Close Close
ThinkAdvisor

Life Health > Life Insurance > Term Insurance

U.S. Working-Age COVID-19 Mortality Shocks Life Insurers

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Prudential, Unum and Voya all made more money than they did in the third quarter of 2020.
  • A Prudential executive said the number of U.S. deaths was more than three times what the company had hoped.
  • A Unum executive said COVID-19 claims may have been higher in the United States than in the United Kingdom because of lower U.S. vaccination rates.

The wave of COVID-19 cases that swept over the United States starting in July stunned U.S life insurers, by increasing the number of deaths of working-age people far over what the companies had predicted.

Executives from Prudential Financial, Voya Financial and Unum Group have all talked about the impact of the COVID-19 delta variant surge on working-age Americans during the conference calls the companies have held to go over earnings for the third quarter. The quarter ended Sept. 30.

Andy Sullivan, the head of the U.S. businesses at Prudential, said the surge had an especially big effect in the South.

“The deaths in the third quarter were three times what we expected,” Sullivan said. “We were expecting 30,000 deaths, and we saw 95,000… U.S. deaths in the age group between 35 and 54 tripled, from a percentage perspective. And we cover a lot of younger workers.”

Michael Smith, the chief financial officer at Voya, said the impact of the surge was higher than the company had expected, because the total number of deaths was high, and because deaths of people in younger working ages were more common than in previous quarters.

“We expect this age shift will persist going forward,” Smith said.

Executives from Unum talked extensively about the impact of pandemic-related mortality.

Richard McKenney, the CEO, noted that about 40% of the people who died of COVID-19 in the third quarter were working-age people. The share of deaths involving working-age people was double what it was in the fourth quarter of 2020 and  the first quarter of this year, he said.

“We now see higher impacts in the working-age population, our primary customers, who are covered by our group and voluntary products,” McKenney said.

Because of the age shift, the average life insurance claim per COVID-19-related death has increased to $60,000, from $55,000 in the second quarter, according to Steven Zabel, Unum’s CFO.

“Looking ahead to the fourth quarter, our current expectation is for U.S. COVID-related mortality to continue to worsen, to approximately 100,000 deaths,” Zabel said.

COVID-19 now appears to be leading to an increase in absence and short-term disability claims as well as an increase in life insurance claims, Zabel added.

More on this topic

Vaccines

Sullivan said he believes one of the drivers affecting Prudential’s U.S. life insurance claims is the share of claims coming from places where COVID-19 vaccination rates are lower.

Vaccine mandates at  large employers could help future earnings, he said.

Unum has large operations in the United Kingdom. Unum executives said they believe that COVID-19 mortality was lower there than in the United States partly because the United Kingdom has an adult vaccination rate over 90%.

“It’s that vaccine piece that’s making the biggest difference in mortality, and also in hospitalizations,” according to Mark Till, the CEO of Unum’s Unum International division.

The lower COVID-19 hospitalization rate in the United Kingdom is helping to hold down Unum disability claims there, Till said.

Earnings

Prudential, Unum and Voya all reported profits for the third quarter, in spite of the effects of COVID-19 on life and disability claims.

Prudential is reporting $1.53 billion in net income for the third quarter on $20 billion in revenue, up from $1.49 billion in net income on $13 billion in revenue in the third quarter of 2020.

Prudential’s U.S. businesses are reporting $1.1 billion in adjusted operating income before income taxes for the latest quarter on $13 billion in revenue, up from $848 million in adjusted operating income on $6.5 billion in revenue for the year-earlier quarter.

Unum is reporting $329 million in net income for the latest quarter on $3 billion in revenue, up from $231 million in net income on $3 billion in revenue for the year-earlier quarter.

Commission spending fell to $144 million, from $146 million, at the Unum US division but increased to $80.5 million, from $79.9 million, at Colonial Life.

Voya is reporting $142 million in net income for the latest quarter on $2 billion in revenue, compared with a $333 million net loss on $2.1 billion in revenue for the year-earlier quarter.

(Image: lakshmiprasada S/Shutterstock)