What Happened?
Shares of insurance holding company Globe Life (NYSE: GL) jumped 4.3% in the morning session after the company announced it was cleared in a federal investigation into its sales practices. The company announced that the U.S. Attorney's Office for the Western District of Pennsylvania closed its investigation into sales practices by certain independent agents. According to the release, the Department of Justice would not be taking any enforcement action against Globe Life or its subsidiary, American Income Life. This development removed a significant legal uncertainty for investors. In response to the news, an analyst from Keefe, Bruyette & Woods maintained an "Outperform" rating on the stock and raised the price target. The positive update followed the company's recent second-quarter results, where it had reported increased net income and a 5% rise in life insurance premiums.
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What Is The Market Telling Us
Globe Life’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 5.6% on the news that the company reported second-quarter earnings that beat estimates and raised its full-year profit forecast. The insurer posted second-quarter operating earnings per share of $3.27, which was slightly above the consensus estimate of $3.25. More significantly, Globe Life increased its full-year operating EPS forecast to a range of $14.25 to $14.65, a notable jump from the previous guidance of $13.45 to $14.05. This positive outlook overshadowed a slight miss on total revenue, which came in at $1.48 billion against an expected $1.51 billion. The company’s core insurance underwriting income also surpassed expectations, contributing to the strong bottom-line performance.
Globe Life is up 26.1% since the beginning of the year, and at $141.54 per share, has set a new 52-week high. Investors who bought $1,000 worth of Globe Life’s shares 5 years ago would now be looking at an investment worth $1,753.
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