Globe Life Releases COVID-19 Death Assumptions

 Commentary  July 29, 2022 at 07:44 AM  Share & Print

What You Need to Know

  • Globe Life is averaging $240 in life claim costs per excess U.S. COVID-19 death, down from $300 earlier in the pandemic.

  • The ‘pandemic factor’ could become less of a drag on the U.S. economy and investment portfolios.

  • Three Medicare plan issuers are talked about expense reduction.

Globe Life executives are going on the assumption that the United States will record about 60,000 deaths related to the COVID-19 pandemic during the second half of the year.

The McKinney, Texas-based insurer reported about 155,000 COVID-19 deaths in the first quarter and about 30,000 in the second quarter. Globe Life’s estimate would bring the total to 245,000 for the year.

Globe Life executives talked about their view of the pandemic on Thursday during a conference call the company held to go over earnings for the second quarter with securities analysts.

Frank Svoboda, the chief financial officer, said the company is now averaging about $2.4 million in extra claims per 10,000 pandemic-related deaths, or about $240 per in claims per death.

That’s down from $3 million per 10,000 pandemic-related deaths, or $300 per death, earlier in the pandemic.

“As a result, the net COVID life claims reported in the second quarter were not significant overall,” Svoboda said.

What It Means

If Globe Life’s assumptions about future COVID-19 mortality are correct, the pandemic could fade as a significant source of life insurer earnings volatility.

For your clients, that could mean that estimating their overall and post-retirement life expectancy could become somewhat easier, and that the pandemic factor could become less of a drag on the U.S. economy, and on most investment portfolios.

Globe Life’s Earnings

The second quarter ended June 30.

Globe Life is reporting $177 million in net income for the quarter on $1.3 billion in revenue, compared with $200 million in net income on $1.3 billion in revenue for the second quarter of 2021.

Net sales of life insurance increased 2%, to $140 million.

The company sells coverage through a network of about 9,400 agents.

The number of agents fell, year-over-year, but was higher than in the first quarter, and the company agencies are opening new offices and adding new sales technology, according to Larry Hutchison, the company’s co-CEO.

“Also, in a slowing economy, it’s always easier to recruit and retain new agents,” Hutchison told Jimmy Bhullar, a JPMorgan analyst who asked about agent recruitment.

Another topic is the new Long-Duration Targeted Improvement accounting rules that are set to take effect in 2023.

Some observers have worried that the new rules might cut some insurers’ earnings, and make their earnings more volatile.

Svoboda estimated that the new rules will increase the earnings Globe Life reports to shareholders by about $120 million to $145 million per year.

Other Insurers’ Numbers

Three health insurers with large Medicare plan operations have reported second-quarter results this week. Executives from all of the companies emphasized efforts to increase efficiency.

Centene is reporting a $129 million net loss on $36 billion in revenue, compared with a $418 million net loss on $31 billion in revenue for the year-earlier quarter.

The loss was due to $1.45 billion the Clayton, Missouri-based insurer took in connection with efforts to give up some leased and owned real estate.

The company ended the quarter providing or administering major medical coverage for 26 million people, up from 25 million people a year earlier.

The number of people covered by Centene’s Medicare Advantage plans and Medicare supplement insurance policies increased to 1.5 million, from 1.2 million.

Humana is reporting $697 million in net income for the latest quarter on $24 billion in revenue, up from $588 million in net income on $21 billion in revenue for the year-earlier quarter.

Executives at the Louisville, Kentucky-based insurer said they hope to find $1 billion in cost savings at the company and use the savings to increase spending on its Medicare Advantage plans.

The company ended the quarter providing or administering major medical coverage for 10 million people, up from 9.8 million people a year earlier.

Medicare Advantage plan enrollment increased to 5.1 million, from 4.9 million people.

The number of Medicare supplement insurance policyholders fell to 317,400, from 330,400.

Molina Healthcare is reporting $248 million in net income for the latest quarter on $8.1 billion in revenue, up from $185 million in net income on $6.8 billion in revenue for the year-earlier quarter.

Executives at the Long Beach, California-based insurer said the company will take a number of steps to hold down expenses, including giving up about 1.3 million of its 2 million square feet of leased office space by the end of the year.

The company ended the quarter providing or administering major medical coverage for 5.1 million people, up from 4.7 million people a year earlier.

Medicare plan enrollment increased to 151,000, from 130,000.


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