Q2 2020 over a picture of SARS-CoV-2 microbes (Credit: NIH)

Reinsurance Group of America — a company that acts as a life insurer for life insurance companies — says the effects of COVID-19 on the death rate have been noticeable in the United States, but relatively modest in most of the rest of the world.

Because most big markets other than the United States have held COVID-19 death rates down, the effects of the pandemic have been smaller than RGA originally feared, the company said Tuesday, when it announced its earnings for the second quarter.

The Chesterfield, Missouri-based life and health reinsurer is reporting $158 million in net income for the second quarter on $2.8 billion in revenue, compared with $202 million in net income on $2.8 billion for the second quarter of 2019.

The company assumed $25 million in new U.S. and Latin America reinsurance business from the direct writers in the quarter, or about as much as it assumed in the year-earlier quarter.

Anna Manning, RGA’s chief executive officer, said in a comment included in the earnings announcement that RGA experienced a “material level of excess mortality claims” in the United States, and that the company believes the excess was related to COVID-19.

In a slidedeck, the company said U.S. individual mortality claims were about $240 million higher than they would have been without the pandemic.

U.S. claims were about the same size as usual, but there were more claims than usual, according to RGA.

A majority of the excess claims were concentrated in policies underwritten more than 15 years ago, for insureds over age 70, according to RGA.

For RGA, the “highest mortality ratios [were] in states with the highest general population COVID-19 deaths,” the company said.

Excess COVID-19-related claim costs amounted to just $60 million for other markets, RGA said.

Originally, RGA was predicting it would face about $400 million to $500 million in mortality claim costs for every 1.4 million additional global deaths, and for every 100,000 additional U.S. deaths.

RGA now expects to face $150 million to $250 million in extra mortality claim costs for every 100,000 additional U.S. deaths.

One reason mortality claim costs are relatively low is that the death rate has been highest for people ages 70 and older. In the United States, RGA said, 11% of all people are ages 70 and older, but only 6.9% of the life insurance that RGA reinsures covers people in that age group.

Prudential Financial (NYSE:PRU)

Prudential is reporting a $2.4 billion net loss for the second quarter on $13 billion in revenue, compared with $738 million in net income on $14 billion in revenue for the second quarter of 2019.

The Newark, New Jersey-based life insurer realized $3.3 billion in investment losses and adjustments during the quarter, and it applied about $55 million in “market experience” adjustments to benefits obligation value estimates.

Adjusted operating income, which excludes those investment losses and experience adjustments, fell to $931 million, from $1.6 billion.

The U.S. individual solutions division is reporting $185 million in adjusted operating income before income taxes on $2.5 billion in revenue, compared with $327 million in adjusted operating income before income taxes on $2.8 billion in revenue.

Individual Life Insurance

  • Term life: $40 million (down from $53 million)
  • Guaranteed universal life: $34 million (up from $24 million)
  • Other universal life: $23 million (down from $48 million)
  • Variable life: $87 million (up from $56 million)

Sales through Prudential’s own advisors fell to $35 million, from $39 million.

Sales through outside distributors increased to $149 million, from $142 million.

Individual Annuities

Variable annuity sales fell to $1.1 billion, from $2.3 billion.

Fixed annuity sales fell to $295 million, from $340 million.

Here’s what happened to sales through specific distribution channels between the second quarter of 2019 and the latest quarter:

  • Insurance agents: $496 million (down from $735 million)
  • Wirehouses: $160 million (down from $533 million)
  • Independent marketing organizations: $82 million (up from none)
  • Independent financial planners: $536 million (down from $1.2 billion)
  • Banks: $72 million (down from $195 million)

Equitable Holdings (NYSE:EQH)

Equitable is reporting a $3.9 billion net loss for the second quarter on negative $2.5 billion in revenue, compared with $430 million in net income on $3.2 billion in revenue for the first second of 2019.

The New York-based life insurer uses derivatives to support the annuities it sells. It comes up with a new estimate of the value of the derivatives every quarter and includes changes in the value in its net results, even though positive changes result in no inflows of cash, and negative values lead to no extra cash payments.

The company included a $6 billion drop in the value of its derivatives, and its revenue, in the results for the latest quarter, compared with a $236 million drop in the year-earlier quarter.

Operating earnings, which exclude derivatives value changes and a number of other gains and losses, increased to $2 million in the latest quarter, from a $58 million loss in the year-earlier quarter.

Commissions and other distribution-related expenses fell to $302 million, from $307 million.

First-year premiums for individual retirement products fell to $1.6 billion, from $2.1 billion.

CNO Financial Group (NYSE:CNO)

CNO is reporting $82 million in net income for the second quarter on $1 billion in revenue, up from $38 million in net income on $980 million in revenue for the second quarter of 2019.

Here’s what happened to new annualized premiums, or sales, from some types of products the Carmel, Indiana-based insurer sells between the second quarter of 2019 and the latest quarter:

  • Supplemental health insurance: $18 million (down from $39 million)
  • Medicare supplement insurance: $8.9 million (down from $14 million)
  • Life insurance: $47 million (up from $39 million)
  • Long-term care insurance: $4.3 million (down from $6.4 million)

Annuity collected premiums fell to $243 million, from $341 million, because of “pricing discipline and current market conditions,” the company said.

Fidelity National Financial (NYSE:FNF)

Fidelity National Financial is a property and casualty insurer with a large annuity business.

The Jacksonville, Florida-based carrier is reporting $309 million in net income for the second quarter on $2.4 billion in revenue, compared with $266 million in net income on $2 billion in revenue for the second quarter of 2019.

The company completed the acquisition of FGL Holdings, the parent of Fidelity & Guaranty Life, June 1. Fidelity National’s earnings include just one month of F&G earnings.

F&G is reporting a $39 million net loss for the latest quarter on $124 million in revenue.

F&G indexed annuity sales increased to $866 million for the entire three months in the second quarter, from $767 million in the year-earlier quarter.

Fidelity National noted in its earnings announcement that F&G began serving the independent broker dealer channel in June, through a partnership with a large independent broker-dealer.

American Financial Group (NYSE:AFG)

American Financial Group is a property and casualty insurer with a large annuity business.

The Cincinnati-based carrier is reporting $177 million in net income for the second quarter on $2 billion in revenue, compared with $210 million in net income on $2 billion in revenue for the second quarter of 2019.

Earnings for the latest quarter included $204 million in realized gains on securities, up from $56 million in the year-earlier quarter.

The company’s annuity business is reporting $42 million in pretax core operating earnings for the latest quarter on $451 million in revenue, compared with $104 million in pretax operating earnings on $450 million in revenue for the year-earlier quarter.

The company’s net interest spread, or the difference between what the company pays annuity holders and what the company earns on its own investments, narrowed to 1.24%, from 2.05%.

The annuity’s results include $42 million in losses related to the parent company’s decision to shut down Neon Underwriting Ltd., a managing general agency that helps clients tap LLoyd’s.

Contract persistency was higher than American Family had expected, and expenses related to guaranteed benefits were lower than expected, the company said.

American Financial said it has responded to low interest rates by taking “more aggressive renewal rate actions” on annuity policies near or after the end of their surrender charge period. The company said those actions should help it cut crediting rate payments by about $35 million to $35 million per year.

Correction: An earlier version of this article gave several incorrect figures for Prudential’s earnings. The company applied a $55 million market experience adjustment to its results, and its variable annuity sales fell to $1.1 billion, from $2.3 billion.

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