things like higher gas prices?

I think what we've seen historically during different economic cycles is, there might be a little bit of pressure, particularly in that first year. What happens, what we've seen through like early 2000s, great financial crisis, those type of cycles is -- we actually see a benefit a lot of times in growth in sales, growth in agent recruiting. And what we see with the in-force is it's very resilient because after that policy has been in the customers' budget, for a couple of years, it's very resilient. And the renewal persistency rates just do not move very much. And I think that gets back to the affordability of our policies, the average premium, depending on the distribution for a rounding sake is $40 to $60 a month on average. And so that's just not a significant component of a consumer's wallet that they're spending on other things really, that's really not the first or the second place that we've seen that they look to scale back just because it's not significant dollars on a monthly basis as well as it's been in their budget for quite some time.

And the consumer also knows that is kind of a security perspective is that periods of uncertainty or high inflation or things like that, my coverage for my family and the protection orientation of how we sell these products is not something that I really want to get rid of as well as I know if I cancel my policy, but I want it long term, I have to go back through underwriting, requalify and the policy may be more expensive because my age is older, my health may be in a different spot than I originally took it out. So from our perspective, as we look at it over decades, we see slight movements, but we do not see significant movements from that resiliency perspective.

And I would just say what we're really hearing from the field in more recent times. And is that while there might be a little bit harder, you're not really seeing a major pushback from the consumers at this point in time. And maybe it's an extra call we get the sales. I mean the thing that helps having the exclusive distribution and contractors wanting to make their own money. And so they're maybe they have to make an extra call or 2 during the week in order to get a sale, but they're continuing to work because they want to have their level of income.

And then I would say Matt noted on prior calls as well, and we've been seeing this quarter too where that average premium just continues. We would think that if we're seeing to a lot of stress within the consumer that they would choose down, and they would say, maybe I can't afford $35 a month. I really want to have this. Let me add something for $25 a month, but we're really not seeing that. We're still continuing to see the average premium monitor issues holding steady, if not decreasing just a little bit.

Okay. That's helpful. And then I wanted to circle back to AI real quick. It was helpful to get some of your thoughts on where the expense ratio could go. But are you seeing any additional threats emerge in terms of your target customer base or your distribution channels where new entrants are coming in, that may have a different distribution strategy to sort of attack your target market?

Yes. I think what's important there is a vast majority of our growth in sales are coming through exclusive agency channels. We don't see or experience a lot of competition in those channels at the at the time of sale. Our agents are out generating their own activity, referrals, working leads, those type of things. And so it's not sold to consumers that are actively looking for a supplemental health policy today or basic protection life products today. The direct-to-consumer channel is more subject to competition because that is going after consumers that are actively looking and shopping and things like that. And so we do recognize there's a little bit more challenges as AI comes into play from entrance. And frankly, that's an easier market to get into from a new entrant perspective, the barrier to entry, the cost of entry is a lot less than agency sold business.

And so that's why I mentioned earlier, we think AI is going to be a benefit to our agency sold business. It's not subject to a lot of competition. It's harder for new entrants to get into that market. And the beauty about our marketplace is that a significant number of people in our targeted demographic is not -- income demographic is not saturated. So when we sell more we are not having to take market share from somebody else. Over 50% of that population doesn't have life insurance and then it's even more significant when you talk about underinsured or they just get a little bit through work that doesn't travel with them because it's a group policy.

And so we're very optimistic of where that goes, and we are focused on more direct competition in our direct-to-consumer channel. That's why you'll hear us over time, we think that's more of a low single-digit growth because there is going to be a certain subset of the population. We believe that's smaller that is more active and looking than the majority of our agents sold business.

Our next question comes from Mark Hughes with Truist.

Just a quick one for me. You talked about the investment in lead generation. Can you talk about the trajectory you're spending there, whether they're are any new technologies or new approaches you're using? And does AI have any meaning for lead generation?

Yes. And so a lot of our lead generation is coming through our direct-to-consumer advertising. And so the benefit that we've had over the last year or 2 has been capitalizing on that investment spend and not just converting that advertising spend into sales of just the direct-to-consumer channel, but a lot of the leads and inquiries that we're getting, we're moving that to an agency channel that has a higher conversion rate. So we have significant growth in just the total volume of leads, which would be equating to the spend in that area last year. And as I mentioned in my prepared remarks, we're probably going to be another 5% or 10% growth in the number of leads.

The dynamic going on there is, over the last several years, until 2025, you heard me talk about we continue to scale back our advertising spend because the costs were going up and the lease conversion was going down. Well, now that our overall aggregate conversion ratio is going up when I look across both our direct-to-consumer and agency channel, that gives us more money to spend on generating more leads. So we're increasing our advertising spend to generate more leads. And that will be something that continues to grow in itself.

So to the extent that we have this better conversion, we have more leads being utilized by our agencies. I anticipate throughout '26 and then into '27, if that trend continues, to continue to spend more on advertising that benefits both sides of the equation, meaning both our direct-to-consumer and agency channels.

So as far as the AI business in that -- no, I was going to say, I think you had a comment about AI is that on the consumer channel -- as you might imagine, the way consumers may be looking for life insurance or responding to ads, I believe that a lot of these AI platforms are going to convert into some sort of advertising revenue model. And we will be there as part of that. And I think that's where our deep experience in advertising in these online channels will come into play. And frankly, the volume of dollars that we spend is very significant. With some of the big platforms we participate in their beta programs, and we're there with the seat at the table, so to speak, with these advertising platforms as they look to convert and monetize some of this AI technology. And it's much like what we saw in some of the early days with Facebook and some of the others as they convert into advertising platforms.

Your next question comes from Ryan Krueger with KBW.

Just a quick one. On the life margin, and maybe this is -- there's some rounding here, but I think you said you expected 41% in the fourth quarter. I would have thought there would be some improvement given the lower net premium ratio after you factor in the remeasurement from the assumption review in the third quarter. So just curious how you're thinking about the benefit on a go-forward basis from the assumption for [indiscernible]?

Yes. Right. I think fourth quarter is one of those quarters that also has a little bit of seasonality in it. So that offsets some of the benefit that you get from a lower net premium ratio. And then also, the net premium ratio changes are relatively small. I mean, there are small incremental changes that happen each time we make an assumption update. But I think for the fourth quarter, it's probably more of a seasonality thing.

Okay. Maybe just one follow-up on that issue is -- would you expect -- do you think 41% roughly is the right margin at this point, stripping out assumption review impacts? Or could there be some upside as we go out further?

I do. I think that's a pretty good normalized underwriting margin. We've seen mortality come down, so obligation ratios have come down. We've talked about amortization coming up a little bit, but it's really kind of aligning around that 41%.

And I think, Ryan, you got to think of it as around that. So if it's 40%, it could be if it 41.1%, 41.2% we're still thinking of that as being around 41%, same as 40.8% or something like that. So it's going to move by a few tenths of a point, but it's going to be pretty close to around that. So you do have some of the impact of the amortization that's coming into play as well.

I'd just add that, and that continues to grow just a little bit each quarter, just as the new renewal commissions at American Income come into amortization. So you'll see some benefits on the policy obligation percentage a little bit more than that. I think that gets offset a little bit by the higher amortization.

Your next question is a follow-up from Wilma Burdis with Raymond James.

Just wanted to confirm. I know you mentioned earlier that the cash flow generation was a little bit towards the higher end of the range. So if you could just give us a little bit more clarity on where the cash flow generation ended up? Just remind us of the range? And then if there was anything in particular that drove it towards the higher end?

Yes. Last quarter, excess cash flow, I said was going to be between $600 million and $700 million. I think as I look at it now, probably narrow that range to $650 million to $700 million. And so that excess cash flow, the midpoint of that is right around the $675 million side.

We got -- we have a better visibility, clearly, on the amount of dividend distributions coming out of the sub from that perspective. So you're down -- the downside clearly is much less, but -- and we're able to kind of get the sense of that as Tom said, in that upper part of the $600 million.

That concludes our Q&A session. I will now turn the conference back over to Stephen Mota, Vice President of Investor Relations for closing remarks.

All right. Thank you for joining us this morning. Those are our comments, we'll talk to you again next quarter.

That concludes today's call. Thank you for attending. You may now disconnect, and have a wonderful rest of your day.

Hello, and welcome to Globe Life Inc. Fourth Quarter Earnings Release Call. My name is Jim. I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions]. I will now hand you over to your host, Stephen Mota, Senior Director of Investor Relations, to begin today's conference. Thank you, sir.

Thank you. Good morning, everyone. Joining the call today are Frank Svoboda; and Matt Darden, our Co-Chief Executive Officers; Tom Kalmbach, our Chief Financial Officer; Mike Majors, our Chief Strategy Officer; and Brian Mitchell, our General Counsel. Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our earnings release 2024 10-K and any subsequent Forms 10-Q on file with the SEC. Some of our comments may also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures. I will now turn the call over to Frank.

Thank you, Stephen, and good morning, everyone. In the fourth quarter, net income was $266 million or $3.29 per share compared to $255 million or $3.01 per share a year ago. Net operating income for the quarter was $274 million or $3.39 per share, an increase of 8% over the $3.14 per share from a year ago. For the full year 2025, net operating income was $14.52, $0.02 above the midpoint of our previous guidance.

On a GAAP reported basis, return on equity through December 31 is 20.9% and book value per share is $74.17 excluding accumulated other comprehensive income, or AOCI, and return on equity of 16% and book value per share as of December 31 is $96.16, up 11% from a year ago.

Before discussing the third quarter insurance operations, I would like to say a few words about the nature of our business. As I reflect on the results of the past year, I remain confident that our business model effectively positions us for future success. Globe Life helps provide financial security in the vastly underserved, lower middle to middle-income market that has largely been ignored by the financial services industry.

We distribute basic protection products that are simple for agents and consumers to understand and are designed specifically to meet the needs of this market. Studies indicate that over 50% of Americans are underinsured. As such, we have a significant sustainable growth opportunity without having to compete for market share with other insurance companies.

The history of growth at Globe Life is clearly demonstrated by both our recent and long-term results, and we are fully focused and confident in our ability to continue to grow in the future. We are honored to serve this market and grateful to have the opportunity to make tomorrow better for millions of working families.

Now in our insurance operations. Total premium revenue in the fourth quarter grew 5% over the year ago quarter. For the full year 2026, we expect total premium revenue to grow approximately 7% to 8%. Life premium revenue for the fourth quarter increased 3% from the year ago quarter to $850 million. Life underwriting margin was $350 million, up 4% from a year ago, driven by premium growth and lower overall policy obligations.

In 2026, we expect life premium revenue to grow between 4% and 4.5% compared to 3% growth for the full year 2025. As a percent of premium, we anticipate life underwriting margin to be between 41.5% and 44.5%. In health insurance, premium revenue grew 9% to $392 million, and health underwriting margin was also up 9% to $99 million. In 2026, we expect health premium revenue to grow in the range of 14% to 16% compared to 9% growth for 2025.

This is due to strong sales activity and premium rate increases on our Medicare Supplement business. As a percent of premium, we anticipate health underwriting margin to be between 23% and 27%. The midpoint of the range is slightly below the underwriting margin percentage for 2025, primarily due to the strong premium growth expected in 2026 from our United American General Agency division which does have a lower underwriting margin percentage than our other distributions.

Administrative expenses were $92 million for the quarter, an increase of approximately 1% over the fourth quarter of 2024. As a percent of premium, administrative expenses were 7.4%. In 2026, we expect administrative expenses to be approximately 7.3% of premium the same as in 2025. I will now turn the call over to Matt for his comments on the fourth quarter marketing operations.

