COVID-19 Is Hitting Life Insurers Harder: Morgan Stanley Analysts

The high number of deaths in January and February, and pandemic-related deaths now, seem to be affecting group life operations, and working-age insureds, not just people with individual life insurance, the analysts write.

The mortality rate from heart attacks, strokes and drug-related problems has spiked higher along with the death rate from COVID-19, the analysts add.

In the first half of the first quarter, “we have already seen deaths well exceed what we saw in the fourth quarter,” the analysts say. “We expect this will hit companies with mortality-driven business particularly hard.”

Other Factors

The analysts also stated:

• Interest rates are still low enough to hurt life insurers’ investment earnings but are a little higher than they were soon after the pandemic hit.
• Private-equity-backed companies seem to continue to be eager to help traditional life insurers transfer the risk associated with old blocks of business, through sales of blocks of business or through reinsurance arrangements. The analysts expect Ameriprise  to do something with the fixed annuities still on its books, and Prudential Financial to do something with its variable annuities and individual life blocks.
• For investors, one problem is that some life insurers’ stock prices have increased so much that the stocks no longer look like great buys. But some other life insurers still seem to have low stock prices, given how well they’ve been doing, the analysts write.

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