GLOBE LIFE INC. (GL) FY 2024 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Globe Life's Consolidated Financial Statements and Notes thereto appearing elsewhere in this report. The following management discussion will only include comparison to prior year. For discussion regarding activity from 2022, please refer to the prior filed Form 10-Ks at www.sec.gov.

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

Results of Operations

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GLOBE LIFE INC.

Management's Discussion & Analysis

Current Highlights.

•Net income as a return on equity (ROE) for the year ended December 31, 2024 was 21.7% and net operating income as an ROE, excluding accumulated other comprehensive income(1) was 15.1%.

•Total premium increased 5% over the same period in the prior year. Life premium increased 4% for the period from $3.14 billion in 2023 to $3.26 billion in 2024.

•Net investment income increased 7% over the same period in the prior year.

•Total net sales increased 9% over the same period in the prior year from $768 million in 2023 to $840 million in 2024. The average producing agent count across all of the exclusive agencies increased 11% over the prior year.

•Book value per share increased 33% over the same period in the prior year from $47.10 to $62.50. Book value per share, excluding accumulated other comprehensive income(1), increased 13% over the prior year from $76.21 in 2023 to $86.40 in 2024.

•For the year ended December 31, 2024, the Company repurchased 10.1 million shares of Globe Life Inc. common stock at a total cost of $946 million for an average share price of $93.76.

The following graphs represent net income and net operating income for the three years ended December 31, 2024.

(1)As shown in the charts above, net operating income is primarily comprised of insurance underwriting margin plus excess investment income and annuity and other income, offset by operating expenses after tax and, as such, is considered a non-GAAP measure. It has been used consistently by Globe Life's management for many years to evaluate the operating performance of the Company. It differs from net income primarily because it excludes certain non-operating items such as realized gains and losses and certain significant and unusual items included in net income. Net income is the most directly comparable GAAP measure.

Net operating income as an ROE, excluding accumulated other comprehensive income (AOCI), is considered a non-GAAP measure. Management utilizes this measure to view the business without the effect of changes in AOCI, which are primarily attributable to fluctuation in interest rates. The impact of the adjustment to exclude AOCI is $(2.03) billion and $(2.77) billion for the year ended December 31, 2024 and 2023, respectively.

Book value per share, excluding AOCI, is also considered a non-GAAP measure. Management utilizes this measure to view the book value of the business without the effect of changes in AOCI, which are primarily attributable to fluctuation in interest rates. The impact of the adjustment to exclude AOCI is $(23.90) and $(29.11) for the year ended December 31, 2024 and 2023, respectively.

Refer to Analysis of Profitability by Segment for non-GAAP reconciliation to GAAP.

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Management's Discussion & Analysis

Summary of Operations. Net income increased 10% to $1.07 billion in 2024, compared with $971 million in 2023. In 2023, net income increased 9% from $894 million in 2022. On a diluted per common share basis, net income per common share for 2024 increased from $10.07 to $11.94. In 2023, net income per common share, on a diluted per common share basis, increased 11% from $9.04 in 2022.

Net operating income increased 8% to $1.11 billion in 2024, compared with $1.03 billion in 2023, due to a 26% increase in excess investment income as well as a 13% increase in life underwriting margin. In 2023, net operating income increased 7% from $961 million in 2022. On a diluted per common share basis, net operating income per common share for 2024 increased from $10.65 to $12.37, an increase of 16%. In 2023, net income per common share, on a diluted per common share basis, increased 10% from $9.71 in 2022. Net operating income is primarily comprised of insurance underwriting margin plus excess investment income and annuity and other income, offset by operating expenses, after tax and, as such, is considered a non-GAAP measure. Net income is the most directly comparable GAAP measure. We do not consider realized gains and losses to be a component of our core insurance operations or operating segments. Additionally, net income in 2024, 2023, and 2022 was affected by certain non-operating items. We do not view these items as components of core operating results because they are not indicative of past performance or future prospects of the insurance operations. We remove items such as these that relate to prior periods or are non-operating items when evaluating the results of current operations, and therefore exclude such items from our segment analysis for current periods.

As previously noted, a component of insurance underwriting margin is policy obligations, which includes for each reporting period the change in the liability for future policy benefits (LFPB). The LFPB is determined each reporting period based on the net level premium method. Net level premiums reflect a recomputed net premium ratio using actual experience since the issue date, and expected future experience based on future cash-flow assumptions. See Note 6—Policy Liabilities for additional information. The policy liability is accrued as premium revenue is recognized and adjusted for differences between actual and expected experience in the form of remeasurement gains and losses during the period. If actual mortality, morbidity, and lapse experience equals our expected assumptions used in the development of our liability for future policy benefits, there would be no impact to our financial results. Actual experience can have a material impact on financial results to the extent it significantly deviates from the expected assumptions which are used to develop our estimates of the liability for future policy benefits and amortization of the deferred acquisition cost asset (DAC). For example, deviations in actual versus expected lapses in the early policy years tend to have a larger impact on DAC amortization than LFPB change in reserves. Conversely, deviations in actual versus expected lapses in the later policy years typically have a larger impact on LFPB change in reserves than DAC amortization. This is due to the release of DAC and LFPB where DAC capitalization in earlier years is amortizing over time and the LFPB is increasing over time as the policy stays inforce. Disaggregated rollforwards of our present value of expected future net premiums and our expected future policy benefits are presented within Note 6—Policy Liabilities, which include disclosure of remeasurement gain (loss) for the effect of actual variances from expected experience and the changes in assumptions (mortality, morbidity, and lapses) on future cash flows.

The Company performed an annual review of its assumptions in the third quarter of 2024 that resulted in favorable changes to its mortality and lapse assumptions on life and unfavorable changes to morbidity assumptions on health. In our life segment mortality assumptions generally decreased across most channels in line with recent experience consistent with decreasing levels of excess deaths. Lapse rate assumptions in the life segment were slightly increased across all channels. For the health segment, morbidity assumptions were increased, causing higher future policy benefit reserves. The assumption review process of the life and health segments resulted in a $46.3 million net remeasurement gain for the period ended December 31, 2024 as compared to a $3.2 million net remeasurement gain for the period ended December 31, 2023 and a $36.5 million net remeasurement loss for the period ended December 31, 2022.

Excluding the impact of assumption changes, the Company's results for actual variances from expected experience for both life and health produced a $57.4 million net remeasurement gain for the period ended December 31, 2024, as compared to a $38.0 million net remeasurement gain for the period ended December 31, 2023 and a $4.6 million net remeasurement gain for the period ended December 31, 2022.

Overall, the Company continues to see positive signs in its core operations, including sales and premium growth, and continues to achieve an operating ROE (excluding accumulated other comprehensive income) generally in the mid-teens.