Thank you, Frank. Now as a reminder, I mentioned last quarter that while growth in our agent count has historically been subject to frequent short-term fluctuations, we continually see significant long-term growth. Over the last 10 years, our agent count has nearly doubled, and I am confident we can continue to see strong long-term growth due to the enormous pool of potential agent recruits and the opportunity that we provide. Our recruiting strategy does not target insurance agents. We are simply recruiting individuals from all walks of life who are looking to improve their financial position and have more control over their career.

Now let's discuss the results of each distribution, starting with our exclusive agencies. At American Income Life, the life premiums were up 6% over the year ago quarter to $457 million. The life underwriting margin was up 5% to $208 million. In the fourth quarter, net life sales were $102 million, up 10% from a year ago. The average producing agent count for the fourth quarter was 11,699, down 2% from a year ago.

While we generated strong recruiting activity, we had more agent turnover than expected. Now this is not always a bad thing as it can result in a more productive agency depending on the quality of the agent's loss. The 10% sales growth this quarter was due to better overall agent productivity. That being said, we place great importance on agent retention and have introduced an initiative to emphasize agent retention to help ensure continued agency growth.

Now at Liberty National, the life premiums were up 4% over the year ago quarter to $98 million, and the life underwriting margin was up 6% to $36 million. Net life sales were $28 million, up 6% from the year ago quarter. Net health sales were $9 million, roughly flat from the year ago quarter. The average producing agent count for the fourth quarter was 3,965, up 6% from a year ago. I believe the initiatives that I had mentioned last quarter are having a positive impact and I'm confident we will continue to see growth at this agency as we move forward.

At Family Heritage, health premiums increased 10% over the year ago quarter to $121 million, and the health underwriting margin also increased 10% to $44 million. Net health sales were up 15% to $31 million due to increases in agent count and productivity. The average producing agent count for the fourth quarter was 1,640, up 8% from a year ago. We've now seen 6 consecutive quarters of strong agent count growth for Family Heritage resulting from the continued focus on recruiting and growing agency middle management.

In our direct-to-consumer division at Globe Life, the life premiums were approximately flat over the year ago quarter to $244 million while the life underwriting margin increased 3% to $74 million. While life premiums were flat this quarter, net life sales were $29 million, up 24% from the year ago quarter. We are excited to see this continued sales turnaround from the declining trend of recent years. As we've mentioned before, new technology introduced earlier this year, has helped improve the conversion of customer inquiries into sales without incurring incremental underwriting risk. The resulting margin improvement has allowed us to increase marketing volume and further grow direct-to-consumer inquiries and sales.

Now we've also seen improved conversion of the direct-to-consumer leads shared with our agencies, which has also contributed to margin improvement, allowing us to invest more heavily in advertising further increasing lead volume, which in turn leads to sales growth in both our direct-to-consumer and agency channels. We expect this division to increase leads generated for our 3 exclusive agencies during 2026 by approximately 10%.

United American is our General Agency division, and here, the health premiums increased 14% over the year ago quarter to $173 million and this is driven by sales growth in Medicare Supplement rate increases that we have discussed previously.

Health underwriting margin was $8 million, up $2 million from the year ago quarter. Strong activity across the entire agency resulted in net health sales of $77 million, an increase of approximately $47 million over the year ago quarter. We attribute this tremendous growth primarily to the significant movement of Medicare beneficiaries for Medicare Advantage plans to Medicare Supplement plans. As a result -- as a reminder, we do not market Medicare Advantage plans.

Now I'd like to discuss our projections and based on recent trends and our experience with our business, we expect the average producing agent count trends for the full year 2026 to be as follows: at American Income, mid-single digit growth; Liberty National, high single digit growth; and at Family Heritage, low double digit growth.

Net life sales for 2026 are expected to be as follows: at American Income, high single digit growth; Liberty National, low double digit growth; and direct-to-consumer, mid-single digit growth. Net health sales for 2026 are expected to be as follows: for Liberty National and Family Heritage, both low double digit growth.

Now for United American, considering we nearly doubled our sales in 2025, we are currently projecting flat sales growth for 2026. We acknowledge there are considerable dynamics in the Medicare marketplace, and we will refine our estimates as we move through the year. I'll now turn the call back to Frank.

Thanks, Matt. We will now turn to the investment operations. Excess investment income, which we define as net investment income less only required interest was $31 million, down approximately $8 million from the year ago quarter. Net investment income was $281 million, approximately flat while average invested assets grew 1%.

Required interest is up approximately 3% over the year ago quarter, relatively consistent with growth in average policy liabilities. Net investment income was negatively impacted in the current quarter by lower average invested asset growth. As discussed on prior calls, and lower average earned yield on our short-term direct commercial mortgage loan and limited partnership investments as compared to a year ago.

Net investment income also declined sequentially from the third quarter as we had very good returns from our limited partnership investments in the third quarter, but that returned to more normal levels in the fourth quarter. As a reminder, the income reported from these investments is based on income earned by the partnerships in the quarter and will vary from quarter-to-quarter.

In addition, we held a little more cash during the current quarter than normal, due to the Bermuda reinsurance transactions executed in the quarter. For the full year 2026, we do expect net investment income to grow between 3% and 4%, required interest to grow around 4% and excess investment income to be relatively flat.

Now regarding our investment yield. In the fourth quarter, we invested $131 million in fixed maturities, primarily in the financial and industrial sectors. These investments were at an average yield of 6.23%, an average rating of A- and an average life of 27 years. We also invested approximately $145 million in commercial mortgage loans and limited partnerships with debt like characteristics and an average expected cash return over time of approximately 9% to 10%.

These non-fixed maturity investments are expected to produce additional cash yield over our fixed maturity investments while still being in line of our overall conservative investment philosophy. For the entire fixed maturity portfolio, the fourth quarter yield was 5.29%, up 2 basis points from the fourth quarter of 2024, including the investment income from our other long-term nonfixed maturity investments.

Fourth quarter earned yield was 5.4%. While we do own floating rate investments, they are well matched with floating rate liabilities on the balance sheet. Invested assets are $21.7 billion, including $18.8 billion of fixed maturities at amortized cost. Of the fixed maturities, $18.3 billion are investment grade with an average rating of A. Overall, the total fixed maturity portfolio is rated A-, same as a year ago.

Our fixed maturity investment portfolio has a net unrealized loss position of $1.2 billion due to the current market rates being higher than the book value on our holdings. As we have historically noted, we are not concerned by the unrealized loss position as it is mostly interest rate driven and currently relates entirely to bonds with maturities that extend beyond 10 years. We have the intent and, more importantly, the ability to hold our investments to maturity.

Bonds rated BBB comprised 42% of the fixed maturity portfolio compared to 46% from the year ago quarter. This percentage is at its lowest level since 2003. As we have discussed on prior calls, the BBB securities we acquire generally provide the best risk-adjusted, capital-adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets. That said, our allocation of BBB rated bonds has decreased over the past few years as we have found better risk-adjusted, capital-adjusted value in higher-rated bonds given the narrowing of corporate spreads.

While the concentration of our BBB bonds might still be a little higher than some of our peers, remember that we have little or no exposure to other higher-risk assets such as derivatives, equities, residential mortgages, CLOs and other asset-backed securities. Below investment-grade bonds remain near historical lows at $521 million compared to $529 million a year ago.

The percentage of below investment-grade bonds to total fixed maturities is just 2.8%, consistent with the year-end 2024. The amount of our below investment-grade bonds at just 6.7% of our total equity, excluding AOCI, is at its lowest percentage of equity at any year-end in over 25 years.

Due to the long duration of our fixed maturity liabilities, we invest in long-dated assets. As such, a critical and foundational part of our investment philosophy is to invest in entities that can survive through multiple economic cycles. While there may be uncertainty as to where the U.S. economy is headed, we are well positioned to withstand a significant economic downturn due to holding historically low percentages of invested assets in BBB and below investment-grade bonds as a percentage of equity. In addition, we have very strong underwriting profits and long-dated liabilities, so we will not be forced to sell bonds in order to pay claims.

With respect to our anticipated investment acquisitions for the full year 2026, at the midpoint of our guidance, we assume investment of approximately $900 million to $1.1 billion in fixed maturities at an average yield between 5.9% and 6% and approximately $300 million to $400 million in commercial mortgage loans and limited partnership investments with debt-like characteristics and an average expected cash return over time of 7% to 9%.

Also at the midpoint of our guidance, we expect the average yield earned on the fixed maturity portfolio to be around 5.3% for the full year 2026. With respect to our nonfixed maturity long-term investments, we anticipate the yield impacting net investment income to be in the range of 7% to 8% for 2026. In total, including these additional investments, we anticipate the blended earned yield to be approximately 5.4% to 5.5%. Now I will turn the call over to Tom for his comments on capital and liquidity.

Thanks, Frank. First, I'll spend a few minutes discussing our available liquidity, share repurchases and the capital position. The parent began the year with liquid assets of approximately $90 million and ended the year with liquid assets of approximately $80 million. In the fourth quarter, the company repurchased approximately 1.3 million shares of Globe Life Inc. common stock for a total cost of approximately $170 million at an average share price of $134.44.

For the full year, we purchased 5.4 million shares for a total cost of $685 million at an average share price of $126.41. Including shareholder dividend payments of approximately $85 million, the company returned approximately $770 million to shareholders during 2025. In addition to the liquid assets held by the parent, the parent will generate excess cash flows during 2026.

The parent company's excess cash flow, as we define it, results primarily from the dividends received by the parent from its subsidiaries, less interest paid on debt and is available to return to its shareholders in the form of dividends and through share repurchases. We invest -- we continue to invest in our growth through making investments in the business, in new business, technology and insurance operations. It should be noted that the cash received by the parent company from our insurance operations is after our subsidiaries have made these substantial investments and acquired new long-duration assets to fund their future cash needs.

In 2025, parent excess cash flow, excluding the benefit of extraordinary dividends, was approximately $620 million. Although statutory results are not yet final, for 2026, we anticipate excess cash flow to increase to approximately $625 million to $675 million, given recent favorable mortality trends and growth in premium.

We will continue to use our cash as efficiently as possible. We still believe that share repurchases provide the best return or yield to our shareholders over other available alternatives. Thus, we anticipate share repurchases will continue to be the primary use of parent's excess cash flow after the payment of shareholder dividends.

In our guidance, we anticipate distributing between $85 million to $95 million -- sorry, $85 million to $90 million to our shareholders in the form of dividend payments with the remainder being used for share repurchases in the range of $535 million to $585 million. We anticipate liquid assets at the parent to be in the range of $50 million to $60 million at the end of 2026.

Now with regards to the capital positions at our insurance subsidiaries. Our goal is to maintain capital within our insurance operations at levels necessary to support our current ratings. Global Life targets a consolidated company action level RBC ratio in the range of 300% to 320%.

Although this target range is lower than many of our peers, it is appropriate given the stable premium revenue from our large number of in-force policies, the nature of our protection products with benefits that are not sensitive to interest rates or equity markets. Our conservative investment portfolio and strong consistent underwriting margins, which result in consistent statutory earnings at our insurance companies.

Since our statutory financial statements are not yet final, our consolidated RBC ratio for year-end 2025 is not yet known. However, we anticipate the final 2025 RBC ratio will be within our targeted range.

