Life insurance is one of those boring businesses, value investors love. For example, Berkshire Hathaway (BRK.B) owned 6.354 million shares or 5.6% of Globe Life (GL) on 15 August 2022, Fintel estimates.
Globe Life (NYSE: GL) was America’s 20th largest life insurance company with 1.5% of the US life insurance market on 11 April 2022, S&P Global Market Intelligence estimates. Globe Life claimed to have 4.4 million policyholders and to issue over $91 billion worth of insurance on 15 August 2022.
Value investors, such as Warren Buffett, love insurance because of the business’s nature. To explain, people have to pay a monthly premium to keep their policies. Hence, Globe Life generates what Buffett calls “float.” To explain, float is a stream of regular cash that adds value to the company.
Does Globe Life Make Money?
Hence, investors will wonder if Globe Life (GL) makes money and generates cash.
Globe Life makes some money, it reported a quarterly gross profit of $483.69 million on 30 June 2022. The quarterly gross profit fell from $494.18 million on 30 June 2021. Similarly, Globe Life’s quarterly operating income fell from $267.01 million on 30 June 2021 to $238.02 million on 30 June 2022.
Conversely, Globe Life’s quarterly revenues grew from $1.271 billion on 30 June 2021 to $1.293 billion on 30 June 2022. Thus, Globe Life’s revenues are growing slowly.
For example, Stockrow gave Globe Life a 1.73% revenue growth rate in the quarter ending 30 June 2022. The revenue growth rate fell from 7.63% in the quarter ending on 30 June 2021.
Why is Globe Life’s Revenue Growth falling?
I guess Globe Life’s revenue growth is falling because people’s awareness of COVID-19 and death is falling. To explain, most Americans almost never think about death. However, the high death rates during the COVID-19 pandemic and the news coverage they attracted got people thinking about death.
Predictably, one of the first things people do when they think about death is to buy life. Insurance. After all, life insurance pays to take care of your family when you die. People who were afraid of dying of COVID-19 bought life insurance.
As awareness of the pandemic and death shrinks. People stop thinking about death and life insurance.
How Much Cash is Globe Life Generating?
The principal attraction at Globe Life (GL) for value investors is cash. Globe Life generates small amounts of cash.
For instance, Globe Life reported a quarterly operating cash flow of $296.26 million on 30 June 2022. The quarterly operating cash flow fell from $330.21 million on 30 June 2021.
In contrast, Globe Life reported a quarterly ending cash flow of $44.63 million on 30 June 2022. The quarterly ending cash flow fell from $56.67 million on 30 June 2021.
Globe Life had $172.26 million in cash and short-term investments on 30 June 2022. The cash and short-term investments grew from $138.07 million on 30 June 2021.
Globe Life is paying off its debts. It had a -$122.80 million quarterly financing flow on 30 June 2022. The quarterly financing cash flow fell from $135.82 million on 30 June 2021. Globe Life’s total debts fell from $2.246 billion on 30 June 2021 to $2.122 million on 30 June 2022.
Is Globe Life A Value Investment?
I consider Globe Life (GL) a questionable value investment because I think Mr. Market could overpay for it. For example, Mr. Market paid $103.42 for Globe Life on 17 August 2022.
Yet, Globe Life had $26.043 billion in total assets on 30 June 2022. Moreover, Globe Life is losing value. For example, the total assets fell from $29.580 billion on 30 June 2021. Thus, Globe Life is shrinking but Mr. Market pays more it. The share price rose from $96.27 on 16 August 2021.
The Globe Life stock has some attractive features, in particular a dividend. Globe Life management has scheduled eight 20.7₵ quarterly dividends through 1 August 2024. Globe Life shares were offering an 83₵ forward dividend and a 0.80% forward dividend yield on 17August 2022.
Thus investors will not lose money with Globe Life, but they may not make it either. I think Globe Life shows life insurance can make money, but it is not a value investment. I advise investors to be skeptical of Globe Life (GL) because its revenues are shrinking.