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Management's Discussion & Analysis

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

Analysis of Profitability by Segment

(Dollar amounts in thousands)

The life insurance segment is our primary segment and is the largest contributor to earnings in each year presented. In 2024, the life insurance segment underwriting margin increased $160 million compared with 2023. This was primarily a result of increased premiums and favorable policy obligations as a percent of premium due to a remeasurement gain resulting from the assumption updates in 2024. In 2023, the life insurance segment underwriting margin increased $63 million when compared with 2022. The increase was due to increased premiums, favorable policy obligations as a percent of premium, and a lower remeasurement loss resulting from assumption updates in 2023. Excess investment income increased $34 million in 2024 compared with 2023, resulting from growth in our invested assets and increased yields due to higher interest rates. In 2023, excess investment income increased $26 million compared with 2022. In 2024, underwriting margin in the health segment decreased to $372 million due to higher claim utilization, compared with $378 million in 2023 and $377 million in 2022.

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Management's Discussion & Analysis

In 2024, the largest contributor of total underwriting margin was the life insurance segment and the primary distribution channel was the American Income Life Division (American Income). The following charts represent the breakdown of total underwriting margin by operating segment and distribution channel for the year ended December 31, 2024.

Total premium income rose 5% for the year ended December 31, 2024 to $4.67 billion. Total net sales increased 9% to $840 million, when compared with 2023. Total first-year collected premium (defined in the following section) increased 11% to $674 million for 2024, compared to $605 million in 2023.

Life insurance premium income increased 4% to $3.26 billion over the prior-year total of $3.14 billion. Life net sales rose 9% to $595 million for the year ended 2024. First-year collected life premium increased 8% to $455 million. Life underwriting margin, as a percent of premium, increased to 41% for 2024 from 38% in 2023. Underwriting margin increased to $1.35 billion in 2024, compared to $1.19 billion in 2023.

Health insurance premium income increased 7% to $1.40 billion over the prior-year total of $1.32 billion. Health net sales rose 10% to $245 million for the year ended 2024. First-year collected health premium rose 18% to $219 million. Health underwriting margin, as a percent of premium, was 27% for 2024 and 29% for 2023. Health underwriting margin declined to $372 million for the year ended 2024, compared to $378 million in 2023.

Excess investment income, the measure of profitability of our investment segment, increased 26% during the year ended 2024 to $164.4 million from $130.4 million in 2023. Excess investment income per common share, reflecting the impact of our share repurchase program and increased net investment income, increased 36% to $1.83 from $1.35 when compared with the same period in 2023.

Insurance administrative expenses increased 14% in 2024 when compared with the prior-year period. These expenses were 7.3% as a percent of premium during 2024 compared to 6.8% in 2023.

For the year ended December 31, 2024, the Company repurchased 10.1 million Globe Life Inc. shares at a total cost of $946 million for an average share price of $93.76.

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Management's Discussion & Analysis

The discussions of our segments are presented in the manner we view our operations, as described in Note 15—Business Segments.

We use three measures as indicators of premium growth and sales over the near term: “annualized premium in force,” “net sales,” and “first-year collected premium.”

•Annualized premium in force is defined as the premium income that would be received over the following twelve months at any given date on all active policies if those policies remain in force throughout the twelve-month period.

•Net sales is calculated as annualized premium issued, net of cancellations generally in the first thirty days after issue, except in the case of Direct to Consumer, where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period (typically 1 month) has expired. Management considers net sales to be a better indicator of the rate of premium growth than annualized premium issued since annualized premium issued excludes cancellations, and cancellations do not contribute to premium income.

•First-year collected premium is defined as the premium collected during the reporting period for all policies in their first policy year. First-year collected premium takes lapses into account in the first year when lapses are more likely to occur, and thus is a useful indicator of how much new premium is expected to be added to premium income in the future. First-year collected premiums are lower than net sales over the prior 12 months because premiums are not collected on lapsed policies after the date of lapse.

Cancellations are not included in lapses.

Approximately 90% of our premiums are collected monthly; however, other premium payment options such as quarterly and annual are offered by the Company and may be elected by the policyholder. The majority of premiums are paid by way of automatic draft or electronic payment from our policyholders and to a lesser extent from other payment methods such as check, credit card, and worksite payroll deduction.

Excluding our Direct to Consumer Division, we sell our policies primarily through independently contracted agents (“agents”) who earn commissions in accordance with contracts they have with the respective insurance subsidiary of the Company. These contract arrangements with agents cover commission structures and rates, contract periods, credit terms for settlement of agent advance accounts, vesting rights in future renewal commissions upon termination of contracts and responsibility for certain premium collections. Contract terms with agents vary, but generally commissions are earned over the life of the policy as premiums are paid. Commissions are calculated on a policy-by-policy basis and vary by product type and policy year. Commission rates are higher for the first-year premium when a policy is issued and are generally reduced for policies that remain in effect for renewal periods (e.g., commission rates may reduce in years 2-10 and again in year 11 and after). After a certain period (typically 10 years), commission rates become constant over the remaining life of the policy and are considered level commissions.

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

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Management's Discussion & Analysis

LIFE INSURANCE

Life insurance is the Company's predominant segment. During 2024, life premium represented 70% of total premium and life underwriting margin represented 78% of the total underwriting margin. Additionally, investments supporting the reserves for life products produce the majority of excess investment income attributable to the investment segment.

The following table presents the summary of results of life insurance. Further discussion of the results by distribution channel is included below.

Life Insurance

Summary of Results

(Dollar amounts in thousands)

Net policy obligations amounted to 37% of premiums for the year ended December 31, 2024, compared to 41% in 2023, and 43% in 2022. This improvement was primarily due to the assumptions updated based upon our review of lapses, mortality, and morbidity resulting in a remeasurement gain of $56.8 million compared to a remeasurement loss of $2.0 million in 2023 and a remeasurement loss of $47.2 million in 2022. Refer to Note 6—Policy Liabilities for further discussion of the Company's annual assumptions review.

The table below summarizes life underwriting margin by distribution channel for the last three years.

Life Insurance

Underwriting Margin by Distribution Channel

(Dollar amounts in thousands)

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Management's Discussion & Analysis

The following table presents Globe Life's life premium distribution channel for the last three years.

Life Insurance

Premium by Distribution Channel

(Dollar amounts in thousands)

Annualized life premium in force was $3.3 billion at December 31, 2024, an increase of 4% over $3.2 billion a year earlier.

The following table presents life net sales, an indicator of new business production, by distribution channel for each of the last three years.

Life Insurance

Net Sales by Distribution Channel

(Dollar amounts in thousands)

The table below discloses first-year collected life premium by distribution channel for the last three years.

Life Insurance

First-Year Collected Premium by Distribution Channel

(Dollar amounts in thousands)

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Management's Discussion & Analysis

A discussion of life operations by distribution channel follows.

The American Income Life Division markets to members of labor unions and other affinity groups and continues to diversify its lead sources utilizing third-party internet vendor leads and obtaining referrals to facilitate sustainable growth. This division is Globe Life's largest contributor of life premium of any distribution channel at 52% of the Company's 2024 total life premium. In 2024, the average monthly life premium issued per policy was $56 as compared to $54 in 2023. Net sales were $382 million in 2024, up from $323 million in 2023. The underwriting margin, as a percent of premium, was 47% in 2024, up from 45% in 2023.

