Frank M. Svoboda
Senior Executive Vice President and Chief Financial Officer at Globe Life
Thanks, Gary. First, I want to spend a few minutes discussing our share repurchase program, available liquidity and capital position. The parent began the year with liquid assets of $119 million and ended the second quarter with liquid assets of approximately $318 million. This amount is higher primarily due to the net proceeds of the issuance in May of a 10-year $400 million senior note with a coupon rate of 4.8%, less amounts used to temporarily reduce our commercial paper balances. The net proceeds will ultimately be used to redeem our $300 million 3.8% senior note maturing on September 15 with the excess proceeds being available for other corporate purposes. In addition to these liquid assets, the parent company annually generates excess cash flow. The parent company's excess cash flow, as we define it, results primarily from the dividends received by the parent from its subsidiaries less the interest paid on parent company debt. During 2022, we anticipate the parent will generate between $355 million and $365 million of excess cash flows. This amount of excess cash flows, which, again, is before the payment of dividends to shareholders, is lower than the $450 million received in 2021, primarily due to higher COVID life losses and the nearly 15% growth in our exclusive agency sales in 2021, both of which resulted in lower statutory income in 2021 and thus lower cash flows to the parent in 2022 than were received in 2021.
Obviously, while the increase in sales creates a drag to the parent's cash flows in the short term, the higher sales will result in higher operating cash flows in the future. We anticipate that approximately $145 million of excess cash flows will be generated during the second half of the year, out of which we anticipate distributing approximately $40 million to our shareholders in the form of dividend payments. In the second quarter, the company repurchased 1,388,000 shares of Globe Life Inc. common stock at a total cost of $134.2 million at an average share price of $96.64. Total repurchases during the quarter were higher than normal as we accelerated approximately $50 million of repurchases from the second half of the year given favorable market conditions. These additional repurchases were at an average price of $94.39. Year-to-date, including $11.6 million in purchases made so far in July, we have repurchased 2.4 million shares for approximately $234 million at an average price of $98.22. Taking into account the liquid assets of $318 million at the end of the second quarter plus the estimated $145 million of excess cash flows expected to be generated in the second half of the year, we anticipate having around $463 million of assets available to the parent for the remainder of the year. As previously noted, we have used $12 million for buybacks so far this quarter and anticipate using approximately $40 million to pay shareholder dividends and approximately $180 million in net debt reduction, leaving approximately $230 million for other uses. As noted on previous calls, we will use our cash as efficiently as possible. We still believe that share repurchases provide the best return or yield to our shareholders over other available alternatives.
Thus, we anticipate share repurchases will continue to be a primary use of the parent's excess cash flows along with the payment of shareholder dividends. It should be noted that the cash received by the parent company from our insurance operations is after our subsidiaries have made substantial investments during the year to issue new insurance policies, expand and modernize our information technology and other operational capabilities and acquire new long-duration assets to fund their future cash needs. As discussed on prior calls, we have historically targeted $50 million to $60 million of liquid assets to be held at the parent. We will continue to evaluate the potential capital needs, and should there be excess liquidity, we anticipate the company will return such excess to the shareholders in 2022. In our earnings guidance, we anticipate between $410 million and $420 million will be returned to shareholders in 2022, including approximately $330 million to $340 million through share repurchases. With regard to the capital levels at our insurance subsidiaries, our goal is to maintain our capital at levels necessary to support our current ratings. Globe Life targets a consolidated company action-level RBC ratio in the range of 300% to 320%. For 2021, our consolidated RBC ratio was 315%. At this RBC ratio, our subsidiaries have approximately $85 million of capital over the amount required at the low end of our consolidated RBC target of 300%.
During 2022, the NAIC will be adopting new RBC factors related to longevity and mortality risk, also known as C2 factors. While the longevity risk factors that primarily relate to life contingent annuities will have little impact on our subsidiaries, the new mortality factors do apply to our products and will increase our company action-level required capital by approximately 4% to 5%. We believe the conservative statutory reserve levels held for our life insurance products already provide for a very strong total asset requirement. Given the consistent generation of strong statutory gains from operations from our product portfolio, these new factors will simply result in even stronger capital adequacy at our target RBC ratios. At this time, while we do not anticipate that any additional capital will be required to maintain the low end of our targeted RBC ratio, the parent company does have sufficient liquid assets available should additional capital be required. At this time, I'd like to provide a few comments related to the impact of COVID-19 and our excess non-COVID policy obligations on second quarter results. In the second quarter, the company incurred approximately $8.4 million of COVID life claims relating to approximately 30,000 U.S. COVID deaths occurring in the quarter as reported by the CDC. However, these incurred claims were fully offset by a favorable true-up of COVID life claims incurred in prior quarters.
Based on the additional claims data we now have available related to first quarter COVID deaths, we now estimate that our average cost per 10,000 U.S. deaths in the quarter was approximately $2.4 million, down from the $3 million average cost previously estimated on our last call. As a result, the net COVID life claims reported in the second quarter were not significant overall or at any of the individual distributions. For the full year and at the midpoint of our guidance, we now estimate we will incur approximately $62 million of COVID life claims, a decrease of $9 million from our prior estimate. This estimate assumes an estimated 60,000 U.S. COVID deaths and an average cost per 10,000 deaths of approximately $2.8 million in the second half of the year. While we had favorable experience with respect to COVID losses incurred in prior quarters, we did experience higher life policy obligations from non-COVID causes. The increase from non-COVID causes of death are primarily medical related, including deaths due to lung disorders, heart and circulatory issues and neurological disorders. The losses that we are seeing continue to be elevated over 2019 levels. As stated on prior calls, we believe these higher deaths are due in large part to the pandemic. Given the lessening number of COVID deaths, we do anticipate these claims will moderate over the remainder of the year. In the second quarter, we estimate that our excess non-COVID life policy obligations were approximately $28 million, $10 million higher than expected, primarily due to adverse development of first quarter incurred losses in our direct-to-consumer channel.
