Life insurers report improved mortality; actuaries say nothing’s changed

Image shows older people in an outdoor scene. — Several life insurers cited mortality improvements in the fourth quarter 2023.

By John Hilton

Several life insurers cited mortality improvements in the fourth quarter for helping to improve life insurance earnings at the end of 2023.

At Globe Life, for example, positive mortality and persistency enabled the company to record $13 million of lower life policy obligations and $4 million of lower health policy obligations during the fourth quarter.

In the first half of the year, mortality was "quite a bit higher," said Thomas Kalmbach, executive vice president and chief financial officer during a recent call with Wall Street analysts.

"There really does seem to be kind of a change that’s happened in the third and fourth quarter," he explained. "At this point, I’d say it’s getting fairly close to pre-pandemic levels, so that excess mortality seems to have dropped much more quickly than what our assumptions had anticipated."

Positive mortality trends helped The Hartford Financial Services Group post profitable premium growth and earnings in its group benefits segment, said Christopher Swift, chairman and CEO. Improvement does not mean normal, however.

"In 2023, group life mortality trends have improved, though they remain above pre-pandemic levels," Swift said.

Excess mortality is an ongoing problem for life insurers dating to the COVID-19 pandemic. Mortality rose during the pandemic with estimates of 16.8 to 28.1 million worldwide excess deaths from all causes. But as COVID-19-related deaths decreased through 2022, excess mortality continued to persist in many countries.

Statistics show the mortality gap increased the number of U.S. deaths by 34.8% in 2021, resulting in 892,491 excess deaths that year. When controlling for population size, the annual number of excess deaths is up 84.9% between 2019 and 2021. In other words, the number of excess deaths each year almost doubled, according to the California Center for Population Research at UCLA.

Projections 'have not changed'

The future mortality improvement tables adopted by the Life Actuarial Task Force in late 2022 "assume deterioration" for 2023 and 2024, followed by zero improvement in 2025. Mortality will then be graded back to average level by year 10 (2032). LATF is a state-based regulator group under the National Association of Insurance Commissioners.

The Society of Actuaries Research Institute had a hand in developing those mortality tables for regulators. While life insurers might be seeing some improved mortality numbers, the SOA sent InsuranceNewsNet a statement indicating that nothing has changed in their data:

“The long-term projections have not changed due to experience from Oct 1 to now. For reference, mortality from October 1 through December 31 was slightly higher on a seasonally-adjusted basis than the rest of 2023.”

Life insurers paid record levels of claims in 2021 as the pandemic drove mortality higher and the issue was widely cited in earnings reports as the drag on profits. That year, the industry distributed a record $100.28 billion in total death benefits, according to BestLink.

The higher-than-normal payouts began in 2020, the first year of the pandemic when insurers saw death benefits rise 15.4% , the biggest one-year increase since the 1918 Spanish Flu epidemic.

Cautiously optimistic

After a few years of tough mortality news, insurers are welcoming any bit of good news on that front. But projections are likely to err on the side of caution.

"We really are seeing [mortality improvements] across all the issue years," said Frank Svoboda, co-CEO of Globe Life. "So it’s kind of a broad-based improvement overall in the mortality, which we think that is favorable. ... We clearly want to see how that kind of plays itself out here over the next couple of quarters and see if it continues in that fashion, or if it was just a fluctuation that we’ve had here at the end of the year."

Equitable Holdings is bracing for elevated mortality to continue to plague its block of life insurance, Chief Financial Officer Robin Raju told analysts.

"We're pleased to see improvement in mortality following several consecutive quarters of elevated claims," Raju said. "While we anticipate some continued pull forward in mortality in the near term, given the older age of our life block, we do not believe it will be to the same magnitude as it was in 2023."

The actuarial phrase “pull forward” refers to a catastrophic event, in this case, the COVID-19 pandemic, accelerating the deaths of older people who were at the end of their lives and likely to die soon in any event.

InsuranceNewsNet Senior Editor John Hilton 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.

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.