The average producing agent count increased 11% over the year-ago period. Over 65% of the Division's net sales are driven by agents that have been producing for the Division for six months or more. The increase in average producing agent count was driven by an increase in new agent recruiting along with continued improvement in new agent retention. Sales growth in this Division, as well as within our other exclusive agencies, is generally dependent on growth in the size of the agency force.

Below is the average producing agent count as of the indicated periods for the American Income Division. The average producing agent count is based on the actual count at the beginning and end of each week during the year.

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

The Direct to Consumer Division (DTC) markets adult and juvenile life insurance through a variety of mediums, including direct mail, insert media, and digital marketing. The different media channels support and complement one another in the Division's efforts to provide consumer outreach. All three channels work in an omnichannel approach. Sales from the internet and inbound phone calls continue to outpace the activity from direct mail. DTC's long-term growth has been fueled by consistent innovation and brand awareness. Additionally, the DTC division provides valuable support to our agency business through brand impressions and inquires that may lead to sales in our exclusive agency channels. New initiatives are continuously introduced to help increase response rates, issue rates, and create a seamless customer experience. The juvenile market is an important source of sales as well as a vehicle to reach the parent and grandparent market of juvenile policyholders, who are more likely to respond favorably to a solicitation for life insurance.

It is also a vehicle to reach the parents and grandparents of juvenile policyholders, who are more likely to respond favorably to a seamless customer experience solicitation for life coverage on themselves in comparison to the general adult population. Also, future offerings to juvenile policyholders and their parents are sources of lower acquisition-cost life insurance sales in the future.

DTC net sales declined 9% to $106 million in 2024 compared with $116 million for the same period a year ago. This decline is due primarily to the management of costs relative to direct mail and mailing insert marketing activity as a result of inflation related to postage, paper, and online advertising costs. While total sales have declined, the focus has been on improving profitability and improving the underwriting margin. In 2024, DTC’s underwriting margin, as a percent of premium, was 29% compared with 24% in 2023.

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Management's Discussion & Analysis

The Liberty National Division markets individual life insurance to middle-income household and worksite customers. Recent investments in new sales technologies as well as recent growth in middle management within the agency are expected to support increased sales. The underwriting margin as a percent of premium was 38% in 2024, compared with 33% in 2023. The increase is primarily attributable to increased premiums and lower policy obligations as a percent of premium during the year compared with the same year ago period. In 2024, the average monthly life premium issued per policy was $43 as compared to $44 in 2023. Net sales rose 3% in 2024 over the same period in 2023 due primarily to increased agent count.

Below is the average producing agent count as of the indicated periods for the Liberty National Division. The average producing agent count is based on the actual count at the beginning and end of each week during the year.

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

The Other agency distribution channels primarily include non-exclusive independent agencies selling primarily life insurance. The other distribution channels contributed $204 million of life premium income, or 6% of Globe Life's total life premium income in 2024, and contributed 2% of net sales for the year.

HEALTH INSURANCE

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

Health premium accounted for 30% of our total premium in 2024, while the health underwriting margin accounted for 22% of total underwriting margin. Health underwriting margin declined to $372 million compared to $378 million in the prior year. While the Company continues to emphasize life insurance sales relative to health due to life’s superior long-term profitability and its greater contribution to excess investment income, the health business provides a significant contribution to return on equity as it does not require a substantial amount of up-front capital.

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Management's Discussion & Analysis

The following table presents the summary of health insurance results. Further discussion of the results by distribution channel is included below.

Health Insurance

Summary of Results

(Dollar amounts in thousands)

Net policy obligations amounted to 53% of premium in 2024 compared to 51% in both 2023 and 2022. This increase was primarily due to the assumptions review of lapses and morbidity resulting in a remeasurement loss of $10.5 million compared to a remeasurement gain of $5.2 million and $10.7 million in 2023 and 2022, respectively. Refer to Note 6—Policy Liabilities for further discussion of the Company's annual assumptions review.

The table below summarizes health underwriting margin by distribution channel for the last three years.

Health Insurance

Underwriting Margin by Distribution Channel

(Dollar amounts in thousands)

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Management's Discussion & Analysis

The following table presents Globe Life's health premium by distribution channel for the last three years.

Health Insurance

Premium by Distribution Channel

(Dollar amounts in thousands)

Premium related to limited-benefit supplemental health products comprise $786 million, or 56%, of the total health premiums for 2024 compared with $743 million, or 56%, in 2023. Premium from Medicare Supplement products comprises the remaining $619 million, or 44%, for 2024 compared with $576 million, or 44%, in 2023.

Annualized health premium in force was $1.48 billion at December 31, 2024, an increase of 7% from $1.39 billion a year earlier.

Presented below is a table of health net sales, an indicator of new business production, by distribution channel for each of the last three years.

Health Insurance

Net Sales by Distribution Channel

(Dollar amounts in thousands)

Health net sales related to limited-benefit supplemental health products, comprise $175 million, or 71%, of the total health net sales for 2024 compared with $161 million, or 72%, in 2023. Medicare Supplement sales make up the remaining $70 million, or 29%, for 2024 compared with $63 million, or 28%, in 2023.

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Management's Discussion & Analysis

The following table discloses first-year collected health premium by distribution channel for the last three years.

Health Insurance

First-Year Collected Premium by Distribution Channel

(Dollar amounts in thousands)

First-year collected premium related to limited-benefit supplemental health plans comprise $155 million, or 71% of total first-year collected premium for 2024 compared with $133 million, or 72%, in 2023. First-year collected premium from Medicare Supplement policies make up the remaining $64 million, or 29%, for 2024 compared with $52 million, or 28%, in 2023.

A discussion of health operations by distribution channel follows.

The United American Division consists of non-exclusive independent agencies and brokers who may also sell for other companies. The United American Division was Globe Life's largest health agency in terms of health premium income, with net sales up 11% from the same period in the prior year.

This Division includes three different units:

•UA General Agency, which primarily sells individual Medicare Supplement insurance through independent agents;

•Special Markets, which markets retiree health insurance to employer and union groups through brokers; and

•Globe Life Group Benefits, which offers group worksite supplemental health insurance through brokers.

The majority of the premium revenue comes from Medicare Supplement. Underwriting margin as a percent of premium for the Division was 8% in 2024, declining due to increased claims utilization, 11% in 2023, and 12% in 2022.

The Family Heritage Division primarily markets individual limited-benefit supplemental health insurance in small to medium sized businesses. Most of its policies include a cash-back feature, such as a return of premium, where any excess of premiums over claims paid is returned to the policyholder at the end of a specified period stated within the insurance policy. Underwriting margin as a percent of premium was 34% in 2024, the same as in 2023 and 2022.

The division experienced a 10% rise in health net sales in 2024 as compared with 2023, primarily due to an increase in producing agents and improved agent productivity and training. The Division will continue to implement incentive and retention programs to further increases in the number of producing agents.

The average producing agent count was up 5% compared with the same period a year ago. The Division has recently increased efforts to grow agency middle management, which also positively impacts average producing agent count. While growth in net sales and earned premium is impacted by agent productivity, growth in the number of average producing agents is the primary driver of future growth in sales, similar to other exclusive agencies.

