Life Insurance Companies Indicate Rising Non-COVID Mortality

As many of you know, higher-than-normal non-COVID death rates have been reported since the fourth quarter of 2021. I’ve been gleaning this information from scientists, foreign governments, life insurance companies, and my local coroner.

It’s currently earnings season on Wall Street, during which many companies report second quarter 2022 results. My focus is on reviewing and reporting on any remarks associated with non-COVID death rates coming from life insurance companies' second quarter earnings releases, and from their accompanying management conference calls, which are attended by Wall Street analysts.

Here’s what life insurance companies have reported about death claims in their second quarter 2022 results this week:

VOYA FINANCIAL (VOYA) reported second quarter results on August 2. If you click on the press release, scroll down to the heading labeled "SEGMENT DISCUSSIONS", and then scroll down to the sub-heading labeled "Health Solutions", this is the area of the company that includes life & disability insurance.

Here is where Voya gets real, stating: "lower COVID-related claims were partially offset by higher non-COVID claims in Group Life and slightly higher loss ratios in Stop Loss and Voluntary".

Directly below that statement, the press release displays worsening numbers with regard to loss ratios and operating margins.

In the conference call that followed the earnings press release, Mike Smith, Vice Chairman and Chief Financial Officer stated:

“Our total aggregate loss ratio was at the top end of our target range, driven by a higher group life loss ratio. Our second quarter group life loss ratio was elevated on an ex-COVID basis as we saw elevated non-COVID claims. … Due to the sharp decline in U.S. COVID-related deaths, COVID claims were not material during the quarter and thus were not viewed as a notable item.”

To reiterate, Voya Financial experienced a noteworthy amount of non-COVID death claims, and also a “sharp decline in U.S. COVID-related deaths.” This should cause the reader to question, “What are all these extra people unexpectedly dying from, if they’re not dying from COVID?”

PRUDENTIAL FINANCIAL (PRU) reported a large earnings miss on August 2. Here are notes from their second quarter earnings press release that could imply the unforeseen costs of vaccine-related death claims:

“The current quarter included a net after-tax charge from our annual assumption update and other refinements of $1.048 billion or $2.80 per Common share… Our second quarter results reflect macroeconomic trends, including rising interest rates, widening credit spreads, and equity market declines, as well as the strengthening of our Individual Life reserves through our annual review of assumptions.” 

You don't "strengthen reserves" with a focus on the life insurance business unless you're expecting something out of the ordinary to cause increased death claims. Notice the phraseology in the press release: despite all those "macroeconomic trends" that are harming the investment business, something separate is harming the Individual Life business. Again, from the press release:

“Individual Life: Reported a loss, on an adjusted operating income basis, of $1.325 billion in the current quarter, compared to adjusted operating income of $146 million in the year-ago quarter. This decrease includes an unfavorable comparative impact from our annual assumption update and other refinements of $1.408 billion, primarily driven by updated policyholder behavior and mortality assumptions in the current quarter.” 

Updated mortality assumptions means that the life insurance actuaries are refiguring their estimates on how many policyholders will die, based on new input that’s changing the mortality trends. That new input could easily be the vaccine’s affect on people’s health outlooks.

LINCOLN FINANCIAL (LNC) reported second quarter results on August 3. The second bullet point, at the top of the press release, states: “Adjusted operating EPS included $(0.42) primarily from pandemic-related claims experience,” and later within the press release, the company referenced “a less favorable group life [insurance] loss ratio.”

The company paid out enough insurance claims, related to the pandemic, that it caused the company to lose 42 cents per share of stock. (Note that other areas of the company were profitable during the quarter, and therefore, the company did make a profit in the quarter, despite the loss within the life insurance division.)

It's interesting to note that if the “pandemic-related claims” were about people dying from COVID, the press release would have specifically stated that. And remember, Voya Financial already told us that “COVID claims were not material during the quarter.” But frankly, if the “pandemic-related claims” were resulting from vaccine-induced deaths, it would not be politically correct for the company to verbalize that. Therefore, the company can avoid making a blunt statement about the vaccine by instead using the words “pandemic-related” because the vaccine is pandemic-related.

I’ll review a few more life insurance companies’ earnings reports in the coming days.

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Crista Huff is a hedge fund portfolio manager who writes on many topics, including politics, economics, investment markets, healthcare, child-rearing, gardening, Christianity, sociology and psychology.

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