Death Business Is Booming—for Now

But he was referring to Covid-19’s grim, primary result: America’s leading death care company had its best year ever in 2020, and 2021 is—unfortunately for its customers and their loved ones—shaping up to be even better.

Analysts following Service Corp. had expected it to earn 55 cents a share in the first quarter of 2021 when polled by FactSet just before the pandemic.

It actually earned $1.32 a share. Counterintuitively, the only period that didn’t exceed expectations since the onset of the crisis was the second quarter of 2020. Strict social distancing norms meant that burials were intimate affairs and that less-profitable cremations grew in popularity. It also made it difficult to sell “pre-need” services—funerals and cemetery plots often sold years in advance with funds put in escrow.

According to numbers tracked by Johns Hopkins University, more than 800,000 Americans have died from Covid-19. That is almost certainly an undercount. Even taking that into consideration, more Americans have died since the onset of the pandemic than what was expected by actuaries—a figure that includes the effects of deferred medical care and record drug overdoses.

Last year saw the largest drop in U.S. life expectancy since World War II, unwinding all the gains since 2003.

We are all dead in the long run, but only once. For a business many investors own because of an expected wave of baby boomers shuffling off this mortal coil, demand really has been pulled forward. That actually might not be such a problem in terms of future profits for Service Corp., and its peers, though.

Especially with the latest wave of deaths concentrated among the unvaccinated, by far the highest excess mortality has been among Americans between 45 and 64 years old rather than the elderly. That grim reminder of mortality in a cohort less prepared for it could be behind a big rise in people prepaying for its services with revenue to be realized later.

For example, the first quarter of 2021 saw a 67% increase in pre-need cemetery sales and 16% in pre-need funeral sales.

The surge in middle-aged deaths has been bad news for life insurers, though. People in that age cohort are more likely to have group life insurance through their employer or term policies in force than senior citizens or young people. After being flat for years, death benefits paid by U.S. insurers jumped by 15% in 2020 according to the Insurance Information Institute. Existing policies can’t change, and being unvaccinated hasn’t joined smoking as a risk factor reflected in new underwriting, perhaps because insurers still view Covid-19 as a temporary phenomenon.

In a positive trend for the industry, the number of people below the age of 44 applying for life policies jumped in 2020. And at least one analysis from Munich Re speculates that, since a disproportionate share of Americans who died from Covid had comorbidities such as obesity or high blood pressure, it has left behind a slightly healthier insured population with greater life expectancy.

That would be one of the few silver linings of an awful chapter.

Write to Spencer Jakab at spencer.jakab@wsj.com