During the quarter, we finalized the licensing and formation of Globe Life Re LTD, a Bermuda reinsurance affiliate for the purposes of reinsuring a portion of new business and in-force life insurance policies issued by Globe Life affiliates and executed the initial reinsurance transactions.

As previously noted, we estimate parent excess cash flow will increase from incremental earnings from our U.S. and Bermuda subsidiaries over time as the reinsurance block grows. We anticipate parent's annual excess cash flow will increase over time toward $200 million as earnings emerge from reinsurance additional in-force and new business. This additional excess cash flow will enhance the financial strength of the company and will provide additional financial flexibility for the parent to support growth.

Now with regards to policy obligations for the current quarter, for the fourth quarter, policy obligations as a percent of premium has declined from 36.7% in the year-ago quarter to 35.4%, consistent with continued favorable trends in mortality. Health policy obligations as a percent of premium were 53.7% compared with 54.1% from the year ago quarter. For United American individual Medicare supplement claim trends have been relatively stable. However, we did see seasonally high claims in the fourth quarter for both individual and group health products.

Now with regards to our full year underwriting margins, normalized for the impact of assumption updates. As I mentioned on previous calls, as required by GAAP accounting standards, each year, we review and generally update actuarial assumptions for mortality, morbidity and lapses, and we have chosen to do this in the third quarter each year.

When assumptions changes are made, GAAP accounting standards require a cumulative catch-up adjustment. This cumulative catch-up is the assumption related remeasurement gain or loss, an assumption remeasurement gain lowers the reserve balances and indicates an improved outlook as less premium is needed to fund reserves to meet future policy obligations. The opposite is true if there is an assumption remeasurement loss.

To better understand the performance of the business for the full year, we think it is beneficial to look at normalized underwriting margins, which exclude the impact of assumption changes and provide an improved basis for comparison of year-over-year results. For the full year 2025, normalized life underwriting margin as a percentage of premium increased to 41% compared with 39.7% for the prior year.

Normalized life policy obligations as a percent of premium improved by over 2 percentage points from the prior year due to favorable mortality trends but was partially offset by higher amortization of acquisition costs. Normalized health margin as a percent of premium was 25.4% compared with 27.3% for the prior year and is reflective of higher claims experience and the timing of premium rate increases during the year at United American.

Finally, with respect to our '26 guidance. For the full year '26 we estimate net operating earnings per diluted share will be in the range of $14.95 to $15.65, representing 5% earnings per share growth at the midpoint of the range. This is an increase from our prior guidance related primarily to continued improved mortality and experience trends that we are monitoring, including anticipated positive impacts from life assumption updates that will occur in the third quarter. In addition, we are anticipating higher health underwriting margins given the strong premium growth at United American.

Normalized earnings per share growth, which removes the impact of assumption updates in both 2025 and in the midpoint of 2026 is approximately 10%. At the midpoint of our guidance, we anticipate total premium revenue growth of 7% to 8% with life premium growth growing 4% to 4.5% and health premium revenue growth growing 14% to 16%.

Health premium growth is benefiting not only from strong growth in Medicare Supplement sales in 2025, but also $80 million to $90 million of additional annualized premiums resulting from approved rate increases on individual Medicare Supplement policies that would be phased in throughout 2026 and fully implemented by 2027.

Recall the majority of these rate increases will be effective beginning in the second quarter of 2026. As a result, this delay, along with seasonally high claims typically incurred in the first quarter, we anticipate United American's health margin percentage in the first quarter will be lower than the full year margin percent of 8% to 10%.

However, we anticipate an average of 10% to 11% in the last 3 quarters of the year as the full effect of the premium rate increases is realized. We anticipate underwriting margins as a percent of premium to be in the range of 41.5% to 44.5% for the Life segment and 23% to 27% for the Health segment.

In our guidance, we anticipate recent favorable trends will continue through 2026. Given this, our '26 guidance range reflects an estimated third quarter benefit from assumption updates and resulting remeasurement gain of $50 million to $100 million, which is expected to increase the life margin as a percent of premium in the third quarter to a range of 48% to 52%. Those are my comments. I'll now turn it over to Matt.

Thank you, Tom. Those are our comments, and we will now open up the call for questions.

[Operator Instructions] Our first question today will come from the line of Jimmy Bhullar at JPMorgan.

I had a couple of questions. First was just on the first year lapses. They seem to pick up across various channels, especially in direct response. So hoping that you could give us some color on what's going on there.

Yes. Thanks, Jimmy. Yes, we -- you're definitely right. First quarter lapses for direct-to-consumer and actually Liberty National were actually a little bit higher than what we had expected. At this point, we see them as fluctuations and we'll continue to monitor them.

On DTC, our sales increases are primarily coming from the internet channel, which we actually see higher lapses on the internet channel. So a little bit higher, not to be unexpected, but it was higher than what we would have anticipated from that channel. The one thing I'd say is I think the growth in sales, even with a little bit higher lapses is a positive because it does add to underwriting margins overall, but it is something we'll continue to pay attention to..

Then on MedSup, maybe if you could just talk about the dynamics between MedSup and med advantage. Historically, obviously, with the Republican government, you'd assume med advantage was going to grow this time it's sort of going in the opposite direction.

But the 2 questions I had on that was, do you expect like -- I'm assuming your outlook for growth in MedSup is fairly constructive. And if that is correct, then if we think about, you filed prices, I think, around the middle of last year, maybe third quarter or so. And since then, claims trends have stayed elevated.

So should we assume that you'd have to sort of go through around the price increases to get the margins on the business that you've signed to more of a normal level. So maybe we should expect slightly weaker margins initially and then improved after you implement the higher prices.

Yes, Jimmy, on the claim trends, we've actually see claim trends stabilize in the third and fourth quarter. So that's different than what we saw in 2024, where we had seen claim trends increase in the third and fourth quarter. So those trends that we've seen recently are actually a little bit less than the anticipated trends that we had in our rate increases.

So we do feel like the rate increases that we got approvals for are adequate to bring us over the course of '26 and into '27 back to kind of our normal margins in that 10% to 12% range. As I mentioned in my comments, we'd expect 10% to 11% in quarters 2, 3 and 4 of 2026, and those rate increases will carry into the first quarter of '27 as well.

Yes, I'd probably just add just kind of a reminder that fourth quarter would just as -- again, seasonality would be probably just a little bit on the lower end of that range and probably just slightly behind where second and third quarter would have been. And then really, as you get all that rate increase fully into 2027, that's where we would really anticipate getting back into those more normal levels that you get it for the full year.

And then I'll touch on your market trend. Obviously, our results are very strong for the fourth quarter. A lot of that is, we believe, the dynamic of what's going on with Medicare Advantage market and people continuing to find value in Medicare Supplement. There's been a lot of discussion related to the government reimbursement rates and associated impact on Medicare Advantage. Carriers as well as what they're doing from either premium increase, cost reductions or scaling back.

We see that also on the provider side of scaling back, taking Medicare Advantage plans. All of those are beneficial to us for a marketplace perspective. I think it is going to be very interesting to see how Q1 and Q2 play out with the dynamics of that market. As we've mentioned before, we are pricing for profitability. We're not pricing just to gain market share.

And so it's very important, as Tom has mentioned, the management of our rate increases consistent with our claims performance is very important for the overall profitability of that block of business. And we're clearly, from what we see, not out of line with what other carriers are experiencing nor the rate increases that we're requesting which bodes well for our premium earnings in 2026.

And so there -- the sales side is really hard to predict right now, but we had tremendous growth in the current -- well, prior year now 2025. And so it will be -- we'll really see how things come through as we get into the first and second quarter of this year.

Maybe one other thing to mention, Jimmy, is just as we think about claim trends is, CMS did introduce prior authorization requirements for traditional Medicare Supplement starting in 6 states in 2026. So I would like to see kind of how that impacts overall claim trends. But I think overall, it should be a favorable impact as they try to reduce fraud, waste and other abuses that they've seen in the Medicare program.

Our next question today will come from Wilma Burdis at Raymond James.

Sales have been quite strong in the last few years, even probably stronger than the long term. And you cited some efficiencies there with branding and lead sharing and sourcing. Is there more tailwind to unlock there? Or has a lot of that work been done there?

No. I think as we continue to leverage on our technology investments, I think we'll continue to see tailwinds from an efficiency perspective. On the agency side, I think there's still more to unlock. There's a variety of technology that has been implemented, but there's a lot of things on the horizon that we are in process that will come online and in '26 and '27.

So I think that will continue to help our agent productivity, which clearly drives sales growth and drives it a little bit faster to the extent that we do that effectively, drives it a little bit faster than our agent count growth, which is our overall goal with those investments.

And then the technology on the DTC side, the way we market, as was mentioned, a significant amount of those sales are coming from our online channel. And as we market and target customers that are in our demographic that are looking for our type of product, the sophistication there from a technology perspective continues to be a significant focus of ours, and we continue to invest in that area.

And I think that's why you'll continue to see growth trends there as well as just any sort of efficiency that we have through the distribution model. So we've talked about of converting people that are interested, those leads and inquiries into ultimate sales and then keeping them on the books through a great customer experience will continue to benefit us going forward.

So I don't -- I'd say my punchline to all that is, I don't think we fully achieved all that we can through the use of technology enhancements, but we'll continue to focus on that in the coming days to get the growth that we're looking for.

Great to hear. Could you talk a little bit about remeasurement gains, which were strong in both life and in health, which actually reversed recently, but health remeasurement gains look pretty strong. Can you just go into a little bit more detail on the drivers there and how you expect that to trend?

Yes. With regards to kind of what I'd say is quarterly actual to expected remeasurement gains. We are seeing life mortality experience and lapse experience that's favorable relative to our long-term assumptions. And similarly, on the health side as well. I think we continue to expect mortality to continue at kind of where they've been recently, which would result in continued life actual to expected remeasurement gains. And as we're looking at that experience and looking to see how the first quarter and second quarter emerge we kind of follow our process of updating assumptions.

We'd also, as I mentioned, expect an assumption remeasurement gain in the $50 million to $100 million range in the third quarter of 2026. Now when we make those assumption changes, I think we can -- depending upon where we set those long-term assumptions, I think that we would continue to see remeasurement gains potentially even in the third and the fourth quarter of next year as well. So I don't think we'd necessarily eliminate all of them.

For the health side, it's a little bit different is health the premium rate increases on the health side will help our ability to generate experience that could produce continued remeasurement gains. But the health side remeasurement gains are much more volatile just because of the way Medicare Supplement and the rate increases are applied to in the reserve practices is just a little bit unique versus our normal supplemental health business. So we will see a little bit of volatility around remeasurement gains and losses in the health line.

Our next question will come from Jack Matten at BMO.

First question I have is on excess cash flow. I think the guidance this year is the same midpoint, and that's before even with a higher GAAP earnings outlook. So I guess that's partly related to the kind of the GAAP assumption remeasurement gain that you're embedding now. But anything else that's different across GAAP versus statutory that we should be thinking about there.

Yes. And I'm sorry, Jack, you're just a little bit -- it's hard to understand your question, but I think it was looking for differences that were kind of happening that we're seeing on the GAAP or the statutory side that was impacting the excess cash flows.

I mean I think in what Tom was providing from his guidance of $625 million to $675 million, we are just seeing that is really being driven in and of itself by just good solid statutory earnings in 2025 that then convert into dividends to the parent company in 2026. That is growing a little bit over, I'm going to say the normal statutory earnings that we had in the prior year there.