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Management's Discussion & Analysis

Below is the average producing agent count as of the indicated periods for the Family Heritage Division. The average producing agent count is based on the actual count at the beginning and end of each week during the year.

The Liberty National Division represented 14% of all Globe Life health premium income in 2024. The Liberty National Division markets limited-benefit supplemental health products, consisting primarily of cancer and critical illness insurance. Much of Liberty National’s health business is generated through worksite marketing targeting small businesses. Health premium at the Liberty National Division was $190 million in 2024 up from $188 million in 2023. Liberty National's first-year collected premium increased 10% to $28 million in 2024 compared with $26 million in 2023. Health net sales is slightly lower in 2024 as compared to 2023. Underwriting margin as a percent of premium was 56% in 2024 and 2023.

While both the American Income Life Division and the Direct to Consumer Division sell life insurance, they also market health products. The American Income Life Division primarily markets accident plans. The Direct to Consumer Division primarily markets Medicare Supplements to employer or union-sponsored groups. On a combined basis, these other channels accounted for 14% of health premium in 2024 and 2023.

INVESTMENTS

We manage our capital resources, including investments and cash flow, through the investment segment. Excess investment income represents the profit margin attributable to investment operations and is the measure that we use to evaluate the performance of the investment segment as described in Note 15—Business Segments. It is defined as net investment income less the required interest attributable to policy liabilities.

Management also views excess investment income per diluted common share as an important and useful measure to evaluate the performance of the investment segment. It is defined as excess investment income divided by the total diluted weighted average shares outstanding, representing the contribution by the investment segment to the consolidated earnings per share of the Company. As excess investment income per diluted common share incorporates all invested assets and insurance liabilities, we view excess investment income per diluted common share as a useful measure to evaluate the investment segment.

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Management's Discussion & Analysis

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

Analysis of Excess Investment Income

(Dollar amounts in thousands except per share data)

(1)Interest on policy liabilities, at original rates, is a component of total policyholder benefits, a GAAP measure.

Excess investment income increased $34 million, or 26%, in 2024 when compared with 2023. In 2023, excess investment income increased $26 million, or 25%, when compared with 2022. Excess investment income per diluted common share was $1.83 during 2024, an increase of 36% over the prior-year period ended 2023. Excess investment income per diluted common share was $1.35 during 2023, an increase of 27% over the period ended 2022. Excess investment income per diluted common share generally increases at a faster pace than excess investment income because the number of diluted shares outstanding generally decreases from year to year as a result of our share repurchase program.

Net investment income increased at a compound annual growth rate of 6% over the three years ending 2024. Mean invested assets increased at a compound annual growth rate of 4% during the same period. The effective annual yield rate earned on the fixed maturity portfolio was 5.26% in 2024, compared with 5.20% in 2023. Generally, investment income grows at a slower rate than the assets when the yield on new investments is lower than the yield on dispositions or the average portfolio yield. It also increases at a faster rate than the assets when new investment yields exceed the yield on dispositions or the average portfolio yield. Investment income grew in the current period due to the growth in invested assets and the higher yields on new investments relative to the yield on dispositions and average portfolio yield. In addition to fixed maturities, the Company has also invested in commercial mortgage loans and limited partnerships with debt-like characteristics that diversify risk and enhance risk-adjusted, capital-adjusted returns on the portfolio. The earned yield on the Company's commercial mortgage loans for the year ended December 31, 2024 was 8.04%. The earned yield on limited partnership investments for the year ended December 31, 2024 was 8.42%. See additional information in Note 4—Investments. The following chart presents the growth in net investment income and the growth in mean invested assets.

Globe Life's net investment income benefits from higher interest rates on new investments. While increasing interest rates have resulted in a net unrealized loss from our available for sale debt securities included in accumulated other comprehensive income (loss) as of December 31, 2024, we are not concerned because we do not generally intend to sell, nor is it likely that we will be required to sell, fixed maturity investments prior to their anticipated recovery.

Required interest on insurance policy liabilities reduces excess investment income, as it is the amount of net investment income considered by management necessary to cover the interest-related growth on insurance policy liabilities. As such, it is reclassified from the insurance segment to the investment segment. As discussed in Note 15—Business Segments, management regards this as a more meaningful analysis of the investment and insurance segments. Required interest is based on the original discount rate assumptions for our insurance policies in force.

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Management's Discussion & Analysis

The vast majority of our life and health insurance policies are fixed interest rate protection policies, not investment products, and are accounted for under current GAAP accounting guidance for long-duration insurance products which mandate that interest rate assumptions for a particular block of business be “locked in” for the life of that block of business. Each calendar year, we set the original discount rate to be used to calculate the benefit reserve liability for all insurance policies issued that year. The liability reported on the balance sheet is updated in subsequent periods using current discount rates as of the end of the relevant reporting period with a corresponding adjustment to Other Comprehensive Income.

The discount rate used for policies issued in the current year has no impact on the in-force policies issued in prior years as the rates of all prior issue years are also locked in for purposes of recognizing income. As such, the overall original discount rate for the entire in-force block of 5.5% is a weighted average of the discount rates being used from all issue years. Changes in the overall weighted-average discount rate over time are caused by changes in the mix of the reserves on the entire block of in force business. Business issued in the current year has little impact on the overall weighted-average original discount rate due to the size of our in-force business.

Information about interest on policy liabilities is shown in the following table.

Required Interest on Insurance Policy Liabilities

(Dollar amounts in thousands)

(1)    Reflects the average discount rate applicable to the current period, which is used to accrue interest on the insurance policy liabilities for each of the years presented.

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

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

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

The following table summarizes our tax-effected realized gains (losses) by component for each of the three years ended December 31, 2024.

Analysis of Realized Gains (Losses), Net of Tax

(Dollar amounts in thousands, except for per share data)

(1)During the three years ended December 31, 2024, 2023, and 2022, the Company recorded $105.6 million, $50.9 million, and $147.6 million, respectively, of exchanges of fixed maturity securities (noncash transactions) that resulted in $0, $(1.5) million, and $1.5 million, respectively, in realized gains (losses), net of tax.

(2)Other realized gains (losses) are primarily a result of changes in the fair value for assets held in rabbi trust.

(3)During the year ended December 31, 2023, the Company incurred a $52 million after-tax realized loss due to the disposal of holdings in Signature Bank New York and First Republic Bank as a result of the banks entering receivership.

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

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

Fixed Maturity Acquisitions Selected Information

(Dollar amounts in thousands)

(1)Fixed maturity acquisitions included unsettled trades of $3.2 million in 2024, $3.8 million in 2023, and $0 in 2022.

(2)Tax-equivalent basis, where the yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.

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

During 2024 and 2023, acquisitions consisted primarily of corporate and municipal bonds with securities spanning a diversified range of issuers, industry sectors, and geographical regions. For the year ended December 31, 2024, we invested primarily in the industrial, financial, and utility sectors. For the entire portfolio, the taxable equivalent effective yield earned was 5.26%, up approximately 6 basis points from the yield in 2023. The increase in taxable equivalent effective yield was primarily due to new purchase yields exceeding the yield on dispositions and the average portfolio yield.

