GLOBE LIFE INC.

A discussion of health operations by distribution channel follows.

The United American Division consists of non-exclusive independent general agents and brokers who may also sell for other companies, selling Medicare Supplement insurance to individuals through independent general agents, and group retiree medical and other health insurance through brokers. The Division was Globe Life's largest health division in terms of health premium income, with net sales up 77% from the same period in the prior year. The majority of the premium revenue in the Division comes from Medicare Supplement. Medicare Supplement sales growth remained strong for the nine months ended September 30, 2026, supported by demographic expansion within the eligible population, a notable migration of Medicare beneficiaries from Medicare Advantage to Medicare Supplement plans, and rate increases that took effect during the first half of the year.

Underwriting margin as a percent of premium for the Division was 2% for the nine months ended September 30, 2026, down from 6% for the same period in 2025. The decrease in margin is driven by increased claim utilization and medical cost trends related to Medicare Supplement in addition to a high number of high-severity claims at Evry Health ("Evry"), the Division's developing group major medical business. Evry claims drove an underwriting loss of $26 million for the nine months ended September 30, 2026. Evry was acquired for a number of strategic reasons, including its technology-driven approach to building a better health insurance platform, providing the opportunity to apply learnings from Evry's technology platform toward enhancing Globe Life's broader customer experience and service offerings as well as help deepen broker relationships. Because Evry's premium volume is still relatively small, severe claims experience can disproportionately affect results. We are working to improve underwriting results related to Evry through pricing adjustments, underwriting discipline, and selective growth. As Evry Health scales its group health products business, we may experience continued volatility related to the operating results.

The Family Heritage Division is an exclusive agency that primarily markets individual limited-benefit supplemental health insurance to individuals, small to medium-sized businesses and strategic alliances. Most of its policies include a return of premium feature, where premium paid is returned less any claims paid to the policyholder at the end of a specified period stated within the insurance policy. Underwriting margin as a percent of premium was 39% for the nine months ended September 30, 2026 and 38% for the same period in the prior year.

The Division experienced a 10% increase in health net sales as compared with the same nine month period a year ago, primarily due to increased agent count and increased agent productivity. The Division will continue to implement incentive and retention programs to further these increases in the number of producing agents.

Below is the average producing agent count for the nine months ended September 30, 2026 and 2025 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 average producing agent count increased 6% compared with the same period a year ago. Along with the Division's increased efforts to grow agent count, it is also focused on the further training and development of its agency middle management, which has risen for the third quarter in a row, alongside continued improvement in agent retention. While growth in net sales and earned premium is impacted by agent productivity, growth in the number of producing agents is the primary driver of future growth in sales, similar to our other exclusive agencies.

The Liberty National Division represented 11% of all Globe Life health premium income for the nine months ended September 30, 2026. The Division markets limited-benefit supplemental health products, consisting primarily of cancer, critical illness, and accident insurance. Much of the Division's health business is generated through worksite marketing targeting small businesses. Health premium at the Division was $141.5 million for the nine months ended September 30, 2026 down slightly from $142.8 million for the same period in 2025. Liberty National's first-year collected premium declined slightly to $20.2 million in the nine months ended September 30, 2026, compared with the same period in 2025. Health net sales for the nine months ended September 30, 2026 fell 11% from the comparable period in 2025. For the nine months ended September 30, 2026, underwriting margin as a percent of premium was 52%, declining slightly from the same period in the prior year. These declines reflect a greater emphasis toward the sale of life insurance products in recent periods. While the agency will continue to focus on life sales, it is currently implementing updates to its sales presentation to reinvigorate health sales going forward.

While both the American Income Division and the Direct to Consumer Division sell life insurance, they also market health products. The American Income Division primarily markets accident plans. The Direct to Consumer Division primarily markets Medicare Supplement insurance to employer or union-sponsored groups. On a combined basis, these other channels accounted for 12% of health premium for the nine months ended September 30, 2026 and 13% for the same period in 2025.

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 12—Business Segments. It is defined as net investment income less the required interest attributable to policy liabilities.

Our life and health insurance companies collect premium income from policyholders for the eventual payment of policyholder benefits, sometimes paid for 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. Our core investment strategy is to primarily invest in 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. We also invest in commercial mortgage loans and other long-term investments to diversify risks and enhance risk-adjusted, capital-adjusted returns.