Of course, we had some extraordinary dividends in 2025 that were brought up as well. But if you kind of pull those out, we're seeing just a nice increase. I feel better that we're actually at a kind of another level with respect to our statutory earnings and therefore, the cash flow generation at the parent company.

No real significant changes in the statutory or the GAAP models. If you think about '25 or even '26 at this point in time, that's really impacting it, like we maybe it had in some of the prior years.

Yes. And just for clarity, we don't expect any benefit from the Globe Life Re Bermuda transaction in 2026 at this point in time.

And to the extent that, that changes at all, over the course of the year, as we talk to our regulators, we'll be sure to disclose that and talk about that on future calls.

Great. And then a follow-up on the American Income agent count. I know that there's usually like a stair-step pattern over time, but it looks like a bit of a larger drop this quarter than what we usually would see. Any sense on what's driving that? And then any more detail on the retention initiatives that you referenced in your prepared remarks?

Yes. I would say for American income, it is not uncommon for the fourth quarter end of the year for agent count from a sequential basis to go down. If you look at 3 of the last 4 years, we've had that phenomenon. So I'd say it's not unexpected. Typically, we see those agents that may be struggling with their productivity and production kind of toward the end of the year, may be a time that they fall off.

What we're doing from a focus on that perspective is, as we've talked about in the past, it's our middle management and managers that are out there recruiting, training, onboarding and retaining agents. And so we're looking at some incentives changing their incentive compensation a little bit to continue to focus on that agent retention. So those will go in towards the beginning of the year, and then obviously, they take a little bit of time to get implemented.

And so like I said, if you look at it over a long term, it's not a concerning trend. That's why we're projecting that we're going to have agent count growth. But overall, we are focused on the productivity of our entire agency and that continues to be very strong for all our agencies, but including American Income. And so I think that's why you see little bit higher sales growth than just the agent count growth. Again, quarter-to-quarter, we're going to get some of those fluctuations.

We'll take our next question from Andrew Kligerman at TD Cowen.

I want to stay on Jack's question with regard to sales. So it sounds like you're going to put the retention initiatives in place this year. So that wasn't the case last year. So I guess that explains why you cited average producing agents going up mid-single digit and then at American Income and then net life sales going up high single digit. So maybe that's -- I'm trying to get at the productivity a little bit more.

What drove it up in the fourth quarter to see a 2% drop in average producing agents with a 10% increase in sales? Was it -- I think you touched on earlier, those -- the lead generation coming from direct-to-consumer, but I can see that you're baking in more productivity even going forward. So trying to get it better. I'd like to get a better understanding of what's driving that.

Sure. I think as we've talked about in the past, you've got to look at the agent count growth as a leading indicator and then the sales growth follows. And so if you go back for American Income, Q4 of '24 was a 7% growth and in Q1, Q2 and Q3 were all low single-digit growth quarters for just the agent count.

And so that carries forward into sales in Q4. We're also seeing some productivity gains as well as just the premium on a per sale basis is up compared to the same quarter in the prior year. And so that's also driving it as well. And as we've talked about, the thing with the product in the marketplace is that the consumer is -- we go through a needs-based analysis that is sitting down with the customer and determining what their needs are and then based upon what those are.

We have the right amount of coverage, which obviously has an impact on the amount of premium that we collect on a per policy basis. I think some of the -- when I talked about the quality of the leads and the conversion of those globe leads generated out of our DTC channel into American Income is also helping on that productivity is reflected in the premium on a per sale basis as well as just the agents that are producing every single week what their sales are from that perspective.

And so you are correct, just recognizing the agent count, we think the agent count growth might be just a little bit slower than the sales growth for 2026, and it's just reflective of some of those dynamics. And we'll see how some of these incentives come into place. And I wouldn't characterize it that we had no incentives in 2025 for our managers to recruit and retain agents.

It's just we found that we always have to kind of adjust to that and make sure we've got the right incentives correct between that balance of sales and recruiting, training and retaining agents. And so we're doing some few tweaks that will go in here at the beginning of '26, and we'll see if we got it right as we move throughout the year.

Very helpful. And if I can go back to the MedSup, I mean, what a fabulous year in terms of sales growth at United American and just saying that you think sales will be flat in '26 is pretty darn good. As we look further out, is there a chance that the dynamic between med advantage and med Supplement kind of shifts in the favor of med advantage where they kind of align better with regulations and compliance and pricing and you could see a dip in the opposite direction, some real pressure on sales as more med advantage gets sold.

I mean, it's certainly possible. As we mentioned before, we've been in this business for decades. We have more and more people from an age perspective entering into the market in general. So that would be, I would think, a tailwind. But it's really hard to predict the government support within the Medicare Advantage space. And so that will play some into the dynamics.

But I think from a Medicare Supplement perspective, there's always going to be a need in a marketplace for that particular product. People that want the freedom of choice and some of the benefits that the Medicare Supplement marketplace provides. So again, I think there will always be a place in that market. We are very much focused on maintaining our margins, and we're really not going to chase market share at the expense of just pricing to gain market share for the sake of it.

So I think you've seen that over a long period of time with us is that our sales growth will ebb and flow in that area, depending on the marketplace, but it's very important that we maintain our pricing for the existing in-force block as well that really translates into that underwriting margin dollar that we're really focused on from a long-term stability perspective.

[Operator Instructions] Moving on, we'll hear from John Barnidge at Piper Sandler.

My first question on the investment portfolio, can you talk about exposure to software and how you see the portfolio impacted by AI along with any derisking activities that have been pursued.

Sure. Thanks, John. On our -- I think a lot of the discussion on potential exposure has kind of been in that alternative portfolio category. We've kind of taken a look at within the limited partnerships and the different investments looking at information that we have available there.

Our best estimate is that there's really less than probably $15 million within that alternative portfolio that is really related to software companies. So we do think it's pretty limited. Overall, our private credit is probably about 1% of our total invested assets. I think that's about the amount we had last quarter, and that really hasn't changed again this year.

So overall, we have pretty low allocation to the alternative space in general than private credit. And then it doesn't look like right now, at least in that side, we have much from the software. As we think about it on the fixed maturity portfolio, we've always been underweight, I would say, on tech you kind of think about we're out there trying to buy bonds that are 20, 30 years out, and it's hard to find the technology companies that we really feel comfortable fit into that space.

So less than 2% of our invested assets of our fixed maturity portfolio is in some type of a technology type activity within that sector. What we have exposure to mostly are the hardware providers, data service providers and that type of thing. There's probably a couple of names in there. We kind of think probably less than $50 million that have a little bit more susceptibility to be displaced. They do have some moats with respect to some proprietary data that they have with respect to the space that they operate in.

So I think it gives them some protection, but that we're kind of keeping an eye on. It is I think the whole AI disruption is a risk that the investment team has been considering for a number of years. And clearly, within part of the matrix that they utilize as they think about the bonds that the companies that we're going to invest in. And again, we're looking for those names that are really long term, we think, are going to be around for the long term. And so it's the IBMs and the Amazons and the Microsofts that are mostly in our portfolio.

Our next question will come from Wes Carmichael at Wells Fargo.

I had a couple of questions on Bermuda. One, I think the press release in December, I think you noticed -- or you noted that the first reinsurance transaction you executed with your business plan. Wondering if you could provide a little more detail on that transaction just in terms of size and scope.

Sure. Yes, we are pleased to get the licensing information of the company and the approval of our U.S. regulators as well as the Bermuda regulators to complete that transaction. And our goal there was really to get the company established because we wanted to actually get it established in 2025, so we could have audited financial statements for the entity beginning in 2026 that we finalize as '25 results.

So that allows us to be on a path for the requirements of reciprocal jurisdiction. And so we're well on that path and we're executing relative to kind of our business plan at this point in time. That initial transaction was about $1.2 billion of statutory reserves that got transferred. And so during the course of 2026, we do intend -- and this is consistent with our business plan as well that was approved by Bermuda. We do intend to reinsure some new business as well as incrementally a little bit more in-force business in 2026. So we'll grow the amount of business that's reinsured in Bermuda over the next 3 to 5 years.

And I guess my follow-up was on that point is, is it still possible to get early approval for reciprocal jurisdiction? And I'm just trying to understand when you get that status. Are there near-term plans for -- to increase the pace of reinsurance? And just really trying to understand how much of a lift in excess cash flows do you kind of expect in 2026 or 2027?

We've kind of thought through that, and that's really part of kind of our business plan that we established earlier on. We do think it is possible to get early reciprocal jurisdiction, but it is subject to regulatory approval. So we really want to go through the process, and we'll update you if we do, in fact, get reciprocal jurisdiction early.

And that would allow the potential for, again, I'd say, potential for additional dividend distributions from the Bermuda sub, but those are also subject to Bermuda regulatory approval. So again, we don't want to get too far ahead of ourselves, and we want to actually go through the process of having those discussions with our regulators.

And I just add, if -- I think the kind of the time frame on that as far as working with the regulators is probably something that happens a little bit more mid-year, we do anticipate that if we were able to get that, any potential distributions that we might get in '26 would be toward the end of the year. And so -- we have not built any of that into our '26 plan as of this time, and we'll clearly take a look at that as the year progresses.

We do anticipate that there would be some opportunity then starting in 2027. And as Tom has kind of talked about, we think that it can be up to $200 million or at least working toward $200 million over time. And that would be -- just kind of a reminder that is what we would anticipate would be annual cash flows up to the parent. But again, part of that is with the business plan and continuing to build that up with continuing transactions here over the next few years.

And we'll hear from Mark Hughes at Truist Securities.

On the claims, you said were seasonally higher in individual and group health. Was that normal seasonality? Or is that a little bit above and beyond?

I think, first of all, we normally expect a little bit higher claims in the fourth quarter in the individual and group health lines. However, I would say is that in the group lines, we did see a little bit higher severity. And so it was a little bit higher than what we had anticipated.

Understood. And then you've talked to a lot of factors that could influence profitability in the health business, but the 23% to 27% the 4-point swing anything else that we should consider when we think about the high end or low end of that range?

I think some of it -- Frank alluded to in his comments as well, is that Medicare Supplement has a lower underwriting margin. Just on it as a line of business. And so to the extent that, that grows faster than some of the other lines, we're going to see a little bit of downward pressure on just the overall health underwriting margins as a percent of premium. Now the underwriting margin dollars from health would grow. And so I think we just got to -- so that's why the range of 23% to 27% is somewhat dependent upon how strong Medicare Supplement sales come in.

Yes. Mark, that's exactly right. When you kind of look at 2025, United American, that whole side of it, the Medicare Supplement side comprised about 49% of the total health premium, whereas in Family Heritage, Liberty, American Income that have that other limited, our true limited benefit product, that's a little bit more stable.

The margins on that limited benefit side are more in that 43% to 44% range versus what we had in 2025 of around 5%, 6% with respect to overall margins on the MedSup side. Now in 2026, we expect that MedSup margin to be up in that 8% to 10% range. But again, it's now at about 53% of the overall premium is what we kind of anticipate right now. And so it's just taking a little higher percentage of that overall premium piece.

And so it's kind of -- just bringing down the average just a little bit. Despite the lower margins that we have on that, I mean, it is still a very good business for us and -- because it is very lower amount of capital required ultimately.

So when you start thinking about internal rates of return and returns on capital and that type of thing, it is a very good business from that perspective. So we don't find it really overly concerning when you kind of see a slight decrease in the overall health margin percentage. If we think about it as long as it's kind of just from that overall mix of business, we think, overall, that's still a good diversification for us.