New cash flow available for investment has been primarily provided through our insurance operations, cash received on existing investments, and proceeds from dispositions. Dispositions of fixed maturities were $1.42 billion in 2024 and $853 million in 2023. Dispositions in 2024 included $462 million related to a coinsurance agreement to cede a majority of annuity business to a third-party insurer. Refer to Note—1 Significant Accounting Policies for further information.

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In addition to the fixed maturity acquisitions, Globe Life invested in commercial mortgage loans and in other long-term investments. Other long-term investments primarily consist of investment funds. See Note—4 Investments for further discussion.

The following table summarizes Globe Life's other investment acquisitions of the following assets.

Other Investment Acquisitions

(Dollar amounts in thousands)

Since fixed maturities represent such a significant portion of our investment portfolio, 89% of total amortized cost net of allowance for credit losses at December 31, 2024, the remainder of the discussion of portfolio composition will focus on fixed maturities. Selected information concerning the fixed maturity portfolio is as follows:

Fixed Maturity Portfolio Selected Information

(1)Tax-equivalent basis. The yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.

(2)Globe Life calculates the average life and duration of the fixed maturity portfolio two ways:

(a) based on the next call date which is the next call date for callable bonds and the maturity date for noncallable bonds; and

(b) based on the maturity date of all bonds, whether callable or not.

(3)Effective duration is a measure of the price sensitivity of a fixed-income security to a 1% change in interest rates.

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Credit Risk Sensitivity. The following tables summarize certain information about the major corporate sectors and security types held in our fixed maturity portfolio at December 31, 2024 and 2023.

Fixed Maturities by Sector

December 31, 2024

(Dollar amounts in thousands)

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Fixed Maturities by Sector

December 31, 2023

(Dollar amounts in thousands)

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Corporate securities, which consist of bonds and redeemable preferred stocks, were the largest component of the fixed maturity portfolio as of December 31, 2024, representing 80% of amortized cost, net, and 81% of fair value. The remainder of the portfolio is invested primarily in securities issued by the U.S. government and U.S. municipalities. The Company holds insignificant amounts in foreign government bonds, collateralized debt obligations, asset-backed securities, and mortgage-backed securities. Corporate securities are diversified over a variety of industry sectors and issuers. At December 31, 2024, the total fixed maturity portfolio consisted of 1,014 issuers.

Fixed maturities had a fair value of $17.2 billion at December 31, 2024, compared with $17.9 billion at December 31, 2023. The net unrealized loss position in the fixed-maturity portfolio increased from $1.0 billion at December 31, 2023 to $1.7 billion at December 31, 2024 due to an increase in market rates during the period.

For more information about our fixed maturity portfolio by component at December 31, 2024 and December 31, 2023, including a discussion of allowance for credit losses, an analysis of unrealized investment losses, and a schedule of maturities, see Note 4—Investments.

An analysis of the fixed maturity portfolio by composite quality rating at December 31, 2024 and December 31, 2023, is shown in the following tables. The company uses the NAIC designation for credit quality ratings. The NAIC designation is generally determined using the second lowest rating available from nationally recognized statistical rating organizations (“NRSRO”) when 3 or more ratings are available and the lowest rating when 2 or fewer rating are available. When NRSRO ratings are unavailable the rating may be assigned by the Securities Valuation Office (“SVO”) of the NAIC.

Fixed Maturities by Rating

At December 31, 2024

(Dollar amounts in thousands)

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Fixed Maturities by Rating

At December 31, 2023

(Dollar amounts in thousands)

The overall quality rating of the portfolio is A-, the same as of year end 2023. Fixed maturities rated BBB are 46% of the total portfolio at December 31, 2024, down from 48% at December 31, 2023. While this ratio is high relative to our peers, it is at its lowest level since 2007 and we have limited exposure to higher-risk assets such as derivatives, equities, and asset-backed securities. Additionally, the Company does not participate in securities lending and has no off-balance sheet investments as of December 31, 2024. Of our fixed maturity purchases, BBB securities generally provide the Company with the best risk-adjusted, capital-adjusted returns largely due to our ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets.

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

Below-Investment Grade Fixed Maturities

(Dollar amounts in thousands)

Our investment policy calls for investing primarily in fixed maturities that are investment grade and meet our quality and yield objectives. Thus, the balance of below-investment grade issues is primarily the result of ratings

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downgrades of existing holdings. Below-investment grade bonds at amortized cost, net of allowance for credit losses, were 3% of total fixed maturities at amortized cost as of December 31, 2024. Globe Life invests long term and as such, one of our key criterion in our investment process is to select issuers that are anticipated to weather multiple financial cycles.

OPERATING EXPENSES

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

The following table is an analysis of operating expenses for the three years ended December 31, 2024.

Operating Expenses Selected Information

(Dollar amounts in thousands)

Total operating expenses for December 31, 2024 increased in comparison with the prior year primarily due to increases in insurance administrative expenses as well as stock compensation and legal proceedings. Insurance administrative expenses increased $41.3 million primarily due to higher information technology costs, legal costs including compliance and security and employee costs, which includes salaries and other. Insurance administrative expenses as a percent of premium were 7.3% for the year ended December 31, 2024 compared to 6.8% for the same period in 2023.

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SHARE REPURCHASES

Globe Life has an ongoing share repurchase program that began in 1986. The share repurchase program is reviewed with the Board of Directors by management quarterly, and continues indefinitely unless and until the Board of Directors decides to suspend, terminate or modify the program. On November 18, 2024, the Board of Directors authorized the repurchase of up to $1.8 billion under the Company's existing share repurchase program. Management generally determines the amount of repurchases based on the amount of the excess cash flows and other available sources after the payment of dividends to the Parent Company shareholders, general market conditions, and other alternative uses. Since implementing our share repurchase program in 1986, we have used $10.3 billion to repurchase Globe Life Inc. common shares after determining that the repurchases provide a greater risk-adjusted after-tax return than other investment alternatives.

Excess cash flow at the Parent Company is primarily comprised of dividends received from the insurance subsidiaries less interest expense paid on its debt and other limited operating activities. Additionally, when stock options are exercised, proceeds from these exercises and the resulting tax benefit are used to repurchase additional shares on the open market to minimize dilution as a result of the option exercises.

The following table summarizes share repurchases for each of the last three years.

Analysis of Share Purchases

(Amounts in thousands)

(1)Excludes excise tax on the repurchase of treasury stock of $8 million in 2024, $4 million in 2023, and $0 in 2022.

During 2024, the amount of share repurchases was higher as we accelerated repurchases given favorable market conditions and the use of additional capital raised during the year. Refer to Note 12—Debt for further details. Throughout the remainder of this discussion, share repurchases will only refer to those made from excess cash flow at the Parent Company and exclude anti-dilutive share repurchases related to stock options exercised.

FINANCIAL CONDITION

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

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

Four of our insurance subsidiaries are members of the FHLB of Dallas. FHLB membership provides the insurance subsidiaries with access to various low-cost collateralized borrowings and funding agreements. While not the only

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source of liquidity, the FHLB could provide the insurance subsidiaries with an additional source of liquidity, if needed. Refer to Note 12—Debt for further details.

