Insurers: U.S. Mortality Is Still Higher Than Before the Pandemic

Executives from life insurance, health insurance and annuity issuers have spent their second-quarter earnings calls telling securities analysts about an open secret: The U.S. death rate is still noticeably higher than it was before 2020, when the COVID-19 pandemic began.

Some executives emphasized that COVID-19 had little effect on earnings because their companies had prepared for COVID-19 to linger, not because the effects have gone away.

But John Gallina, Elevance CFO, said costs related to COVID-19 and the pandemic’s impact are a headwind.

“When you combine COVID and non-COVID cost, the overall cost of the health care system is more expensive than if COVID had never occurred,” Gallina said. “We’ve seen it, we’ve priced for it and we’ve factored it into our expectations. But COVID is not gone. It still exists. It’s just no longer the big significant driving force that it had been for the past several years.”

What It Means

Clients may feel comfortable about going on cruises and eating at restaurants without wearing masks, but, for now, COVID-19 and its impact on the health care system and society as a whole are still adding uncertainty to any kind of planning that involves life expectancy estimates.

The Backdrop

Hospitals reported a spike in patient counts in late 2022 and in the first weeks of this year because of a combination of a bad flu season, a small surge in COVID-19 cases and an increase in the number of patients suffering from other viral illnesses.

“Tripledemic” news stories disappeared after the first quarter, which ended March 31, but preliminary, incomplete death statistics from the U.S. Centers for Disease Control and Prevention appeared to show that the number of deaths recorded from April through June was about 6% to 7% higher than the typical number recorded in the second quarter from 2017 through 2019.

The United States has about 330 million residents and was averaging about 2.7 million deaths per year before the pandemic. Over the long term, a persistent 6% increase in the U.S. death rate would translate into about 160,000 extra deaths per year, meaning that COVID-19 itself and the effects of the pandemic would continue to have an impact on mortality comparable to that of diabetes or Alzheimer’s disease.

Life Insurers’ Mortality Trends

When life insurers report the kind of financial statements that investors see, they show life insurance claim ratios and related information in different ways.

The claim ratios depend on factors such as the prices charged for the insurance, average policy death benefit amounts and changes in reserving levels as well as the insureds’ mortality rate.

Kevin Hogan, CEO of Corebridge Financial — the life and annuity business now being separated from AIG — noted that second-quarter mortality was within its pricing expectations, and that mortality trend data can be difficult to interpret.

“We haven’t seen any trends in mortality that suggest a change to our long-term assumptions,” Hogan said.

Company executives who did compare the latest mortality figures with pre-pandemic mortality said mortality looks high.

Chris Swift, Hartford Financial CEO, said mortality losses at that company’s big group life business “continued to run above pre-pandemic levels but improved sequentially.”

At Voya, the interest-adjusted group life ratio loss ratio was 85.1% in the second quarter, compared with a targeted range of 77% to 80%.

The high claim ratio was due to the size of the death benefits being larger than expected, according to Don Templin, the CFO.

“Claims frequency was in line with our expectations,” Templin said.

At Globe Life, CFO Thomas Kalmbach said the company has included assumptions about elevated mortality in its pricing.