Morgan Stanley Assumes 155,000 Q1 U.S. COVID-19 Deaths in Earnings Forecast

 Commentary  March 25, 2022 at 07:44 AM  Share & Print

What You Need to Know

  • The pandemic death count estimate is up from 129,000 in the fourth quarter of 2021.

  • Analysts expect the COVID-19 impact on claims to be similar to what it was in the fourth quarter.

  • The analysts expect higher interest rates to help life and annuity block sales but increased regulator scrutiny to hurt.

Morgan Stanley securities analysts are assuming that the current quarter has been another terrible period for COVID-19 mortality in the United States.

Nigel Dally and other Morgan Stanley analysts are estimating that COVID-19 and other pandemic-related illnesses will kill 155,000 to 160,000 in the period from January through March.

If that prediction is correct, the U.S. pandemic death total will be down from about 192,000 in the first quarter of 2021, but up from 129,000 in the fourth quarter of 2021, and up from about 120,000 in the third quarter of 2021.

The analysts based COVID-19 death figures on data compiled by Refinitiv.

Based on what U.S. insurers have said about how their life insurance and annuity death benefits claims correlate with total U.S. COVID-19 mortality, 158,000 U.S. COVID-19 deaths could reduce some big, publicly traded life insurers’ first-quarter earnings by about 11 cents to 91 cents per share, according to the analysis.

The analysts included the COVID-19 impact assessment in a commentary on what they’re hearing about the upcoming quarterly results releases.

What It Means

Financial professionals need to continue to tell clients that this is an important time to keep any life insurance available in force.

They will also face continuing uncertainty about how long clients can expect to live in retirement.

Other Morgan Stanley Commentary Highlights

Dally and his colleagues say that two other topics of interest relate to life and annuity issuers’ investments.

Alternative investments: The strong performance of mortgage loans, private equity firm stakes and other “alternative investments” buoyed many insurers’ earnings in 2021. The analysts say they are expecting alternative investment results for the current quarter to be strong, but not as strong as they were in the fourth quarter of 2021.

If that prediction is correct, insurers might feel a little more pressure to increase what your clients pay for life insurance and annuities.

Mergers and acquisitions: Life and annuity issuers depend heavily on investments in high-grade corporate bonds to support benefits guarantees. The analysts predict that the recent increase in interest rates will make efforts by life insurers to sell blocks of in-force life and annuity business easier, but that regulators’ increased interest in the “block deals” could slow deal-making.

The net result may be that clients will continue to get notices about in-force life policies and annuities being sold, and that, in the future, they may also get more regulator-mandated disclosure notices.


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