2Q Earnings To Reveal Accuracy Of Life Insurers’ COVID-19 Estimates

By John Hilton

Texas-based insurer Globe Life estimates $2 million in life insurance claims per 10,000 lives lost to the COVID-19 pandemic.

Frank Svoboda, chief financial officer for Globe Life, revealed the projection Thursday during the company's second-quarter earnings call. The insurer estimates $45 million of COVID-related life claims for 2020, nearly double its first-quarter projection. These additional claims are expected to cut Globe Life's 2020 earnings per share by $0.33, Svoboda explained.

"While we do expect higher COVID-related life claim payments over the course of the year, these higher claims are expected to be largely offset by higher premium collections and lower health claim payments," Svoboda added.

Globe Life is one of the first life insurance companies to report second-quarter earnings. The quarter offers the first glimpse at how well insurers are countering the financial impacts of the worldwide pandemic. Recent indications are favorable, with many insurers lifting age restrictions on life underwriting.

Insurers entered 2020 with "very strong balance sheets," said Doug Meyer, managing director and head of life insurance at Fitch Ratings, which is helping companies withstand the weakened economy and ultra-low interest rates.

In the big picture, companies were helped by the mostly strong liquidity throughout the pandemic, Meyer said. By comparison, the markets "seized up" during the 2008-09 economic crisis, he added.

"That didn’t happen this time around," he said. "It did for a short period of time, but it was pretty quickly rectified. But the insurance companies were also in a much better position in terms of their liquidity profile going into this downturn."

Big Insurers To Come

Principal Financial Group will release second-quarter earnings Monday and executives will discuss the numbers Tuesday morning. Several major insurers, including Prudential and MetLife, are scheduled to release earnings data the week of Aug. 3.

Despite the pandemic losses, Globe Life remained profitable in the second quarter. The insurer earned $173 million for the quarter on $1.2 billion in revenue. In the year-ago quarter, Globe Life reported $187 million in net income on $1.3 billion in revenue.

"With respect to the premium revenue, we've been very pleased to see the persistency and premium collections improve since the onset of the crisis," said co-CEO Gary Coleman. "However, the decline in margin is due primarily to approximately $22 million of incurred claims related to COVID-19.

"For the year, we expect life premium revenue to grow approximately 5% and life underwriting margin to decline 1% to 3%, primarily due to the impact of COVID-19."

Globe Life has 4.2 million life insurance policyholders, and also sells supplemental health insurance products and Medicare plans to middle-income consumers. The company reports $82 billion of insurance in force.

New health insurance sales declined 23% year over year, Coleman said, but the company expects health insurance premium revenue to grow 6% for the year.

'A Better Opportunity'

Company executives credited strong agent force recruitment across its three companies for life insurance premium growth. The roughly 12,000 agents produced strong sales despite a transition to virtual meetings and new sales tactics.

Globe Life increased its producing agent count at American Income Life by 14% in the quarter, to 8,393 agents, and by 5% at Liberty National, to 2,395 agents. At its Family Heritage Division, the average producing agent count was 1,248 for the quarter, up 15%.

Life premiums were up 8% at Globe Life's direct-to-consumer division to $235 million.

The new selling environment has actually been a positive in agent recruiting efforts, said Larry Hutchison, co-CEO.

"There are a number of people that are underemployed and looking for a better opportunity," he said. "We can reach more people that are interested in their career and the virtual selling has been a positive because it appeals to more people because they have more flexibility on when they set appointments and make presentations."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.