Here are the 3 publicly traded life insurers in Morgan Stanley's business mix chart that get the highest share of their business from individual life insurance...

(Credit: The Cooper Collections of U.S. Railroad History)

3. CNO Financial Group Inc.: 25%

2. Lincoln Financial: 29%

1. Globe Life: 73%

COVID-19 could still flare up.

But, if the pandemic continues to be more like the terrible 1968 Hong Kong flu pandemic than like the catastrophic 1918 flu pandemic, life insurance claims could have a much smaller effect on the companies’ earnings than investment market turmoil.

Nigel Dally and other securities analysts at Morgan Stanley have given that assessment in a look at how the pandemic has affected the life insurers they track.

(Related: Moody’s Analysts Puzzle Over Life Insurers’ COVID-19 Mortality Comments)

Securities analysts help active investors look for investment ideas.

The Morgan Stanley analysts focus in the new report on the kinds of large, life insurance-focused insurers that might be of special interest to an investor who wanted to try to make money by betting for, or against, insurers that could feel a big impact from the pandemic.

The list includes Aflac, Ameriprise, Athene, Brighthouse, CNO, Equitable, Globe Life, Lincoln Financial, MetLife, Principal Financial, Prudential, Reinsurance Group of America, Unum, Voya, Manulife and Sun Life Financial.

The list does not include multiline giants like American International Group Inc.; smaller carriers, like Primerica; or policyholder-owned mutual insurers, like New York Life, MassMutual, Nationwide and Northwestern.

Here are five points from the analysts’ analysis.

1. Few the life insurers on their list get all that much of their revenue from selling individual life insurance.

The carriers on the list get an average of just 10% of their business from selling group life and disability, and 9% from selling individual life.

Variable life accounts for just 1% of their business mix.

Individual disability insurance accounts for 0%.

2. “Longevity-based” products, which could benefit from increased mortality, accounts for 34% of the companies’ business mix.

The insurers on the analysts have reported that 6% of their business comes from fixed annuities, 16% from various types of variable annuities, and 12% from pension and retirement plans.

3. Only one insurer on the list would feel much of an earnings effect if the death toll is around 100,000.

Because RGA reinsurers the direct writers’ pandemic risk, it could that kind of death toll cut earnings about 50%, according to the analysts.

But the life insurance claims associated with that kind of death toll would, apparently, amount to less than 10% of earnings for the other companies on the list, the analysts predict.

4. Low interest rates, bond issuer downgrades, bond issuer defaults and other investment problems could have  effects that differ widely from insurer to insurer.

“Interest rates remain a sizable headwind,” the analysts write. “Disclosure regarding future rate assumptions among the companies tends to be inconsistent.”

5. Some earnings components did a lot more than others to help life insurers surprise investors in a good way in the first quarter.

The analysts looked at how various types of income statement items led to positive earnings surprises, or negative surprises, in the first quarter.

Individual life insurance earnings, for example, were about 10% lower than expected.

At life insurers on the list that have some property and casualty operations, the P&C operations did more than 30% better than expected.

Group life and disability did more than 5% better than expected.

Voluntary products and annuities did a little better than expected.

Something else that did better than expected was a lower level of “corporate losses,” or company losses not attributed to ongoing operations.

“This mostly reflected the positive impact on management compensation expenses from sharply lower stock prices,” the analysts write. “As this is a temporary item, we view it as being a low quality source of upside.”

If individual life insurance did better, that would be a much higher-quality source of future positive earnings surprises, the analysts write.

— Read State COVID-19 Job Loss Ratios Vary Widely: Researcheron ThinkAdvisor.

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