For the full year, we anticipate that our excess life policy obligations will be around $64 million or around 2% of our total life premium. Essentially all of the entire obligations relate to higher non-COVID causes of deaths. With respect to our earnings guidance for 2022, we are projecting net operating income per share will be in the range of $7.90 to $8.30 for the year ended December 31, 2022. The $8.10 midpoint is higher than the midpoint of our previous guidance of $8.05, primarily due to a greater impact of our share repurchase program. We continue to evaluate data available from multiple sources, including the IHME and CDC to estimate total U.S. deaths due to COVID and to estimate the impact of those deaths on our in-force book. We estimate the total U.S. deaths from COVID will be in the range of 215,000 to 275,000 and that our cost per 10,000 U.S deaths for the year will be approximately $2.5 million. Before I close, a few comments with respect to the potential impact of the upcoming changes of long-duration accounting that will be effective in 2023. As I discussed on our February call, we expect the new accounting guidance to have a significant impact on our reported GAAP income and our reported equity, including accumulated other comprehensive income, or AOCI. The impact on GAAP income will primarily result from changes that affect the future capitalization and amortization of deferred acquisition costs and, to some degree, changes in the manner of computing policyholder benefits. The impact on AOCI will primarily be related to the new requirement to revalue policy reserves using current discount rates. The new accounting guidance is especially relevant to our GAAP financial statements since nearly all of our business is subject to the new rules.
Our products are highly profitable and persistent, and we have many policies still on the books that were sold decades ago. While the GAAP accounting changes will be significant, it is very important to keep in mind that none of the changes will impact our premium rates, the amount of premiums we collect, nor the amount of claims we ultimately pay. Furthermore, it has no impact on the statutory earnings or the statutory capital we are required to maintain for regulatory purposes, nor will it cause us to make any changes in the products we offer. In other words, the accounting change will in no way modify the way we think or manage our business. Under the new standard, our GAAP earnings will be higher. The annual amortization of deferred acquisition costs, or DAC, will be lower than under current guidance in the near and intermediate term due to changes in the treatment of renewal commissions, the treatment of interest on DAC balances and the methods of amortizing DAC. We currently estimate that these changes will increase net income after tax in the range of $120 million to $145 million on an annual basis. Due to the treatment of deferred renewal commissions in our captive agency channels, we do expect the impact of this change to diminish over a period of time. It is important to note that our policyholder benefits reported for 2021 and 2022 will be required to be restated to reflect the new guidance.
While we aren't able to provide a range of expected impact at this time, the restated policy obligations as a percent of premium are expected to be lower in both 2021 and 2022 than under the current guidance due to the treatment of COVID life claims and other fluctuations in claims experience in both of these years. As the new guide requires us, in concept, to recognize these fluctuations over the life of the policies. This will result in higher net income in both 2021 and 2022 than reported under current guidance. Going forward, we anticipate that our policy obligations as a percent of premium will be similar in the near term to those restated percentages in the absence of assumption changes. With respect to changes to the balance sheet and AOCI, the new guidance adopts a new requirement to remeasure the company's future policy benefits each quarter utilizing a discount rate that reflects upper-medium-grade fixed income yields, with the effects of the change to be recognized in AOCI, a component of shareholders' equity. The upper-medium-grade fixed income yields generally consist of A-rated fixed income securities that are reflective of the currency and tenor of the insurance liability cash flows. On the transition date, which will be January 1, 2021, the company expects an after-tax $7.5 billion to $8.5 billion decrease in the AOCI balance as of this date due to this new requirement since the discount rate to be used will be lower than what was used in valuing the future policy benefits under existing guidance. Given the long average duration of our liabilities, changes in the current discount rate could have a meaningful effect on the reported AOCI. For instance, if we were to hold all else equal as of the transition date, but use current discount rates as of June 30, 2022, the after-tax decrease in AOCI due solely to the increase in future policy benefits would have been only in the range of $2.4 billion to $3.2 billion.
Keep in mind that AOCI would also be adjusted in such a situation to reflect changes in the valuation of the fixed maturity bond portfolio. As discussed on the February call, while the new guidance requires the company to recognize the inherent unrealized interest rate loss for purposes of determining AOCI, it ignores the unrealized gains from underwriting margins that are available to fund future policy benefits and changes in interest rates. Given our strong underwriting margins, this submission has the effect of reporting the policy liability that understates the value of these margins. This fact, along with the noneconomic impact of this new requirement for determining our future policy obligations for AOCI purposes, we continue to believe that equity, excluding AOCI, will be a more meaningful measure of Globe's financial condition going forward. The new guidance also requires a more granular assessment of the ratio between present value of benefits and the present value of gross premium, also known as a net premium ratio. Any blocks of business that require increases in future policy benefits to minimum levels or that have a net premium ratio greater than 100% will require a decrease to the opening balance of retained earnings. At the transition date, we expect this adjustment to retained earnings to be less than $50 million. We will provide more discussion of the impact of the accounting change in our second quarter Form 10-Q to be filed next month, and we may be in a position to provide more guidance on our anticipated restated 2021 and 2022 operating income and initial views on 2023 earnings on our next call. Those are my comments.
I will now turn the call back to Larry.
