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August 05, 2020 at 03:39 PM
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.