Parent Company Liquidity. An important source of Parent Company liquidity is the dividends from its insurance subsidiaries. These dividends are received throughout the year and are used by the Parent Company to pay dividends on common and preferred stock, interest and principal repayment requirements on Parent Company debt, and operating expenses of the Parent Company.

(1)Excess cash flows are reported gross of shareholder dividends. For the year ended December 31, 2024, 2023, and 2022, shareholder dividends were $85 million, $84 million, and $81 million, respectively.

For more information on the restrictions on the payment of dividends by subsidiaries, see the Restrictions section of Note 13—Shareholders' Equity. Although these restrictions exist, dividend availability from subsidiaries historically has been more than sufficient for the cash flow needs of the Parent Company.

Dividends from subsidiaries and excess cash flows are projected to be higher in 2025 than in 2024 primarily due to improved earnings from favorable mortality trends and growth in business, as well as positive impacts from lower reserve increases under statutory accounting impacting the 2024 statutory earnings that derive the 2025 dividends. Additional sources of liquidity for the Parent Company are cash, intercompany receivables, intercompany borrowings, public debt markets, term loans, and a revolving credit facility. See Schedule II for more information. The credit facility is discussed below.

Short-Term Borrowings. An additional source of Parent Company liquidity is a credit facility with a group of lenders. The facility was amended on March 29, 2024, resulting in an increased capacity of $250 million. The facility allows for unsecured borrowings and stand-by letters of credit up to $1 billion, which could be increased up to $1.25 billion. While the Parent Company may request the increase, it is not guaranteed. The updated five-year credit agreement will mature on March 29, 2029. Up to $250 million in letters of credit can be issued against the facility. The facility serves as a back-up line of credit for a commercial paper program under which commercial paper may be issued at any time, with total commercial paper outstanding not to exceed the facility maximum less any letters of credit issued. Interest charged on the commercial paper program resembles variable rate debt due to its short term nature. As of December 31, 2024, we had available $466 million of additional borrowing capacity under this facility, compared with $316 million a year earlier. Globe Life has consistently been able to issue commercial paper as needed during the three years ended December 31, 2024. As of December 31, 2024, the Parent Company was in full compliance with all covenants related to the aforementioned debt.

As a part of the credit facility, Globe Life has stand-by letters of credit. These letters are issued among our insurance subsidiaries, one of which is an offshore captive reinsurer, and have no impact on company obligations as a whole. Any future regulatory changes that restrict the use of off-shore captive reinsurers might require Globe Life to obtain third-party financing, which could cause an increase in financing costs. On March 29, 2023, the letters of credit were amended to reduce the amount outstanding from $125 million to $115 million. The outstanding letters of credit remained at $115 million at December 31, 2024.

Through internally generated cash flow and the credit facility the Parent Company expects to have readily available funds for 2025 and the foreseeable future to conduct its operations and to maintain target capital ratios in the insurance subsidiaries. In the unlikely event that more liquidity is needed, the Company could generate additional funds through multiple sources including, but not limited to, the issuance of debt, an additional short-term credit facility, and intercompany borrowings. Refer to Note 5—Commitments and Contingencies and the discussion surrounding the Company's obligations over the next five years. As noted above, the Parent Company had access

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to $90 million of liquid assets available as of December 31, 2024. This liquidity is available to the Company in the event additional funds are needed to support the targeted capital levels within our insurance subsidiaries.

Consolidated Liquidity. Consolidated net cash inflows provided from operations were $1.40 billion in 2024, compared with $1.48 billion in 2023. The decrease is attributable to routine fluctuations in the settlement of operating activities. In addition to cash inflows from operations, our insurance companies received proceeds from dispositions of fixed maturities, mortgage loans, and other long-term investments in the amount of $1.52 billion in 2024. The Company sold shorter term securities and reinvested in longer term investments, extending duration and taking advantage of higher current interest rates during the year ended December 31, 2024. As noted under the caption Credit Facility in Note 12—Debt, the Parent Company has in place a revolving credit facility. The insurance companies have no additional outstanding credit facilities.

Cash and short-term investments were $250 million at the end of 2024 compared with $185 million at the end of 2023. In addition to these liquid assets, $17.2 billion (fair value at December 31, 2024) of fixed income securities are available for sale in the event of an unexpected need. Approximately $1.3 billion, at fair value, are pledged for outstanding FHLB advances and reinsurance. Further, approximately 98% of our fixed income securities are publicly traded, freely tradable under SEC Rule 144, or qualified for resale under SEC Rule 144A. While our fixed income securities are classified as available for sale, we have the ability and general intent to hold any securities to recovery or maturity. Our strong cash flows from operations, ongoing investment maturities, and available liquidity under our credit facility make any need to sell securities for liquidity highly unlikely.

Capital Resources. The Parent Company's capital structure consists of short-term debt (the commercial paper facility and current maturities of long-term debt), long-term debt, and shareholders’ equity. It does not include short-term FHLB borrowings, which are obligations of the insurance subsidiaries and typically repaid over the course of the year.

Debt: The carrying value of the long-term debt was $2.3 billion at December 31, 2024 and $1.6 billion at December 31, 2023. A complete analysis and description of long-term debt issues outstanding is presented in Note 12—Debt.

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

Analysis of Financing Costs

(Dollar amounts in thousands)

In 2024, financing costs increased 24% compared with the prior year. The increase in financing costs is primarily due to higher average balances in the current year compared to the prior year. We increased durations on commercial paper issuances during 2024 due to market considerations. More information on our debt transactions is disclosed in the Financial Condition section of this report and in Note 12—Debt.

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

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Our goal is to maintain statutory capital within our insurance subsidiaries at levels necessary to support our current ratings. For 2025, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300% to 320%. The Company has concluded that this capital level is more than adequate and sufficient to support its current ratings, given the nature of its business and its risk profile. For 2024, our consolidated Company Action Level RBC ratio is expected to be approximately 310%. The Parent Company is committed to maintaining the targeted consolidated RBC ratio at its insurance subsidiaries and has sufficient liquidity available to provide additional capital if necessary.

Shareholder's Equity: As noted under the caption Analysis of Share Purchases within this report, we have an ongoing share repurchase program.

Globe Life has continually increased the quarterly dividend on its common shares over the past three years.

Shareholders’ equity was $5.3 billion at December 31, 2024. This compares to $4.5 billion at December 31, 2023, an increase of $819 million or 18%. Shareholders' equity increased $537 million, or 14%, during 2023 from $3.9 billion in 2022.

During 2024, shareholders’ equity increased as a result of net income of $1.1 billion, but was offset by share repurchases of $946 million and an additional $48 million in share repurchases to offset the dilution from stock option exercises. Additionally, the balance of AOCI increased $743 million primarily due to increased interest rates and discount rates over the period. During 2023, shareholders' equity increased as a result of net income of $971 million, but was offset by share repurchases of $380 million and an additional $127 million in share repurchases to offset the dilution from stock option exercises. Additionally, the balance of AOCI increased $18 million due to increased interest rates and discount rates over the period.