Management 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.

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

Analysis of Excess Investment Income

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

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

Excess investment income increased $5 million, or 5%, compared with the year-ago period. Excess investment income per diluted common share was $1.43 for the nine months ended September 30, 2026, an increase of 11% from the prior-year period. Excess investment income per diluted common share generally increases or decreases at a different 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 for the nine months ended September 30, 2026 was $880 million, or 4% greater than the prior year quarter period. Mean invested assets increased 2% during the first nine months of 2026 over the same period last year. Net investment income increased faster than the increase in mean invested assets in the current period due to higher earned yields on fixed maturities, commercial mortgage loans and other long-term investments compared to the prior year period. The effective annual yield earned on the fixed maturity portfolio was 5.32% in the first nine months of 2026, compared to 5.27% for the comparable period in 2025. The earned yield on total long-term invested assets, which includes our fixed maturity, commercial mortgage loan and other long-term non-fixed maturity investments, was 5.51% for the first nine months of 2026 compared to 5.45% for the comparable period of 2025.

While our core investments are fixed maturities, the Company also invests 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 nine months ended September 30, 2026 was 7.00% compared with 6.11% in the prior-year period. The higher earned yield on commercial mortgage loans is primarily due to a lower number of non-accrual loans in the first nine months compared to the prior-year period. The earned yield on limited partnership investments for the nine months ended September 30, 2026 was 8.07%, compared with 7.99% in the comparable prior-year period. See additional information in Note 4—Investments.

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 September 30, 2026, we are not concerned because we do not generally intend to sell, nor is it likely that we will be required to sell, the fixed maturities prior to their anticipated recovery.

Required interest on insurance policy liabilities reduces excess investment income, as it is the amount of net investment income 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 12—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.

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 mandates 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 Condensed Consolidated Balance Sheets 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.

In comparison to the year-ago period, required interest on insurance policy liabilities increased $25 million, or 3%, to $767 million, generally consistent with the 4% growth in average interest-bearing insurance policy liabilities.

Realized Gains and Losses. 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)"on the Condensed 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.

Analysis of Realized Gains (Losses), Net of Tax

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

(1)During the nine months ended September 30, 2026 and 2025, the Company recorded $111.0 million and $128.5 million, respectively, of exchanges of fixed maturity securities (noncash transactions) that resulted in net realized gains (losses) of $0 and $(2.3) million net of tax, respectively.

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

Investment Acquisitions. Globe Life's investment policy calls for a core investment strategy of investing primarily in investment grade fixed maturities that meet the Company's 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

(1)Fixed maturity acquisitions included unsettled trades of $33 million in 2026 and $15 million in 2025.

(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 the nine months of 2026 and 2025, acquisitions consisted primarily of corporate and municipal bonds with securities spanning a diversified range of issuers, industry sectors, and geographical regions. In the nine months ended September 30, 2026, we invested primarily in the industrial, financial, and utility sectors. For the entire portfolio, the taxable equivalent effective yield earned was 5.32%, up approximately 5 basis points from the yield in nine months ended September 30, 2025. The increase in taxable equivalent effective yield was primarily due to new purchases at yields exceeding the yield on dispositions and the average portfolio yield. For the remainder of 2026, the Company will continue to execute on its existing strategy by seeking to invest in assets that satisfy our quality and other objectives, while striving to maximize the risk-adjusted, capital-adjusted return.

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

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

Other Investment Acquisitions

Since fixed maturities represent such a significant portion of our investment portfolio, 88% of total amortized cost, net of allowance for credit losses, at September 30, 2026, 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)Weighted average annual effective yield as of the end of the period, on a 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 non-callable 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.

Credit Risk Sensitivity. The following tables summarize certain information about the major corporate sectors and security types held in our fixed maturity portfolio at September 30, 2026 and December 31, 2025.

Fixed Maturities by Sector

September 30, 2026

Fixed Maturities by Sector

December 31, 2025

Corporate securities, which consist of bonds and redeemable preferred stocks, were the largest component of the fixed-maturity portfolio as of September 30, 2026, representing 79% of amortized cost, net, and 80% 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, asset-backed securities, and mortgage-backed securities. Corporate securities are diversified over a variety of industry sectors and issuers. At September 30, 2026, the total fixed maturity portfolio consisted of 1,005 issuers.

