AM Best Downgrades Credit Ratings of Globe Life Inc. and Its Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating (FSR) to A (Excellent) from A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” from “aa-” of the key life/health subsidiaries of Globe Life Inc. (formerly Torchmark Corporation) (Globe Life) (headquartered in McKinney, TX) [NYSE:GL]. Concurrently, AM Best has downgraded the Long-Term ICR to “bbb+” from “a-” of Globe Life. AM Best also has downgraded the associated Long-Term Issue Credit Ratings (Long-Term IRs) on the debt and indicative Long-Term IRs on the securities of Globe Life Inc. The outlook of these Credit Ratings (ratings) has been revised to stable from negative (See below for a detailed listing of these companies and ratings).

The ratings of the life/health insurance subsidiaries of Globe Life reflect their balance sheet strength, which AM Best categorizes as strong, as well as their very strong operating performance, favorable business profile and appropriate enterprise risk management.

The rating downgrades reflect Globe Life’s relatively low level of risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), for its previous balance sheet strength assessment. AM Best notes that Globe Life’s risk-adjusted capitalization has trended down in recent years and is substantially below that of similarly rated peers. In addition, statutory capital and surplus has remained relatively flat in recent years, as organic earnings were largely offset by dividends paid to its parent, which have primarily been used for share repurchases and stockholder dividends. While the overall credit quality of invested assets is good, its allocation to NAIC-2 bonds has increased in recent years. As a result, any downward credit migration caused by the pandemic will likely negatively impact Globe Life’s risk-adjusted capital position.

The ratings of Globe Life reflect its very strong operating performance over the past several years as all core lines of business have reported strong earnings annually and premium trends have been favorable. In addition, return ratios are superior to its peers and the life insurance industry averages. In addition, Globe Life maintains adequate liquidity supported by liquid assets, strong cash flows and good financial flexibility with access to capital markets, as well as short-term credit facilities if needed. The company has moderate financial leverage and strong interest coverage ratios, which are well within the guidelines for its current ratings. Globe Life also benefits from its diversified distribution platform and its niche businesses that provide life and supplemental health insurance products to the middle class and retired individuals.

The FSR has been downgraded to A (Excellent) from A+ (Superior) and the Long-Term ICRs downgraded to “a+” of “aa-” with the outlooks revised to stable from negative for the following life/health subsidiaries of Globe Life Incorporated:

• Globe Life And Accident Insurance Company
• American Income Life Insurance Company
• National Income Life Insurance Company
• Liberty National Life Insurance Company
• Family Heritage Life Insurance Company of America
• United American Insurance Company
• Globe Life Insurance Company of New York

The following Short-Term IR has been affirmed:

Globe Life, Inc. —
— AMB-1 on commercial paper

The following Long-Term IRs have been downgraded and the outlook has been revised to stable from negative:

Globe Life, Inc. —
— to “bbb+” from “a-” on $300 million 3.80% senior unsecured notes, due 2022
— to “bbb+” from “a-” on $200 million 7.875% senior unsecured notes, due 2023
— to “bbb+” from “a-” on $550 million 4.55% senior unsecured notes, due 2028
— to “bbb-” from “bbb” on $300 million 6.125% junior subordinated debentures, due 2056

The following indicative Long-Term IRs available under the shelf registration have been downgraded and the outlook has been revised to stable from negative:

Globe Life, Inc. —
— to “bbb+” from “a-” on senior unsecured debt
— to “bbb” from “bbb+” on subordinated debt
— to “bbb-” from “bbb” on preferred stock

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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