We plan to use excess cash available at the Parent Company as efficiently as possible in the future. Excess cash flow, as we define it, results primarily from the dividends received by the Parent Company from its insurance subsidiaries less the interest paid on debt. The cash received by the Parent Company from our insurance subsidiaries is after they have made substantial investments during the year to grow the business. Possible uses of excess cash flow include, but are not limited to, share repurchases, acquisitions, shareholder dividend payments, investments in securities, or repayment of short-term debt. We will determine the best use of excess cash after ensuring that targeted capital levels are maintained in our insurance subsidiaries. If market conditions are favorable, we currently expect that share repurchases will continue to be a primary use of those funds.

Future policy benefits are computed using current discount rates with the impact of changes in discount rates included in accumulated other comprehensive income. Additionally, the liability for future policy benefits is calculated using net premiums rather than gross premiums. Given that gross premiums are considerably higher than net premiums for our business, as seen in Note 6—Policy Liabilities, the measurement of the liability is higher than what it would be had it been computed using gross premiums. This is an important consideration when analyzing shareholders' equity.

We maintain a significant available-for-sale fixed maturity portfolio to support our insurance policy liabilities. Current accounting guidance requires that we revalue our portfolio to fair market value at the end of each accounting period. The period-to-period changes in fair value, net of their associated impact on income tax, are reflected directly in shareholders’ equity. Changes in the fair value of the portfolio can result from changes in market rates.

While a majority of invested assets are revalued, accounting rules do not permit interest-bearing insurance policy liabilities to be valued at fair value in a consistent manner as that of assets, with changes in value applied directly to shareholders’ equity. Due to the size of our policy liabilities in relation to our shareholders’ equity, an inconsistency exists in measurement, which may have a material impact on the reported value of shareholders’ equity. Fluctuations in interest rates cause undue volatility in the period-to-period presentation of our shareholders’ equity, capital structure, and financial ratios. Due to the long-term nature of our fixed maturity investments and liabilities

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and the strong cash flows consistently generated by our insurance subsidiaries, we have the ability to hold our securities to maturity. As such, we do not expect to incur losses due to fluctuations in market value of fixed maturities caused by market rate changes and temporarily illiquid markets. Accordingly, our management, credit rating agencies, lenders, many industry analysts, and certain other financial statement users prefer to remove the effect of this accounting rule when analyzing our balance sheet, capital structure, and financial ratios.

Financial Strength Ratings. The financial strength of our major insurance subsidiaries is rated by Standard & Poor’s and A. M. Best. The following table presents these ratings for our five largest insurance subsidiaries at December 31, 2024.

A.M. Best states that it assigns an A (Excellent) rating to insurance companies that have, in its opinion, an excellent ability to meet their ongoing insurance obligations.

The AA financial strength rating category is assigned by Standard & Poor’s Corporation (S&P) to those insurers which have very strong capacity to meet its financial commitments. The plus sign (+) or minus sign (-) shows the relative standing within the major rating category.

OTHER ITEMS

Litigation. For more information concerning litigation, please refer to Note 5—Commitments and Contingencies.

CRITICAL ACCOUNTING ESTIMATES

Application of Critical Accounting Estimates. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. The preparation of financial statements in conformity with GAAP requires the application of accounting estimates that often involve a significant degree of judgment. Management reviews these key estimates and assumptions used in the preparation of financial statements on a timely basis. If management determines that modifications are necessary due to current facts and circumstances, the Company’s results of operations and financial position as reported in the consolidated financial statements could possibly change significantly. Information on our accounting policies is disclosed in Note 1—Significant Accounting Policies.

Future Policy Benefits. Considerable information concerning the policies, procedures, and other relevant data related to the valuation of our liability for future policy benefits is presented in Note 1—Significant Accounting Policies and Note 6—Policy Liabilities.

The liability for future policy benefits for traditional and limited-payment long duration life and health products comprises the vast majority of the total liability for future policy benefits for the Company. The liability is determined each reporting period based on the net level premium method. This method requires the liability for future policy benefits to be calculated as the present value of estimated future policyholder benefits and the related termination expenses, less the present value of estimated future net premiums to be collected from policyholders.

The Company reviews, and updates as necessary, its cash flow assumptions (mortality, morbidity, and lapses) used to calculate the change in the liability for future policy benefits at least annually. These cash flow assumptions are reviewed at the same time every year, or more frequently, if suggested by experience. If cash flow assumptions are

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changed, the net premium ratio is recalculated from the original issue date, or the Transition Date, using actual experience and projected future cash flows. As cash flow assumptions are changed, the liability for future policy benefits is adjusted with changes recognized in policyholder benefits on the Consolidated Statements of Operations.

The following table illustrates the sensitivity of our liability for future policy benefits, including the corresponding pre-tax impact on OCI, and net income, as of December 31, 2024, to changes in cash flow assumptions. This information is useful in understanding the potential financial impact on our financial statements from changes in these items and the expected impact to our liability for future policy benefits. We could experience impacts that are more or less significant than noted in the following analysis; however the sensitivities provide insight regarding the direction and magnitude of those potential impacts.

(1)Represents the associated impact to OCI from updating the net premium ratio based upon the cash flow assumptions and the remeasurement of the liability for future policy benefits using the current discount rate.

The liability for future policy benefits is discounted using a current upper-medium grade fixed-income instrument yield that reflects the duration characteristics of the liability for future policy benefits. Accordingly, the discount rate assumption is key in determining the change in the value of the liability for future benefits for long duration life and health contracts. Since the liability for future policy benefits for traditional and limited-payment long duration life and health products comprises approximately 93% of the total liability for future policy benefits, it is subject to interest rate risk. A decrease in discount rates will cause an increase in the obligation with a corresponding change in AOCI.

The following table illustrates the interest rate sensitivity of our liability for future policy benefits as of December 31, 2024. This table measures the effect of a parallel shift in discount rates on the liability. The data measures the change in reported value arising from an immediate change in rates in increments of 50 and 100 basis points, which would be recorded as a component of OCI.

Value of Liability for Future Policy Benefits

(Dollar amounts in thousands)

(1) In basis points.

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Deferred Acquisition Costs. Certain costs of acquiring new insurance business are deferred and recorded as an asset. These costs are capitalized on a grouped contract basis and amortized over the expected term of the related contracts, and are essential for the acquisition of new insurance business.

Deferred Acquisition Costs (DAC) are amortized on a constant-level basis over the expected term of the grouped contracts, with the related expense included in amortization of deferred acquisition costs on the Consolidated Statements of Operations. The in-force metric used to compute the DAC amortization rate is annualized premium in force. The assumptions used to amortize acquisition costs include mortality, morbidity, and lapses, and are consistent with those used in calculating the liability for future policy benefits.