Fixed maturities had a fair value of $16.9 billion at September 30, 2026, compared to $17.6 billion at December 31, 2025. The net unrealized loss position in the fixed-maturity portfolio increased from $1.2 billion at December 31, 2025 to $2.7 billion at September 30, 2026 due to a change in market rates during the period.

For more information about our fixed-maturity portfolio by component at September 30, 2026 and December 31, 2025, 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 September 30, 2026 and December 31, 2025, 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 three or more ratings are available and the lowest rating when two 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 September 30, 2026

Fixed Maturities by Rating

At December 31, 2025

The overall quality rating of the portfolio is A-, the same as of year-end 2025. Fixed maturities rated BBB are 39% of the total portfolio at September 30, 2026, down from 42% at December 31, 2025. While this ratio may be high relative to our peers, it is at its lowest level since 2003 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 September 30, 2026. 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. Our allocation to BBB rated bonds has decreased over the past few years as we have found better risk-adjusted, capital-adjusted value in higher-rated bonds.

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

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 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 September 30, 2026.

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.

An analysis of operating expenses is shown below.

Operating Expenses Selected Information

Total operating expenses for September 30, 2026 increased in comparison with the prior year primarily due to increases in insurance administrative expenses. Insurance administrative expenses increased $18 million primarily due to higher information technology costs and other administrative expenses. Insurance administrative expenses as a percent of premium were 7.2% for the nine months ended September 30, 2026 and 2025.

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 quarterly, and continues indefinitely unless and until the Board of Directors decides to suspend, terminate or modify the program. On August 5, 2026, the Board of Directors authorized up to $2.5 billion under the Company's existing share repurchase program. Management generally determines the amount of repurchases based on the amount of excess cash flows and other available sources after the payment of dividends to the Parent Company shareholders, general market conditions, and other alternative uses. At September 30, 2026, we had $2.4 billion remaining under the authorization to repurchase. Since implementing our share repurchase program in 1986, we have used $11.6 billion to repurchase Globe Life Inc. common shares, after determining that the repurchases provide a greater risk-adjusted after-tax return than other alternatives and we expect to continue this program into the future.

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. Share repurchases were made in the current period with anticipation of the expected cashflows for the year.

The following table summarizes share repurchases for the nine month periods ended September 30, 2026 and 2025.

Analysis of Share Repurchases

(Amounts in thousands, except per share data)

(1)Excludes excise tax on the repurchase of treasury stock of $4.8 million and $4.6 million for the nine months ended September 30, 2026 and 2025, respectively.

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, pre-capitalized trust securities facility, 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. While the insurance subsidiaries annually generate more operating cash inflows than cash outflows, the companies also have the entire available-for-sale fixed-maturity 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 source of liquidity, the FHLB could provide the insurance subsidiaries with an additional source of liquidity, if needed. Refer to Note 11—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 nine months ended September 30, 2026 and 2025, shareholder dividends were $73 million and $64 million, respectively. For the twelve months ended December 31, 2026, we project approximately $95 million in shareholder dividends, compared to the $86 million paid in 2025.

Our U.S. subsidiaries' dividends are generally paid in amounts equal to the subsidiaries’ prior year statutory net income excluding net realized capital gains. For our Bermuda regulated subsidiaries, dividends cannot exceed 25% of the prior year’s statutory capital and surplus and cannot cause the reinsurer to drop below the minimum solvency margin. Additional sources of liquidity for the Parent Company are cash, intercompany receivables, intercompany borrowings, debt markets, term loans, and a revolving credit facility.

The Company has access to a P-CAP Facility Agreement that provides us with the right to sell at any time to the Trust up to $500 million par of our 6.580% Senior Notes due 2055 (the “6.580% Senior Notes”) in exchange for a corresponding amount of the Strips held by the Trust (the “Issuance Right”). Our capacity under the agreement is based on the value of the Strips which was $447 million as of September 30, 2026. We agreed to pay a semi-annual facility fee of 1.789% per annum on the unexercised portion of the Issuance Right.

The Company can redeem the 6.580% Senior Notes at any time, in whole or in part, at a price equal to the greater of par or a make-whole redemption price. At September 30, 2026, the Company had no senior note issuances under the Facility Agreement.

