Globe Life Reports Third Quarter Results Amid Swirling Controversy – Insurance News

Globe Life executives will meet Wall Street analysts on Thursday in a call that is much more interesting than two weeks ago.

The insurer is expected to share figures from a successful third quarter. But ongoing lawsuits and a troubling data breach will certainly come up.

It’s been a tough 2024 for Globe Life. At least three short-selling and other research firms have issued reports accusing brokers at subsidiary American Income Life of widespread sexual harassment and insurance fraud, including writing policies for dead and fictitious people, and an alleged kickback scheme that raked in millions for senior executives.

Last week, the insurer announced that it is being extorted by a hacker who has stolen sensitive customer data.

In a regulatory filing Thursday with the Securities and Exchange Commission, Globe Life said it “recently received communications” from an unknown entity seeking to extort money from the company in exchange for not disclosing data stolen from its systems.

The extortion threat is apparently related to a data breach in June that the insurer itself reported. In a subsequent SEC filing, Globe Life said it has “initiated an investigation into potential vulnerabilities related to access rights and user identity management for a corporate web portal that likely resulted in unauthorized access to certain consumer and policyholder information.”

Despite all the negative publicity, Globe Life continues to deliver results.

Globe Life reported strong premium increases on life insurance and health insurance in the second quarter. The insurer also said an internal audit of the numerous allegations of fraud and agent misconduct cleared the company of any wrongdoing.

Victory in court

The news is not all disastrous for Globe Life. The insurer recently scored a major victory in court when a federal judge dismissed a lawsuit from a former American Income Life executive for wrongful termination.

Scott Dehning claims Globe Life and its subsidiary American Income fired him in May 2023 after he reported “a clear practice of unethical and potentially illegal business practices” to Michigan regulators.

“Dehning has failed to demonstrate a genuine material issue regarding his (whistleblower) claim,” Judge Hala Y. Jarbou wrote in an Oct. 11 decision. “(H)e cannot establish the causal link between his protected activity and his termination.”

Jarbou also rejected AIL’s counterclaim.

Dehning served as vice president of field operations from September 2015 until his resignation. In that role, he supervised approximately 17 state agents, the lawsuit said.

In the original eight-page complaint, filed in August 2023, Dehning said he viewed certain sales practices with growing discomfort. He ultimately investigated and confirmed the “unethical and potentially illegal sales practices” and shared his findings with Globe Life’s executive team, the lawsuit said.

Globe Life and AIL suggest Dehning was fired following a sexual harassment claim filed by his girlfriend at the time, court documents show. The woman had contacted AIL about a possible job opportunity and Dehning supported her for a job.

The shares are recovering strongly

Shares of Globe Life initially fell sharply after the first short seller reports were published in April, but have since risen about 65%.

In its report, Fuzzy Panda claimed it “reviewed hundreds of pages of court documents and interviewed dozens of former executives and agents. We discovered a whistleblower from the executive ranks who showed us where the fraud was hidden. We even went undercover to investigate the recruitment to go through.” process more than 10 times.”

Fuzzy Panda alleged that third-party policy sellers known to have committed insurance fraud contributed more than 60% of new sales at Globe Life’s American Income Life unit. AIL accounted for almost half of total insurance margins last year.

The report alleged that Globe Life and AIL executives were involved in a bribery and kickback scheme that a lawsuit estimates netted them more than $65 million. Fuzzy Panda said it has spoken to a former executive who sent more than 200 emails to senior managers describing fraud. The investigation agency claims to have “documents to prove this.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other topics in more than two decades of daily journalism. John can be reached at (email protected). Follow him on Twitter @INNJohnH.