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Globe Life shares drop 54% following short seller allegations

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Shares of life insurance company Globe Life dropped by 54% to $57, their lowest point in over a decade, after short seller Fuzzy Panda Research published a research report alleging insurance fraud at the company, according to a report by Reuters.

Fuzzy Panda Research’s research report, entitled “Globe Life (GL): Executives Disregard Wide-Ranging ‘Insurance Fraud’ While They Received Millions in Undisclosed Kickback Scheme”, claimed that multiple instances of insurance fraud were overlooked by management. The research report also stated that Fuzzy Panda had a short position in the life insurance company.

According to Fuzzy Panda’s website, the research report draws on interviews with “dozens of former executives and agents” and involved the review of “hundreds of pages of court documents”, though the short seller’s claims were not verified by Reuters.

Fuzzy Panda’s insurance fraud allegations included policies issued for deceased and non-existent individuals; forged signatures; funds withdrawn from consumers’ bank accounts without approval; and fictitious bank accounts used to fund fraudulent policies to count towards agents’ bonuses.

In a press statement refuting the allegations, Globe Life said that it was “disappointed…to see self-motivated short sellers push inflammatory allegations in order to drive down Globe Life’s stock price”, adding that “the short seller analysis by Fuzzy Panda Research mischaracterises facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false”.

The report cites data from Ortex in revealing that short interest in Globe Life is estimated to be 2.99% of free float.

In Q4 2023, Globe Life reported an increase in profit, driven by stronger underwriting and improved returns on investments.

Fuzzy Panda’s research report further alleged that third-party policy sellers known to have committed insurance fraud contributed to over 60% of the new business at Globe Life’s American Income Life unit, with this unit accounting for nearly half of the total underwriting margins last year.

Globe Life’s American Income Life unit primarily sells policies to labour unions, credit unions and associations.

Earlier this month, Nate Koppikar, a Portfolio Manager at hedge fund Orso Partners, suggested that Globe Life’s book value was “inflated” making it an “attractive” potential target for short selling. In response, Globe Life pointed to its sustainable earnings growth and stated that the articles referenced by Koppikar were inaccurate and misleading.

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