3Q Earnings Could Reveal Insurers’ Plans On Layoffs, Low Rates

With the economic recovery slowing, winter on the way, and a second round of COVID-19 threatening public health, insurers are staring at a prolonged downturn.

This is the backdrop as public companies produce their third-quarter earnings reports. Analysts are eager to see the bottom lines as many insurers are starting to show cracks in the economic foundation -- in the form of significant employee layoffs.

Just under 300 employees from Pacific Life Insurance Co. were laid off last week, with the company citing the ongoing coronavirus pandemic and low interest rates. MassMutual is laying off 160 employees at the end of the year, as part of the sale of its retirement business to Empower for $3.35 billion.

Industry intelligence guru Sheryl Moore said the layoffs could be just beginning.

"I am anticipating that this is just the beginning of the layoffs," said Moore, president and CEO of Moore Market Intelligence. "I've heard about five companies and I think we could easily see 10 or 20 more companies making layoffs. And that's really scary for the industry."

The pandemic unleashed a chain reaction of bad economic conditions for insurers. Those conditions continue to multiply and are creating a deeper hole. The sales process for life insurance products has long been dependent on face-to-face sessions, which are largely absent today. Likewise, the market for products is drying up as Americans experience their own economic hardship.

Finally, already low interest rates dropped further following the COVID-19 outbreak in March and have remained near record lows. The 10-year Treasury rate crept to 0.84% today -- down from the Jan. 1 rate of 1.92%.

"I think it's going to be a while before things rebound," Moore said. "The one thing I am really optimistic about is that I have seen the 10-year Treasury slowly picking back up. So I'm holding on to that."

The 10-year Treasury rate stood at 0.52% on Aug. 4.

Up To 220,000 Deaths

Globe Life kicked off 3Q earnings reports today, and reported strong results given the circumstances. The McKinney, Texas-based insurer took in $1.2 billion in revenue, up from $1.1 billion in 3Q 2019.

Investment returns reflect the low interest rate environment, Gary Coleman, co-chairman and chief executive officer, told analysts today.

"For the entire portfolio, the third quarter yield was 5.31%, down 16 basis points from the yield in the third quarter of 2019," he said.

Globe Life is estimating $2 million in life insurance claims per 10,000 deaths from the coronavirus, Coleman said. The company projects $56 million in COVID-19 losses for 2020 and between 100,000 and 220,000 pandemic deaths in 2021.

Globe Life reported that revenue for life insurance ($647 million) and health insurance ($288 million) were both up 7% in year-over-year quarterly figures, but annuities ($1 million) were down 67%. The insurer sells both through a traditional sales force, as well as direct-to-consumer channels.

'Significant Pool Of Candidates'

Larry Hutchinson is co-chairman and chief executive officer with Coleman. Globe Life agent count and production remain very strong, he said.

"We have seen continued adoption of virtual recruiting and selling practices also the relaxation of certain local restrictions has allowed agents to be able to return to some in-person presentations in addition to virtual methods," he said. “We continue to see a significant pool of candidates, due in part to current unemployment levels.”

Third-quarter earnings calls continue next week with Principal Financial Group and American Financial Group. The heavy hitters follow the week of Nov. 2, when MetLife, Prudential and American International Group will face analysts.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.