A SARS-CoV-2 virion in a crystal ball (Credit: NIH; Thinkstock)

Even now, it looks as if the number of U.S. deaths caused by COVID-19 may not be big enough to do much to the typical publicly traded U.S. life and annuity issuer’s 2020 earnings.

Ryan Krueger, a securities analyst at Keefe, Bruyette & Woods Inc., makes that case in a new analysis of COVID-19 mortality scenarios.

(Related: Humana Tells Investors About COVID-19 Risks)

Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes the COVID-19 disease, can kill people by causing pneumonia, heart inflammation and kidney failure.

The U.S. Centers for Disease Control and Prevention reported Monday that it had recorded 140,904 cases of COVID-19 that were confirmed by state, municipal or federal testing laboratories, and 2,405 COVID-19-related deaths.

Many cities and states, including California and New York, have shut down schools, restaurants and hair salons, and encouraged residents to stay at home, in an effort to slow the spread of SARS-CoV-2.

Krueger did not include the economic impact of COVID-19 “shelter in place” and “stay at home” campaigns in his new analysis; he focused solely on mortality.

The General Analysis

In the analysis, which is published behind a paywall, Krueger presents a chart that shows how the deadliness of the 1918 Spanish flu pandemic compares with the deadliness of other famous pandemics, and tables that show what the excess death rate per 1,000 insured lives might be like in a range of SARS-CoV-2 infection rate and fatality rate scenarios.

At this point, he says, his base assumption is that the current pandemic will end up being more like the terrible “Asian flu” pandemic of 1957, rather than like the catastrophic 1918 pandemic.

He assumes in his own base scenario that about 20% of U.S. residents will end up having COVID-19, and that the death rate for people who get COVID-19 will be about 0.5%, or four times the death rate for ordinary flu.

Under those assumptions, COVID-19 could cause about 330,000 deaths.

Krueger assumes, further, that people with life insurance and annuities tend to be healthier than other Americans, and that their death rate will be about 25% lower than the death rate for the average Americans.

If that base scenario is correct, then the COVID-19 death rate for insured Americans could be about 0.7 deaths per 1,000 insured lives, Krueger says.

He has included a table showing that the life insurers he’s tracking could be on the hook for about $16 trillion in death benefits if every insured died.

He notes that insurers and reinsurers tend to think of a death rate of 1.5 deaths per 1,000 insured lives when planning for severe pandemic scenarios.

The Product-by-Product Analysis

About 80% of the people who die from COVID-19 are ages 65 or older, Krueger says.

This is how he sizes up the risk COVID-19 poses for specific types of products:

  • Group life: Low
  • Individual term life: Low
  • Permanent life: Medium
  • Life reinsurance: High

The Company Impact

Reinsurance Group of America Inc. sells insurance to life insurance companies, through life reinsurance arrangements.

Krueger predicts that a COVID-19 pandemic that causes about 330,000 deaths could wipe out RGA’s earnings for a year.

But RGA’s mortality levels might be lower in the next fewer years, and its earnings higher, because “you ‘can’t die twice,’” Krueger writes, quoting a past RGA chief executive officer, Greig Woodring.

In the base scenario pandemic, three direct writers — Brighthouse Financial, CNO Financial Group, and Lincoln Financial — could see COVID-19 deaths cut their earnings by between 5% and 10%, Krueger writes.

He see COVID-19 mortality cutting earnings from slightly over 0% to 5% for seven insurers and having no effect, or even a positive effect, on the earnings of five life insurers, High mortality could reduce benefits obligations at some companies with large blocks of long-term care insurance or group annuity business.

— Read Prudential Looks Strong: Analystson ThinkAdvisor.

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