And that was our final question from our audience today. I'm happy to turn the floor back to Mr. Stephen Mota for any additional or closing remarks.

All right. Thank you for joining us this morning then. Those are our comments, and we will talk to you again next quarter.

Ladies and gentlemen, thank you for joining today's Globe Life Inc. fourth quarter earnings. You may now disconnect your lines. Enjoy the rest of your day.

Hello, and welcome to the Globe Life Inc. Third Quarter Earnings Release Call. My name is Jeannie, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions]

I will now hand you over to your host, Stephen Mota, Senior Director of Investor Relations, to begin today's conference. Thank you.

Thank you. Good morning, everyone. Joining the call today are Frank Svoboda and Matt Darden, our co-Chief Executive Officers; Tom Kalmbach, our Chief Financial Officer; Mike Majors, our Chief Strategy Officer; and Brian Mitchell, our General Counsel.

Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our earnings release 2024 10-K and a subsequent Forms 10-Q on file with the SEC.

Some of our comments may also contain non-GAAP measures. Please see our earnings release and website for discussion of these terms and reconciliations to GAAP measures.

I will now turn the call over to Frank.

Thank you, Stephen, and good morning, everyone. In the third quarter, net income was $388 million or $4.73 per share, compared to $303 million or $3.44 per share a year ago.

Net operating income for the quarter was $394 million or $4.81 per share, an increase of 38% over the $3.49 per share from a year ago. On a GAAP reported basis, return on equity through September 30 is 21.9% and book value per share of $69.52. Excluding accumulated other comprehensive income, or AOCI, return on equity at 16.6% and book value per share as of September 30 is $93.63, up 12% from a year ago.

Before I discuss the third quarter insurance operations, I would like to revisit the nature of the market we serve. As most of you know, we serve the lower middle to middle income market. This market is vastly underserved and has significant growth potential, providing us with a distinct competitive advantage. This advantage is protected due not only to our ability to efficiently reach this market through both exclusive and direct-to-consumer distribution channels, but also due to the tremendous amount of data and experience we possess as we have been in the same market for over 60 years with essentially the same products.

The basic protection life and health insurance products we offer are specifically designed to help provide financial security to consumers in this market. We continue to be proud to serve this market and are grateful for the opportunity to help working family protect their financial future. In our insurance operations, total premium revenue in the third quarter grew 5% over the year ago quarter. For the full year 2025, we expect total premium revenue to grow approximately 5% as well, which is slightly higher than in 2024 and consistent with our 10-year average growth rate.

Life premium revenue for the third quarter increased 3% from the year ago quarter to $844 million. Life underwriting margin was $482 million, up 24% from a year ago, driven by premium growth plus remeasurement gains due to good mortality experience, including the updating of both mortality and lapse assumptions. For the full year, we expect life premium revenue to grow between 3% and 3.5%. As a percentage of premium, we anticipate life underwriting margin to be between 44% and 46%. In health insurance, premium revenue grew 9% in the quarter to $387 million and health underwriting margin was up 25% and to $108 million due primarily to premium growth and remeasurement gains. For the year, we expect health premium revenue to grow in the range of 8% to 9% and anticipate health underwriting margin as a percent of premium to be between 25% and 27%.

Administrative expenses were $90 million for the quarter, an increase of 1% over the third quarter of 2024. As a percent of premium, administrative expenses were 7.3%. For the year, we expect administrative expenses to be approximately 7.3% of premium, the same as in 2024.

I will now turn the call over to Matt for his comments on the third quarter marketing operations.

Thank you, Frank. I'd like to start with a few comments about our exclusive agency force. We currently have over 17,500 exclusive agents that sell only for us. These agents are the strength to grow Globe Life.

While we frequently see short-term agent count fluctuations in a stairstep pattern, this agency force has consistently generated significant long-term growth. In fact, the average agent count has nearly doubled over the past 10 years. The ability to maintain and grow an exclusive agency force is a core competency of our company. As a reminder, we typically recruit individuals who haven't previously sold insurance and are looking for a better opportunity. This provides us with an enormous pool of potential recruits that provides a tremendous growth opportunity going forward.

As we have mentioned in the past, there is a very close correlation between sales growth and agent count growth over the long term. And we are confident that our agent force will continue to grow, and our goal is to surpass 28,000 exclusive agents and $1.4 billion in annual sales by 2030.

Now I'll discuss each distribution channel. First, let's start with our exclusive agencies, American Income, Liberty National and Family Heritage. At American Income, the life premiums were up 5% over the year ago quarter to $451 million. And the life underwriting margin was up 18% to $261 million. In the third quarter of 2025, net life sales were $97 million, flat compared to a year ago. But as a reminder, we had a difficult comparable this quarter as American Income had a 19% increase in life sales in the year ago quarter. The average producing agent count for the third quarter was 12,230 up 2% from a year ago. We are currently focused on initiatives to enhance our recruiting as growth in agent count will lead to future sales growth.

At Liberty National, the life premiums were up 5% over the year ago quarter to $98 million, and the life underwriting margin was up 57% to $70 million. Net life sales were $24 million, flat from the year ago quarter, and net health sales were $8 million, up 4% from the year ago quarter. Average producing agent count for the third quarter was 3,847, up 1% from a year ago. We have a few initiatives underway that we expect to have a near-term positive impact. We have developed a new worksite enrollment platform designed to improve agent productivity and training. In addition, we are in the process of rolling out a new recruiting CRM which will further enable the use of data and analytics to enhance the recruiting process. I continue to be optimistic about the future growth of this agency.

At Family Heritage, the health premiums increased 10% over the year ago quarter to $119 million, and the health underwriting margin increased 49% to $51 million. Net health sales were up 13% to $33 million, and this is due to an increase in agent count and productivity. The average producing agent count for the third quarter was 1,553, up 9% from a year ago. And this is 5 consecutive quarters of strong agent count growth for family heritage. The continued focus of the past few years on recruiting and growing agency middle management has produced significant momentum and results.

Now let's move on to our direct-to-consumer channel. In our DTC division of Globe Life, the life premiums were down 1% over the year ago quarter to $245 million while the life underwriting margin increased 29% to $114 million. While the life premiums were down slightly this quarter, net life sales were $27 million, up 13% from the year ago quarter. I'm very pleased to see this continued sales turnaround from the declining trend of recent years. As we mentioned on our last call, we have implemented new technology to enhance our underwriting process. This technology is helping improve the conversion of customer inquiries into sales.

Now as a reminder, the value of our direct-to-consumer business is not only those sales directly attributable to this channel, but the significant support that is provided to our agency business through brand depressions and sales leads. We expect this division to generate approximately 1 million leads during 2025, which will be provided to our 3 exclusive agencies. Improved conversion of our direct-to-consumer leads across the enterprise allows us to increase our marketing spend and increase direct-to-consumer lead volume and marketing campaigns, which leads to sales growth in both our DTC and agency channels.

United American is our General Agency division, and here, the health premiums increased 14% over the year ago quarter to $170 million, driven by the sales growth and Medicare supplement rate increases we have discussed previously. Health underwriting margin was $16 million, up $2 million from the year ago quarter. Strong activity across the entire agency resulted in net health sales of $25 million, an increase of approximately $9 million over the year ago quarter.

Now I'd like to discuss projections. And based on the trends we are seeing, we expect the average producing agent count trends for the full year 2025 to be as follows: at American Income, an increase of around 2%, at Liberty National, an increase of around 4% and family heritage, an increase of around 8%. We Net life sales for the full year 2025 are expected to be as follows: American Income, an increase of around 3%, Liberty National, an increase of around 1% and direct-to-consumer, an increase of around 4%. Net health sales for the full year 2025 are expected to be as follows: Liberty National, flat family heritage, an increase of around 13%, United American, an increase of around 50%.

Now let's move on to projections for 2026. And at the midpoint of our guidance, we expect sales growth for the full year to be as follows. For net life sales, we expect American income to have mid-single-digit growth Liberty National high single-digit growth; direct-to-consumer, low single-digit growth. For net health sales, we expect Liberty National to have high single-digit growth; Family Heritage, low double-digit growth; and United American mid-single-digit growth.

I'll now turn the call back to Frank.

Thanks, Matt. We will now turn to investment operations. Excess investment income, which we define as net investment income less only required interest was $37 million down approximately $3 million from the year ago quarter. Net investment income was $286 million in the quarter, slightly above last year's third quarter. The low growth of net investment income is consistent with the low growth in average invested assets.

Required interest is up approximately 1% over the year ago quarter, relatively consistent with the growth in average policy liabilities. As a reminder, the growth in average invested assets and average policy liabilities is lower than normal, primarily due to the impact of the annuity reinsurance transaction in the fourth quarter of last year, which involved approximately $460 million of annuity reserves being transferred to a third party along with supporting invested assets. Net investment income was also negatively impacted in the current quarter by lower average earned yield as compared to a year ago. For the full year 2025, we expect net investment income to be flat and required interest to grow around 2%, resulting in a decline in excess investment income of around 10% to 15% for the year.

The growth in average invested assets for the full year is lower than normal due to the impact of the previously mentioned annuity reinsurance transaction as well as higher dividend distributions from the insurance companies to the parent.

Now regarding our investment yield. In the third quarter, we invested $279 million in fixed maturities, primarily in the municipal and industrial sectors. These investments were at an average yield of 6.33%, an average rating of A+ and an average life of 29 years. We also invested approximately $86 million in commercial mortgage loans and limited partnerships with debt-like characteristics and an average expected cash return of approximately 9%. None of our direct investments in commercial mortgage loans involve office properties. These non-fixed maturity investments are expected to produce additional cash yield over our fixed maturity investments while still being in line with our conservative investment philosophy.

For the entire fixed maturity portfolio, the third quarter yield was 5.26%, up 1 basis point from the third quarter of 2024. As of September 30, the fixed maturity portfolio yield was 5.28%. Including the investment income from our commercial mortgage loans, limited partnerships and corporate owned life insurance investments, the third quarter earned yield was 5.46%. While we do own some floating rate investments, they are well matched with floating rate liabilities on the balance sheet.

Now regarding the investment portfolio. Invested assets are $21.5 billion, including $18.9 billion of fixed maturities and amortized cost. Of the fixed maturities, $18.5 billion are investment grade with an average rating of A-. Overall, the total fixed maturity portfolio is rated A-, same as a year ago. Our fixed maturity investment portfolio has a net unrealized loss position of $1.1 billion due to the current market rates being higher than the book yield on our holdings. As we have historically noted, we are not concerned by the unrealized loss position and it is mostly interest rate driven internally relates entirely to bonds with maturities that extend beyond 10 years. We have the intent and, more importantly, the ability to hold our investments to maturity.

Bonds rated BBB comprised 43% of the fixed maturity portfolio compared to 46% from the year ago quarter. This percentage is at its lowest level since 2003. As we have discussed on prior calls, we believe the BBB securities we acquire generally provide the best risk-adjusted, capital-adjusted returns due in part to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets. While the percent of our invested assets comprised of BBB bonds might be a little higher than some of our peers, remember that we have little or no exposure to other high-risk assets such as derivatives, equities, residential mortgages, CLOs and other asset-backed securities.

Below investment-grade bonds remain at historical lows at $455 million compared to $556 million a year ago. The percentage of below investment grade bonds to total fixed maturities is just 2.4%, are below investment-grade bonds as a percent of equity, excluding AOCI, are at their lowest level in over 30 years. While there is uncertainty as to where the U.S. economy is headed, we are well positioned to withstand a significant economic downturn due to holding historically low percentages of invested assets in BBB and below investment-grade bonds.