Value of business acquired (VOBA) is amortized on a basis that is consistent with DAC, as described above, and is subject to periodic recoverability and loss recognition testing to determine if there is a premium deficiency. These tests evaluate whether the present value of future contract-related cash flows will support the capitalized VOBA asset. These cash flows consist primarily of premium income, less benefits and expenses. The present value of these cash flows, less the reserve liability, is then compared with the unamortized balance. In the event the estimated present value of net cash flows is less, the deficiency would be recognized by a charge to earnings and either a reduction of unamortized acquisition costs or an increase in the liability for future benefits.

Policy Claims and Other Benefits Payable. This liability consists of known benefits currently payable and an estimate of claims that have been incurred but not yet reported to us. The estimate of unreported claims is based on prior experience and is made after careful evaluation of all information available to us. However, the factors upon which these estimates are based can be subject to change from historical patterns. Factors involved include the litigation environment, regulatory mandates, and the introduction of policy types for which claim patterns are not well established, and medical trend rates and medical cost inflation as they affect our health claims. Changes in these estimates, if any, are reflected in the earnings of the period in which the adjustment is made. The Company concludes that the estimates used to produce the liability for claims and other benefits, including the estimate of unsubmitted claims, are the most appropriate under the circumstances. However, there is no certainty that the resulting stated liability will be our ultimate obligation. At this time, we do not expect any change in this estimate to have a material impact on earnings or financial position consistent with our historical experience. There were no significant changes in the claims process in the current year.

Valuation of Fixed Maturities. We hold a substantial investment in high-quality fixed maturities to provide for the funding of our future policy contractual obligations over long periods of time. While these securities are generally expected to be held to maturity, they are classified as available for sale and are sold from time to time to maximize risk-adjusted, capital-adjusted returns or for other general purposes. We report this portfolio at fair value. Fair value is the price that we would expect to receive upon sale of the asset in an orderly transaction. The fair value of the fixed maturity portfolio is primarily affected by changes in interest rates in financial markets. Because of the size of our fixed maturity portfolio and the long average life, small changes in rates can have a significant effect on the portfolio and the reported financial position of the Company. This impact is disclosed in 100 basis point increments under the caption Market Risk Sensitivity in this report. However, as discussed under the caption Financial Condition in this report, the Company regards these unrealized fluctuations in value as having no meaningful impact on our actual financial condition and, as such, we remove them from consideration when viewing our financial position and financial ratios.

At times, the values of our fixed maturities can also be affected by illiquidity in the financial markets. Illiquidity may contribute to a spread widening, and accordingly to unrealized losses, on many securities that we would expect to be fully recoverable. Even though our fixed maturity portfolio is available for sale, we have the ability and general intent to hold the securities until maturity as a result of our strong and stable cash flows generated from our insurance products. Considerable information concerning the policies, procedures, classification levels, and other relevant data concerning the valuation of our fixed maturity investments is presented in Note 1—Significant Accounting Policies and in Note 4—Investments under the captions Fair Value Measurements in both notes. There were no significant changes in the valuation process in the current year.

Market Risk Sensitivity. Globe Life's investment securities are exposed to interest rate risk, meaning the effect of changes in financial market interest rates on the current fair value of the Company’s investment portfolio. Since 88% of the carrying value of our investments is attributable to fixed maturity investments and these investments are

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predominately fixed-rate investments, the portfolio is highly subject to market risk. Declines in market interest rates generally result in the fair value of the investment portfolio rising, and increases in interest rates cause the fair value to decline. Under normal market conditions, we are not concerned about unrealized losses that are interest rate driven since we would not expect to realize them. Globe Life does not generally intend to sell the securities prior to maturity and, likely, will not be required to sell the securities prior to recovery of amortized cost. The long-term nature of our insurance policy liabilities and strong operating cash-flow substantially mitigate any future need to liquidate portions of the portfolio.

The following table illustrates the interest rate sensitivity of our fixed maturity portfolio at December 31, 2024. This table measures the effect of a parallel shift in interest rates (as represented by the U.S. Treasury curve) on the fair value of the fixed maturity portfolio. The data measures the change in fair value arising from an immediate and sustained change in interest rates in increments of 100 basis points.

Market Value of Fixed Maturity Portfolio

(Dollar amounts in thousands)

(1) In basis points.

Investments: Allowance for Credit Losses. We continually monitor our investment portfolio for investments where fair value has declined below carrying value to determine if a credit loss event has occurred. When a credit event does occur, an allowance for credit loss is recorded and the corresponding provision is recognized in the Consolidated Statements of Operations in Realized Gains or Losses. Non-credit related fluctuations in the fair value are recorded in Other Comprehensive Income. The policies and procedures that we use to evaluate and account for allowance for credit losses are disclosed in Note 1—Significant Accounting Policies and the discussions under the captions Investments and Realized Gains and Losses in this report. While every effort is made to make the best estimate of status and value with the information available regarding an allowance for credit loss, it is difficult to predict the future prospects of a distressed or impaired security.

Defined Benefit Pension Plans. We maintain funded defined benefit plans covering most full-time employees. We also have an unfunded nonqualified defined benefit plan covering a limited number of officers. Our obligations under these plans are determined actuarially based on specified actuarial assumptions. In accordance with GAAP, an expense is recorded each year as these pension obligations grow due to the increase in the service period of employees and the interest cost associated with the passage of time. These obligations are offset, at least in part, by the growth in value of the assets in the funded plans. At December 31, 2024, our gross liability under these plans was $635 million, but was offset by assets of $615 million.

The actuarial assumptions used in determining our obligations/expenses for pensions include: employee mortality and turnover, retirement age, the expected return on plan assets, projected salary increases, and the discount rate at which future obligations could be settled. Additionally, a corridor approach is used to amortize any unrecognized gains or losses outside the corridor (the standard 10% of the greater of plan PBO and fair value assets) and have an amortization service period of approximately nine years. These assumptions have an important effect on the pension obligation. A decrease in the discount rate will cause an increase in the pension obligation. A decrease in projected salary increases will cause a decrease in this obligation. Small changes in assumptions may cause significant differences in reported results for these plans. For example, a sensitivity analysis is presented below for the impact of change in the discount rate and the long-term rate of return on assets assumed on our defined benefit pension plans expense for the year 2024 and projected benefit obligation as of December 31, 2024.

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Pension Assumptions

(Dollar amounts in thousands)

(1)In basis points.

(2)The discount rate for determining the net periodic benefit cost was 5.40% for 2024. The discount rate used for determining the projected benefit obligation as of December 31, 2024 was 5.81%.

(3)The expected long-term return rate assumed was 7.18% at December 31, 2024, and 6.98% in the prior year. Management considers both historical and future yields to determine the expected return.

The Company determines mortality assumptions through the use of published mortality tables that reflect broad-based studies of mortality and published longevity improvement scales.

The criteria used to determine the primary assumptions are discussed in Note 10—Postretirement Benefits. While we have used our best efforts to determine the most reliable assumptions, given the information available from Company experience, economic data, independent consultants, and other sources, we cannot be certain that actual results will be the same as expected. The assumptions are reviewed annually and revised, if necessary, based on more current information available to us. Note 10—Postretirement Benefits also contains information about pension plan assets, investment policies, and other related data. There were no significant changes in the assumptions in the current year.

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