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

By Allison Bell

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What You Need to Know

  • A kidney dialysis provider continues to see a 6% increase in the patient death rate.
  • A 6% increase in overall U.S. mortality implies that the country will record about 160,000 extra deaths per year.
  • Globe Life says excess mortality is clearly there but within its expectations.
  • Equitable has responded to the higher mortality level by cutting the top end of its life insurance profit range by 25%.

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.

“We’re definitely seeing some continued excess mortality,” he said. “We probably expect that to continue for at least for the remainder of this year and probably into the next couple of years.”

DaVita

The company that might have the best, quickest information about mortality may be DaVita, which provides kidney dialysis for about 200,000 of the 800,000 U.S. residents who need kidney dialysis.

In a normal year, about 34,000 of DaVita’s patients, or 17%, die.

Over the course of the COVID-19 pandemic, the company’s mortality rate has increased about as much in percentage terms as the mortality rate for the U.S. population as a whole.

During that company’s earnings call, CEO Javier Rodriguez said the company saw 900 excess patient deaths in the first quarter and about 500 to 600 excess deaths in the second quarter, for an average of about 700 excess deaths per quarter.

That’s down from an average of about 1,600 excess deaths per quarter in 2020 and 2021.

The company is estimating that it might face a total of about 2,000 excess patient deaths this year, meaning that the number of deaths might be about 6% higher than the pre-pandemic average.

Today, “we all know there’s a minor surge going on,” Rodriguez said. “But I think minor is the operative word from what we’ve seen so far. So, we’re keeping a careful eye on it.”

The Impact

Equitable Holdings reported $831 million in net income on $2.4 billion in revenue, and its CFO, Robin Raju, was confident enough about overall results to give analysts details about the impact of excess mortality on the company’s individual life insurance business.

The company recorded a $53 million “notable item,” mainly to reflect the continuing impact of COVID-19 on insureds with variable universal life insurance coverage.

“We’re seeing higher mortality in the older-age insured population, which we believe is a pull-forward of future claims,” Raju said. “This is consistent with what we’re hearing from our reinsurers.”

Actuaries use the term “pull forward” to refer to the COVID-19 pandemic or another epidemic accelerating the deaths of frail people who were likely to die within the next few years, even if the epidemic had not occurred.

Raju noted that the company had been predicting that life insurance earnings would range from $50 million to $100 million per year. Now, because of the excess mortality, the company has narrowed the expected life insurance earnings range to $50 million to $75 million.

The Future

Christian Mumenthaler, the group CEO for Swiss Re, a company that acts as many life insurers’ own insurer, acknowledged during Swiss Re’s earnings call that COVID-19 and other respiratory diseases continue to create uncertainty for life insurers and life reinsurers.

“To what extent will we see a resurgence at the end of the year?” he asked. “And how big will that be? If you use post-pandemic data and look at that, you see decreasing humps. Every winter has a bit of a hump.”

But, this past winter, the hump “was still pretty severe,” Mumenthaler said. “It was much, much less severe than during COVID, but pretty severe. To me, it’s logical to assume that next winter we’ll have a hump, but there will be, again, a further decrease.”

Credit: Syda Productions/Shutterstock

Allison Bell

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