In addition, due to the long duration of our fixed policy liabilities, we invest in long-dated assets. As such, a critical and foundational part of our investment philosophy is to invest in entities that can survive through multiple economic cycles. In addition, we have very strong underwriting profits and long-dated liabilities so we will not be forced to sell bonds in order to pay claims. With respect to our anticipated investment acquisitions for the full year 2025, at the midpoint of our full year guidance, we assume investment of approximately $800 million to $850 million in fixed maturities at an average yield of around 6.4%. And approximately $300 million to $400 million in commercial mortgage loans and limited partnership investments with debt-like characteristics and an average expected cash return of 7% to 9%.

Also at the midpoint of our guidance, we expect the average yield earned on the fixed maturity portfolio to be around 5.27% for the full year 2025 and approximately 5.29% for the full year 2026. With respect to our commercial loans, limited partnerships and corporate-owned life insurance, we anticipate the yield impacting net investment income to be in the range of 7% to 8% for 2025 and 2026. In total, including these additional investments, we anticipate the blended earned yield to be approximately 5.45% in 2025 and in the range of 5.4% to 5.5% in 2026.

Now I'll turn the call over to Tom for his comments on capital and liquidity.

Thanks, Frank. First, I'll spend a few minutes discussing our available liquidity, share repurchase program and capital position.

The parent began and ended the quarter with liquid assets of approximately $105 million. We anticipate concluding the year with liquid assets in the range of $50 million to $60 million. In the third quarter, the company repurchased approximately 840,000 shares of Global Life Inc. common stock for a total cost of approximately $113 million at an average share price of $134.17. Including shareholder dividend payments of $22 million for the quarter, the company returned approximately $135 million to shareholders during the third quarter and approximately $580 million year-to-date. We expect share repurchases will be approximately $170 million and anticipate distributing approximately $20 million to our shareholders in the form of dividend payments in the fourth quarter.

For the fourth quarter, share repurchases are higher than previously anticipated as we recently received approval for an extraordinary dividend from one of our subsidiaries, which will be -- which we anticipate will be available to support additional share repurchases by the parent. At the midpoint of our guidance, we anticipate share repurchases will total $685 million in 2025. In addition, we intend to distribute approximately $85 million to our shareholders in the form of dividends.

We will continue to use our cash as efficiently as possible. We still believe that share repurchases provide the best return of yield to our shareholders over other available alternatives. Thus, we anticipate share repurchases will continue to be the primary use of the parent's excess cash flow after payment of shareholder dividends. The parent company's excess cash flow, as we define it, results primarily from the dividends received by the parent from its subsidiaries less the interest paid on debt and is available to return to its shareholders in the form of dividends and through share repurchases. We continue to invest in our growth through investments in sales, technology and the insurance operations. It should be noted that the cash received by the parent company from our insurance operations is after our subsidiaries have made substantial investments during the year to issue new insurance policies, implement new technologies, enhance operational capabilities, and modernize existing information technology as well as to acquire new long-duration assets to fund their future cash needs.

Financial strength is paramount to our company's success, and we believe the $500 million contingent capital funding arrangement established early in this quarter, will add to our already strong capital generation capabilities that exist within our insurance companies.

Now with regard to capital levels at our insurance subsidiaries. Our goal is to maintain capital within our insurance operations at levels necessary to support our current ratings. To do that, Global Life targets a consolidated company action level RBC ratio in the range of 300% to 320%. Although the target range is lower than many of our peers, it is appropriate given the stable premium revenue from the large number of in-force policies, the nature of our protection products with benefits that are not sensitive to interest rates or equity markets. Our conservative investment portfolio and strong consistent underwriting margins, which result in consistent statutory earnings at our insurance companies.

As we do every quarter, we performed stress tests on our investment portfolio under multiple economic scenarios, anticipating various levels of downgrades and defaults. If all estimated losses under our stress tests were to occur before year-end, which we believe is highly unlikely, we have concluded that we have sufficient capital resources exist within our subsidiaries and the parent to maintain our target RBC range and our share repurchases as planned. For 2025, we intend to maintain our consolidated RBC within the target range of 300% to 320%.

As previously discussed, we continue to progress towards establishing a Bermuda reinsurance affiliate for the purpose of reinsuring a portion of new business and in-force life insurance policies issued by Global Life affiliates. We currently estimate parent excess cash flow will increase from incremental earnings from our U.S. and Bermuda subsidiaries over time as the reinsurance block grows. This additional excess cash flow will enhance the financial strength of the company and provide additional flexibility, allowing the company to meet various capital and liquidity needs of the parent. We continue to make progress on the required regulatory filings and subject to approvals, we anticipate executing the first reinsurance transaction by the end of 2025, and we will provide an additional update on our next call.

Now with respect to policy obligations for the current quarter. Each year, GAAP accounting requires us to review and generally update actual assumptions for mortality, morbidity and lapses. We have chosen to review and update as necessary both our life and health reserve assumptions in the third quarter each year. The remeasurement exhibit included in our supplemental financial information available on our website includes the impact of these assumption changes as well as experience related remeasurement gains and losses by distribution channel. When assumption changes are made, GAAP accounting standards require a cumulative catch-up adjustment going back to January 1, 2021, the transition date for LDTI. This cumulative catch-up is the assumption related remeasurement gain or loss. An assumption remeasurement gain lowers the reserve balances and indicates an improved outlook as less premium is needed to fund reserves to meet future policy obligations. The opposite is true if there is an assumption to remeasurement loss.

For the quarter, the overall impact of both life and health assumption changes reduced policy obligations by $134 million, with life obligations reduced by $131 million and health obligations reduced by approximately $3 million, indicating an anticipation of an improved outlook for future policy obligations. To put this into perspective, total GAAP life and health reserves on our balance sheet are approximately $19 billion, so the adjustment to reserves is less than 1%.

To better understand the performance of the business, we think it is beneficial to look at normalized underwriting margins, which exclude the impact of assumption changes and provide an improved basis for comparison of quarterly results. For the third quarter, normalized life underwriting margin as a percent of premium was 41.5% compared with 40.4% for the year ago quarter, which is a notable improvement and reflects recent favorable mortality experience. Normalized health margin as a percent of premium was 27.2% compared with 27.5% for the year ago quarter. For the Health segment, as expected, health margins as a percent of premium continued to increase from the first half of the year. This is largely driven by margin increases from the Medicare supplement business as 2025 premium rate changes became fully effective.

So now with respect to guidance for 2025. For the full year 2025, we estimate net operating earnings per diluted share will be in the range of $14.40 to $14.60, representing 17% growth at the midpoint of our range and 11% growth when excluding the impact from assumption updates in both '24 and '25. The midpoint is higher than our previous guidance due to the anticipation of continued favorable mortality experience.

Finally, with respect to 2026 guidance. For the full year 2026, we estimate net operating earnings per diluted share will be in the range of $14.60 to $15.30 representing 3% growth at the midpoint of the range. The growth rate is lower than historical averages given the significant impact of the assumption updates in 2025. At the midpoint of our guidance, we anticipate total premium revenue growth of 6% to 7%, with life premium revenue growth growing 4% to 5% and health premium revenue growing 9% to 11%. We anticipate underwriting margins as a percent of premium to be in the range of 40% to 43% for life and 24% to 27% for health. We anticipate net investment income growth will be approximately 3%.

Although 2025 statutory results are not final for the year, we anticipate parent excess cash flows available to return to shareholders through both dividends and share repurchases in 2026 will be approximately $600 million to $700 million. This is greater than the amount available in 2025, excluding the impact of extraordinary dividends. On the next call, I'll provide an update as we get updated statutory results for 2025 and after we finalized the initial reinsurance transactions for the new Bermuda subsidiary.

Those are my comments, and now I'll turn it back to Matt.

Thank you, Tom. Those are our comments, and we will now open the call up for questions.

[Operator Instructions] We will take our first call from Jack Matten of BMO Capital Markets.

First question was just on the life sales growth of the exclusive agencies. Just wondering is there anything you're seeing or hearing from customers since driving more muted sales growth in recent quarters? Is the challenge really around agent productivity given that you currently have a higher mix of newer agents? And I guess looking forward, what gives you confidence that life sales growth can reaccelerate in the coming quarters?

Yes. Thanks, Jack, for the question. It's not anything we're hearing from a consumer perspective as we talk with our agency owners. We're actually seeing an improvement in the premium on a per sale basis. And so we're not seeing any demand weakening from a consumer perspective. It really does get back to agent count growth.

And what I'd point to is usually followed years that follow significant growth years, we do temper the growth a little bit as we get those new agents onboarded. Start producing, and then they start moving into the middle management ranks. And then the middle managers out there in the field are responsible for a lot of the recruiting, training and onboarding. And so as I've mentioned before, one of the things we look at is just our whole recruiting pipeline. What we're talking about on the call on our agent count is those agents that are actually up and producing for us. But we look at what the agents are in the pipeline coming in as they get onboarded and licensed and trained, et cetera.

And so our hires for AIL are actually up this quarter by 17%. And so this is individuals that have started into the process there in the process of taking exams, getting their licenses and in the move forward into training and selling their first policy. And so it's a good leading indicator for us. And so some of those trends are what we're seeing that gives us the confidence that 2026 will have a higher agent count growth, which bodes well for sales growth for 2026 as well as we've looked at some of our incentive programs and just getting our middle management focused on growing the agent count by recruiting activities and onboarding also plays into our consideration for our sales growth guidance.

Got it. And my follow-up on excess cash flow. I think you said that the guidance for next year is $600 million to $700 million. I mean, does that include any assumption or an incorporation of a benefit from Bermuda entity? I guess related to, you thought out, I think, an extraordinary dividend this quarter. Any other updates you can or color you can provide on that? I think it looks like you sort of the buyback guide for the full year by $50 million or $60 million. So just making sure I have the numbers right there.

Yes. Thanks, Jack. The $600 million to $700 million does not include any benefit from the Bermuda affiliate. We -- it takes at least 2 accounting periods. The rules require 2 accounting periods for reception jurisdictions. So we think the earliest time at this point would be 2027. And as I mentioned on prior calls, we'll try -- we'll work with and try to get recipe jurisdiction earlier, but it's just really not up to us. It's really up to the regulators to accept receptible jurisdiction status.

Our next question comes from the line of Andrew Kligerman of TD Cowen.

First question, just kind of following up on JAK about the sales growth outlook and the recruiting outlook.

You mentioned, Matt, on the comments earlier that you've got a newer worksite enrollment platform new recruiting CRM with different kinds of data and analytics, there are 2 things. They sound very interesting. Could you elaborate a little bit more on that and how they work and why they're different and why they'll have an impact?

Sure. So Liberty, as you may recall, about 75% of our business is marketed at work sites for those smaller employers. And we've rolled out -- or we're in the process of rolling out technology that's a new enrollment platform, and it really takes some of the lessons that we've learned in our processes on our individual sales and it really where an agent sits down with the client and really goes through and you've heard us talk about a needs-based analysis.

And so on the worksite side, put some more tools in the hands of our agents where they sit down with the customer, go through their needs and help customize a package appropriate for them of the various different coverages and types of policies. And as I said, we're early on and rolling that out, but on the first few agencies that we've rolled that out, we've seen significant increase in premium production on a per worksite basis as well as just a per sale basis. And it exceeds 20-plus percent on the increase there. And so we anticipate as that gets rolled out across the entire agency, which will take into the beginning of next year, that's really going to be a tailwind for our worksite sales growth there.