Short-Term Borrowings. An additional source of Parent Company liquidity is a credit facility with a group of lenders. The five-year credit agreement was amended on June 26, 2026, resulting in an extended maturity date of June 26, 2031. 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. Up to $250 million in letters of credit can be issued against the facility. The facility serves as a backup 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 September 30, 2026, we had available $576 million of additional borrowing capacity under this facility, compared to $554 million a year earlier. As of September 30, 2026, 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 of credit are issued on behalf of our insurance subsidiaries.

The following tables present certain information about our commercial paper borrowings.

Credit Facility—Commercial Paper

Credit Facility—Commercial Paper Activity

The Company increased commercial paper borrowings by $3 million since year end.

The Parent Company expects to have readily available funds for 2026 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 and intercompany borrowings. The Parent Company had access to $111 million of liquid assets available as of September 30, 2026. 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 from operations were $1.06 billion in the nine months ended September 30, 2026, compared with $1.05 billion in the same period of 2025. The increase 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 available for sale, mortgage loans, and other long-term investments in the amount of $1.17 billion during the nine months ended September 30, 2026. The Parent Company has in place a revolving credit facility and a P-CAPS facility. See Note 11—Debt for further details. The insurance companies have no additional outstanding credit facilities.

Cash and short-term investments were $353 million at September 30, 2026, compared with $459 million at December 31, 2025. In addition to these liquid assets, $17 billion (fair value at September 30, 2026) of fixed income securities are available for sale in the event of an unexpected need. Approximately $1.7 billion, at fair value, is pledged for outstanding FHLB advances and reinsurance. Further, approximately 97% 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, on-going investment maturities, and available liquidity under our credit facility, FHLB and P-CAPS 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.

Long-Term Borrowings. At September 30, 2026, the outstanding long-term debt at book value was $2.7 billion compared with $2.3 billion at December 31, 2025.

Selected Information about Debt Issues

As of September 30, 2026

(1)The $150 million 4.80% Senior Notes, previously held by two insurance subsidiaries, were sold and issued to a third party at a discount of $4.2 million during the quarter ended June 30, 2026.

(2)The term loan was amended and restated on June 26, 2026, extending the maturity date from August 15, 2027 to June 26, 2029 and increasing the principal amount from $250 million to $450 million.

(3)Unamortized issuance costs for P-CAPS facility agreement.

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 Condensed Consolidated Statements of Operations.

Analysis of Financing Costs

During the nine months ended September 30, 2026, financing costs increased slightly compared to the prior year. More information on our debt transactions is disclosed in the Financial Condition section of this report.

Subsidiary Capital: The National Association of Insurance Commissioners has established a risk-based factor approach for determining threshold risk-based capital levels for all U.S. insurance companies. This approach was designed to assist the regulatory bodies in identifying companies that may require regulatory attention. A Risk-Based Capital ratio is typically calculated by dividing adjusted total statutory capital by the amount of RBC 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.

Our goal is to maintain statutory capital within our insurance subsidiaries at levels necessary to support our current ratings. We target a consolidated Company Action Level RBC ratio of 300% to 320% for our U.S. insurance subsidiaries. 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 2025, our consolidated Company Action Level RBC ratio was 316%. 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.

In addition, our Bermuda-based insurance subsidiaries are subject to regulation in Bermuda. The Bermuda Monetary Authority ("BMA") has capital requirements and solvency standards including limitations on dividends or distributions to shareholders. Our Bermuda subsidiaries' level of capitalization exceeded the required minimum solvency margins for the year ended 2025.

Shareholders' Equity: Shareholders’ equity was $6.6 billion at September 30, 2026. This compares with $6.0 billion at December 31, 2025 and $5.7 billion at September 30, 2025. During the nine months since December 31, 2025, shareholders’ equity increased as a result of net income of $919 million in 2026, but was offset by share repurchases of $564 million and an additional $165 million in share repurchases to offset the dilution from stock option exercises. Additionally, the change in the balance of AOCI increased shareholders' equity $355 million primarily due to changes in interest rates and discount rates over the period.

On August 6, 2026, the Parent Company announced that it had declared a quarterly dividend of $0.33 per share, an increase of 22% from the previous amount of $0.27 per share. This dividend was paid on October 30, 2026.

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, subsidiary capital contributions, 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 in AOCI. 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 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 effects of AOCI when analyzing our balance sheet, capital structure, and financial ratios.