And then the recruiting CRM system, right now, a lot of our agencies are tracking that manually with spreadsheets and those type of things. And so just like a sales CRM system, the recruiting CRM system is going to have all of that data in one place to be able to for our agency owners and those middle managers to be able to have the data and the analytics they need to really understand their recruiting pipeline, much more on a real-time basis so they can see what's happening during the week as people start listening to our opportunity, come back for the different interviews, get through the various phases of taking the test, getting licensed and ultimately producing.

And so what we've seen with some of our agencies that utilize more of a system that they've developed on their own, it's definitely an improvement for them to be able to manage all of that activity. And so we're designing a system that will be enterprise-wide, roll that out to the organization. And it will just give us a more real-time view into the recruiting pipeline and being able to manage the various conversion points that happen throughout the life cycle of a new person coming into the organization and getting up and producing.

Sounds very impactful. And then my follow-up is still on the sales area, direct-to-consumer. And I think the stats you mentioned on the call were that while sales in direct-to-consumer were up 13%, premiums were down 1%. I'm kind of curious maybe a mesh of a question here. I'm kind of curious as to the policy retention ratio in direct-to-consumer? And then secondly, you mentioned low single-digit sales in direct-to-consumer next year. Is that just because you're going to you're having a really good second half of 2025 that you want to get too aggressive?

Yes. Let me address your first part of that question. Related to -- if you think about it, we've got a big in-force block. And so we've been discussing sales declines for quite some time over the last couple of years. And so those sales declines are hitting that our premium growth rate. And so we've only had 2 quarters now of positive sales growth, and it's been very strong and we anticipate that continuing. So the premium earnings are going to turn around as we continue to have positive sales growth. But that's just kind of the dynamic you're looking at from this quarter's perspective. And so we're very pleased.

As we mentioned, this is technology and processes we've been working on for quite some time. they're coming to market here in Q2 and Q3, we're seeing the results. And so we're -- we've got very strong results here. And so we're just kind of cautiously optimistic is we're, at this point, before we see what fourth quarter looks like as we think about next year. And so I'd just say that's a good estimate right now based on what we're seeing early days. We'll certainly modify that as we have Q4 experience. But obviously, we've got a pretty good lift here in the last half of this year. And so we just want to be a little bit cautious about what we think at this early stage for 2026.

Andrew, one thing I'd just like to tack on to that is really the decline in the premium growth rate here that we're seeing in 2025 really has more to do with those -- the declining sales that we've been seeing here in the recent periods. Really, if you look at the lapse rates for DTC overall, they're pretty consistent with our long-term averages. We've actually seen very good lapse rates, favorable lapse rates, if you will, in our renewal. Once the policies have been on the books here for several years, really seeing with our renewal premium seeing a little bit higher in some of the first year the last few quarters. But again, it's really stabilized when you look at it overall, it's pretty consistent with our long-term rates.

And then I think with -- as we're getting a little bit of that ability, as Matt was talking about, reinvesting some of those dollars and improving those sales we really do anticipate some growth in premium -- overall premium income in 2026. And then assuming that, that continues on with growth in that low to mid-single digits on the sales side, and that will help to bring up the premium growth then as well.

Thank you. Our next call comes from Jimmy Bhullar of JPMorgan.

I had a couple of questions. Maybe first just on your 2025 guidance. If we look at what that's implying for EPS in 4Q, it seems like it's 325 to 345. So that's a lower number than you've had in the most recent quarter even at the high end, if you take out the remeasurement gain. So wondering if you're seeing anything in the business that suggests you to be conservative? Or just any color on sort of the guidance -- the implied guidance for 4Q?

Thanks, Jimmy, for the question. Yes, the $0.05 raise reflects the favorable third quarter results and anticipated fourth quarter results. One thing I'd say is third quarter, we benefited a little bit from timing on a couple of items. So for instance, we had a research and development tax credit that came through in the third quarter that we had planned for the full year, but just the timing was favorable to us.

The other thing is that really mortality experience was really very favorable in the third quarter. And you kind of can see that from -- we expected remeasurement gains, but the remeasured gain life, excluding assumption updates was $18 million. So that's indicative of a pretty favorable quarter. And we -- to us, it's a fluctuation at this point. We'd love to see that emerge in 2024, but it's not really -- sorry, in the fourth quarter, but it's not really in our guidance for the fourth quarter. And that would -- if it does come through, that would put us, I think, at the higher end of our guidance range.

The other thing is health experience was very favorable as well in the third quarter that we really wouldn't expect that to continue in the fourth quarter either for both life and health. Fourth quarter claims tend to tick up a little bit just from a seasonal perspective, where we're starting to get in the flu season for life and then at the end of the year, people start to give the doctor a little bit more and try to get some of those medical visits in. So we do see a little bit of an uptick oftentimes in the fourth quarter.

So those are some of the things impacting kind of our fourth quarter EPS expectations, but I'm glad to see that we also raise the guidance by $0.05 at the midpoint.

Okay. And then secondly, could you comment on what you're expecting in terms of name trends and sales in the health business. There's obviously been a lot of concern about margin compression at some of the major medical companies in various products. Your margins had gone down too, but they seem to be recovering. Should we assume that, that continues into 2026 as you implement price hikes? Or -- and then similarly, with a lot of companies indicating that they're going to raise prices on met advantage plans do you -- are you seeing that happen? And how is that affecting demand for your metaproduct?

I'll start first, Jimmy, on the health trends is we're really pleased with the third quarter with Medicare supplement and the group retiree health trends. They are favorable to our expectations, which is great. And we've really seen the medical trend claim cost trends really flatten, which is actually a nice sign for us.

So we actually have built in the experience that we saw late in the fourth quarter of -- third and fourth quarter of 2024 as well as the experience we've seen in the first half of 2025 into our rate increase requests to regulators, and we really believe that those rate increases will bring us back to target profitability. Again, those get implemented throughout 2026. So in the first quarter, I think it's going to look a little bit more like 2025, but in the second, third and fourth quarter of '26, I think we'd see an increase in margins just because of the rate increases becoming effective then.

And then, Tom, it's fair to say that recent experiences we're just kind of seeing trend moderate a little bit. We had some acceleration of that in Q3 and Q4 of last year.

Exactly. Certainly, third quarter trend moderated.

And then, Jimmy, to answer your second part of your question, yes, we're seeing that related to the Med Advantage, which we don't write. As you know, the market that is providing a tailwind as price increases happen or carriers pull out of the market. It's definitely been a tailwind for us. It's hard to say now what 2026 will look like. That's why we kind of have a moderate growth, considering the significant sales growth that we've had for 2025.

And so really, we need to see what happens here over the next quarter or 2. But right now, I do believe it will be a tailwind for us to continue to grow those sales in a profitable way, as Tom mentioned, related to our price actions. But there's a lot of dynamics, as you know, going on in that market. And so things change quite a bit. But currently, I think we're getting some benefit from a lot of that disruption that's going on in the Medicare Advantage space.

Our next call comes from John Barnidge of Piper Sandler.

So my question is around health. The performance and production in the third quarter wasn't really that far off from the level you produced in the fourth quarter of a year ago. And I know there's in seasonality, it would really occur in the fourth quarter, and I understand you updated your sales assumptions. But this is more of a broader question. What are you seeing in the distribution environment and we all have parents in the baby boomer generation is aging? Is there a portion of the cohort that more and more is a need on our products that will be secular in nature and more extended beyond just what we've seen in recent years?

Well, like I said, I just kind of go back to the conversation around where to the extent that there is -- Medicare Advantage has been growing for quite some time with just the appeal from a -- I think from a pricing perspective, some of those were offered at very low premiums or if not virtually free.

And so I think now with some of what's happening on the profitability side, you see carriers increasing the rates. And so we kind of have a different customer in the Medicare supplement space where people are willing to pay for choice and willing to pay to keep their providers or be able to have the freedom of choice to go to who they want to. And so I think that will always be there for a segment. There's, of course, a segment of the market that was kind of on the bubble that may move back and forth depending on when they sign up what's appealing at that point. But I think there will always be a place for Medicare Advantage from our product portfolio perspective.

Medicare Supplement.

Oh, sorry, Medicare Supplement, excuse me. I think there will always be that opportunity for us. It just as we've seen over a long period of time, we've been in this business forever. It ebbs and flows just a little bit with what's going on in the overall broader market. So we feel good from a long-term perspective, but just recognize there's going to be short-term disruption as we have pricing and competitive pressures in that marketplace.

I do think there's some demographic characteristics of growing retirement a number of people that are in retirement and those that are retiring over the next few years is also a favorable dynamic that will support continued product sales.

My follow-up question. Shortly after the last call, the DOJ and SEC investigations have concluded. Is the EEOC investigation still ongoing? And what's your visibility into that taking care of itself?

As a reminder, the EEOC findings are not binding the litigation has to actually be initiated, and there is no pending litigation. So I don't really have anything to update from that perspective is just -- it's kind of status quo.

Yes. And John, I would just remind you that the courts have with respect to just the whole independent contract or employee issue, the courts have addressed this issue in the past several times with regard to AIL sales agents and have always found that they have been appropriately classified. So if there are any lawsuits, we would vigorously defend those.

Our next call comes from [ Joel Hurwitz ] of Dillingham Partners.

Tom, on excess cash flow generation, the $600 million to $700 million is above the $500 million to $600 million run rate you mentioned a few quarters ago. I guess, what's the driver of the increase there? And is that level sustainable going forward before factoring in Bermuda benefits?

Yes. Thanks. I really do believe that it is sustainable. I think it's indicative of the improving trends that we've seen in mortality. To the extent that health margins continue to improve, that will be a tailwind for future years. And I also I think the investment income environment or the investment yield environment, '25 was more favorable than 2024. So as long as that stays consistent, I think we'll also benefit from higher yields going forward.

Yes. Then I would just remind you that the $500 million to $600 million range that I think Tom has talked about on prior calls was the amounts available for shareholders or share repurchases after dividends. And when Tom is talking about the $600 million to $700 million that is the total excess cash flow. And so if you assume around $80 million, $85 million of dividends, shareholder dividends being paid out of that, that brings you back into the mid-$500 million consistent with what Tom had talked about before.

Got it. That makes sense. And then just a follow-up. In terms of the '26 guidance and the margin guidance for Life, does that factor in any expectation for remeasurement gains?

Yes, thanks. The -- with mortality, we just updated assumptions. As I mentioned, third quarter remeasurement gains, excluding the assumption update impact were very favorable as well, right? So we do expect that the -- our assumptions that our mortality is performing. We're getting mortality results, which are better than our assumptions, and we anticipate that mortality experience to continue into 2026, which we would then expect continued remeasurement gains relative to the assumptions that we just set.

And so I think the important thing, I think, to pay attention to is what are the obligation ratios that are emerging. And are those obligation ratios staying similar to what we've seen in the third quarter. And I think that those -- that really is kind of the more -- the thing that I pay attention to more. I think as we see remeasurement gains, if we see continued positive remeasurement gains I think that's a leading indicator that we might have an assumption change. And so I think that's kind of what I would take from looking at remeasuring gains themselves. But the absolute number that I pay attention to would be policy obligations and I'd normalize those policy obligations for assumption updates.

Our next call comes from Wes Carmichael of Autonomous Research.

Just wanted to circle back to Bermuda real quick. Just curious has there been any progress with the BMA or other regulators? And should we expect any change to your expectations on uplift to free cash flow or the timing there? I think you had previously mentioned $200 million and maybe that's in 2027, but I just wanted to see if that still stands?

Yes. Previous comments were $200 million trending over time. So over time, to $200 million of benefit. We have -- Bermuda has approved our business plan. We have started -- we've established the company. We're going through the licensing process, and we're going through U.S. regulatory approvals for the reinsurance transactions and the transfer of assets to the new entities. So we're in the middle of the approval process. And once we get that, then we can actually execute on that first reinsurance transaction.

And John, I would think that we haven't seen anything at this point in time that would really change what we said with respect to amount of timing at this point. I think as we kind of get the final approvals, I think we should be pretty close to being able to really give a little bit more guidance early next year on what that kind of looks like and maybe a little bit more sense of what that timing might be too.

Got it. And second question, I just wanted to come back to your comments on floating rate exposure. I think you mentioned that assets and liabilities are well matched. But how should we think about sensitivity of your NII if we get additional Fed cuts from here?

Yes. I think it's around $1 million that -- for a 1% change in the short-term rates.

But I also think that there's a -- the geography of the change is -- happens in a few places, which is required interest would also go down a little bit if short-term rates went down. And then we have a floating rate debt as well, which would also go down as well. So we'd see a little bit reduction in financing costs, which is part of one of the offsets. So Frank, your $1 million is really a combination of the 2. Yes.

Our next call comes from Ryan Krueger of KBW.

I just had a couple of quick ones. Can you give us a couple more details on your 2026 guidance in terms of admin expenses and excess NII growth?

Yes, Brian. I think admin expenses, we still expect to be around 7.3% of premium, so very stable with in 2025. So we're pleased with respect to that. And then with respect to net investment income, we probably see being up around 3% and required interest probably being a little bit higher than that, closer to maybe a little bit closer to 4%.

Got it. And then for the -- I guess, what did you assume for buybacks? I assume it's just the $600 million to $700 million of free cash flow minus the $85 million dividend, just want to confirm.

Yes, I think that's a reasonable way of looking at it. Yes. I think that's right. And then it's really, again, fairly well spread out over the course of the year at this point in time with respect to the buyback. One thing else I would know, Ryan, is that you think about -- bring the conversation around some of the floating rates, we do anticipate that interest. Our financing costs will be down a little bit next year as compared to 2025. Just given some of the floating rate exposure we have there on the CD balances and our term loan. We do -- we just follow the economists forecast with respect to what the expectations are around those changes in the short-term rates.

Our next call comes from Elyse Greenspan of Wells Fargo.

I guess my first question, given, I guess, your comments around share repurchase as well as, I guess, the plan outlined for next year. it feels like, I guess, M&A is still less likely, but I was just hoping to get some updated thoughts there.

Yes. I would say M&A is always in our minds, it's not foremost, if you will, and that we're feel compelled that we have to do on M&A transactions. So we're very comfortable with our ability to grow organically. And so with our baseline as we think about guidance, we anticipate that the excess cash flows would, in fact, be used for share repurchases. Now if an opportunity came along, that provided us a better return and a better answer to our shareholders than using that money for share repurchases then we would clearly divert some of that money and make a good positive acquisition.

I think as we think about M&A, it's still really being very focused on opportunities that really improve the core of who we are around being able to provide protection-oriented products in the middle and lower middle income markets. And we really distribution that comes along with that ability. So it's something that we feel that we can come in and help to grow much like the acquisition family heritage been over 10 years ago now, but an organization that is really hitting its stride as far as continuing to grow. So we'll also look for opportunities that there are for -- to help us within our operations and to make those operations more efficient, but that becomes from the value proposition there that we'd be looking for.

And then I guess my second question, just given the focus right on agent recruitment, would you expect, I guess, the sales guidance in life to be more back-end weighted? Or I guess, maybe there's some easier comps to start the year. Just if you could kind of help us think about the cadence there?

Sure. As we've talked about before, it's definitely a momentum game with the agent count being a leading indicator for the sales growth. So early Q4 is good for us. And then as you might imagine, around the holidays and things like that, there's a little bit of slowdown and then picks up back again mid-January and moving forward. So the first quarter of the year definitely has an impact of determining what the entire year looks like.

We're seeing some good, as I've mentioned, positive momentum from our hires, which is a leading indicator for new agents. And so we've got hires up at 15% at Liberty and 17% up at AIOs compared to a year ago. And so I think that bodes well for where we're at for Q4 and leading into Q1 of next year. But there is typically a quarter or 2 lag, I'll say, between good increase in agent count growth and the sales growth comes as some of those agents get onboarded, producing and get a little bit more experienced.

But I do agree with you also. I have to kind of go back and look at -- we're talking about quarter-over-quarter. You got to look at comps from the prior year quarters to kind of really think through that. But right now, as we had indicated, I think Liberty is set up well to have high single-digit growth next year in AIL in that mid-single-digit growth range.

Our next call comes from Suneet Kamath with Jefferies.

First question, just in your prepared remarks, you talked about an extraordinary dividend. I was just curious if you could size that. And was that a 2025 event? Or is that something that's going to show up in 2026?

Yes, it was a 2025 event and it was $80 million.

Got it. And then I guess on this whole remeasurement mortality thing. I guess the way I think about it, and maybe I'm wrong, is every third quarter, you true-up your assumptions to your best estimates. But if you expect that mortality will still continue to improve or remain favorable, why would that not be in your best estimates at this point?

I think we just really want to see it emerge quarter-to-quarter before we actually put it into our valuation assumptions. There's been some discussion about did we have a pull forward of deaths from the pandemic. And so we're just patient in making those changes into our overall long-term assumptions. So again, they're long-term assumptions. And so we do see short-term trends that actually influence us in our judgments, but we want to really focus on kind of where we believe the long term is.

Yes. To me, that's the key. It's very much a long term over the life of the business assumption and we can have differences in the short run that are different from that. And I think Thomas' fair assessment is that we're fairly close to kind of pre-pandemic levels from a long-term assumption perspective. But some of our recent experience is actually more favorable than that. So we're reluctant to move it back to a short-term very favorable position at this point.

Our next call comes from Tom Gallagher of Evercore ISI.

First question is the long-term assumption changes that were made in 3Q, how much of a go-forward earnings boost is that -- will that result in, in terms of prospective earnings?

Yes. I actually -- I reflected those in my comments around normalized underwriting margins that we saw for the quarter. I think that's a good way to kind of think about the go-forward normalized and also just the range that I gave you for underwriting margins in general for each of the life and health. I think that's a reasonable range for where we see life underwriting income coming in or life under earning margins and help underwriting margins.

Yes. So Tom, if you look at it back in for 2024, your normalized margins were closer -- a little under 40%. And now we're a little bit closer to 41%. I think Tom noted that maybe 41.5% for Q3 and maybe for the full year, we're closer to 41%. So you see a little bit of that uptick. And that really comes from having the lower policy obligations as a result of that assumption change.

It's exactly right. I mean in 2023, we were 38%. In 2024, we're 39.7%. In 2025, we're right around 41%. It's really demonstrating the significant improvement in mortality we've seen over time.

And so something that as you think about those remeasurement gains, the normal fluctuations, if you will, each quarter as we continue to see positive experience below those long-term assumptions end up with some positive remeasurement gains, but that's really just showing that the book of business is still performing really better than the long-term assumptions and over time just by the nature of the long-term assumptions we wouldn't.

We currently anticipate that eventually, they'll kind of revert back to those long-term assumptions. And -- but what we're seeing right now, as Tom was talking about. We do anticipate the trends that we're seeing right now saying that we anticipate those continuing on in '26. As we get more experience as that emerges over time, then we'll either be change of long-term assumptions? Or do you ultimately have fewer remeasurement gains.

And just relatedly, just to clarify, are there any long-term assumption change benefits embedded in your '26 guidance? Or is it only some assumption of sort of current period measurement gains that you're assuming?

Yes. The way we're thinking about that is the range that we've provided. The top end of the range would be indicative of a number of things, but one of those possibilities could be an assumption update that comes through. And so we've tried to factor in, in the scenarios that we look at in determining the range an assumption update of what that might do to the results overall.

Got you. So high end would have something in it for that?

Correct.

And then just, I guess, final question, if I could, in terms of thinking about I think you mentioned the actuarial assumption update was under 1% of reserves. Just to sort of compare how favorable the remeasurement gains are and quantifying it. I assume they're running well better than 1% of your long-term assumption in terms of current experience. And that's the reason you pointed out that the reserve release was under 1%. Can you quantify how -- like right now, if you just isolate to 3Q, how much more favorable is that running? Is it 3%? Is it 5%? Is it 10%? Can you give sort of indication of comparing 1 versus the other?

That's a hard question to answer directly. What I'd point to is, again, kind of looking at normalized underwriting margins and normalized policy obligations. And I think that really -- the normalized policy obligations is really the underlying metric that reflects the actual experience that's coming through. And I think that's kind of where I put a little bit of focus as far as looking at those trends.

And I think the point of the 1% comment was just recognizing that a small change in an assumption can have a decent size impact in the current quarter and -- on a dollar-wise but [ not ] 100% of reserve. And it's a cumulative catch-up from the day of transition. And so just slight tweaks and long-term assumptions can have a decent impact. So it's just really reflective of the reserve balances and moving significantly 1%.

I think what's also important there is what it's telling us, right, is when we have an adjustment from the assumptions that brings down reserve levels. That said that we have -- and I mentioned in my comments that we have a more favorable outlook of future profits from that business or future that we need less premium to fund the benefits that we have promise to our policyholders. So that's a really, I think, good indication of just kind of how the business is performing and how we think it's going to perform.

Our next call comes from Maxwell Fritscher of Truist.

I'm calling in for Mark Hughes. Just further digging into DTC, how does this conversion rate lead to sales compared historically in the same channel? And then is that elevated compared to recent experience in DTC? Or are conversions high historically?

Yes. So the technology improvements that we've put in and just process improvements is that keep in mind, direct-to-consumer sale is fairly passive. The customer goes out an application. Well, in some of those instances, based on how they fill out the application, we have follow-up questions or we have information from data perspective related to some medical questions that we need to follow up on. And so there was times when we could not get a hold of a customer. And therefore, that policy just never got issued, it pinned it out.

And so now with more advanced data and analytics, we knew there was some good risks in there that we want to go ahead and issue but trying to get past some of this friction. And so we're issuing those policies now without really changing our risk profile. So the conversions ratio has gone up just in the last couple of quarters as that's been implemented. And again, that's kind of a onetime adjustment upward for a new conversion ratio that we would expect on a go-forward basis and an improvement. The other thing that's going on in the direct-to-consumer channel, though is that as we have a better conversion of those advertising spend across the entire organization. Then you've heard me talk about in the previous quarters, how we scaled back advertising from unprofitable different campaigns.

We were able to go back into those campaigns and other campaigns because the profitability metrics have changed because now I'm issuing more policies with the same advertising spend. And so that's why I said in my comments that the that program and the conversion of looking at it enterprise-wide, meaning agency and direct-to-consumer allows us to spend more money on advertising, and that's growing sales, both in our direct-to-consumer channel as well as giving more leads and growing sales in our agency channel. And so that's what we're very pleased about is all of those channels working together from a growth perspective.

There are no further questions in queue. I will now hand it back to Stephen Mota for closing remarks.

All right. Thank you for joining us this morning. Those are our comments, and we will talk to you again next quarter.

This does conclude today's call. You may now disconnect.