This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: There May Be Life Left in Life-Insurance Stocks
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > There May Be Life Left in Life-Insurance Stocks
Markets

There May Be Life Left in Life-Insurance Stocks

Last updated: January 5, 2022 12:30 pm
Editorial Board
Share
There May Be Life Left in Life-Insurance Stocks
SHARE

The pandemic’s third year might bring declining benefit payouts to life-insurance policyholders. Whether that brings increasing benefits for shareholders depends on more than Covid-19.

Perhaps surprisingly, 2021 was a solid year for life-insurance stocks in the U.S., with the sector keeping up with financials overall and rising by about a third. While dealing with Covid-19 fatalities, large U.S. life insurers also had offsetting strong returns on their investment portfolios. Their variable-income portfolios—in asset classes such as equities and alternatives—delivered a roughly 10% to 20% bump in earnings over what was anticipated, according to Autonomous Research analyst Erik Bass. The flood of private-equity money into the industry has also enabled insurers to shift some of their risks onto others, and these moves were broadly rewarded in share prices.


Newsletter Sign-up

Heard Alert

The first word on what Wall Street is talking about.


Insurers’ gains did slow later in the year, though, as the pattern of Covid-19 fatalities changed with the emergence of the Delta variant. There was a rise in the percentage of deaths coming from people under age 65. Since people in this group are more likely to be covered by group life insurance, often through work, there was an increase in group claims for some firms such as MetLife and Lincoln National. Insurers had a degree of insulation, as vaccines emerged and helped to protect older populations more likely to have individual policies. One of the offsetting benefits of the pandemic was a decrease in claims for other things such as dental treatments or long-term care. This started to wane as more of the economy reopened, though.

But in the fourth quarter, the skew toward younger deaths began to fade, which has thus far continued during the emergence of Omicron. Roughly a third of deaths related to Covid-19 were of people 65 and younger in the fourth quarter, down from more than 40% in the third quarter, according to Centers for Disease Control and Prevention provisional data. There is another consideration as the year turns over. Group life insurance risk tends to be “short-tailed,” meaning that a policy only covers risks over a relatively short and defined period. This is unlike an individual policy that might last decades. So group life insurers have an ability to reprice group insurance as policies renew, which means that they can use higher premiums to offset higher risk.

Life-and-health insurance stocks in the S&P 500 did quite well in December, rising over 6%. That was about twice the gain of the broader financial sector. Overall, they gained 32% last year. So now, the forward price-to-earnings ratio for S&P 500 life & health insurers is about 9 times. This is around where the sector averaged in the five years preceding 2020, so it may be roughly fully valued in that way. But the sector’s multiple reached 11 times in 2017 when interest rates were rising—a good thing for life insurers.

A continuing discount might be warranted for uncertainty about the pandemic’s path and its lingering effects on health. It is also hard to bet too confidently on another year’s worth of outsize non-fixed-income investment performance. Meanwhile, rising rates can be offset to a degree if yield spreads compress on corporate bonds and other fixed-income securities, which insurers often own. But shareholders should be on the lookout for other ways of boosting returns, such as via big share buybacks, or further moves to unload risk to private-equity firms.

There are at least some things in life insurers’ control.

Scientists are using automation, real-time analysis and pooling data from around the world to rapidly identify and understand new coronavirus variants before the next one spreads widely. Photo Illustration: Sharon Shi

Write to Telis Demos at telis.demos@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 6, 2022, print edition as ‘Stocks In Life Insurance Show Life.’

Contents
Newsletter Sign-upHeard Alert
TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article China Mobile Makes Debut in Shanghai China Mobile Makes Debut in Shanghai
Next Article Chinese Internet Stocks Tumble Again After Tencent Divestment Chinese Internet Stocks Tumble Again After Tencent Divestment

Editor's Pick

OpenAI backs off push to change into for-profit firm

OpenAI backs off push to change into for-profit firm

OpenAI CFO Sarah Friar discusses the corporate's partnership with SoftBank, shoppers embracing synthetic intelligence, OpenAI's 'deep analysis' software and DeepSeek's…

By Editorial Board 4 Min Read
Six Flags theme park closing after greater than twenty years, pronounces ultimate day for rides
Six Flags theme park closing after greater than twenty years, pronounces ultimate day for rides

Try what's clicking on FoxBusiness.com. The Six Flags theme park with the…

4 Min Read
Jennifer Love Hewitt: Pregnant in Actual Life?
Jennifer Love Hewitt: Pregnant in Actual Life?

Studying Time: 3 minutes Jennifer Love Hewitt is pregnant … on TV.…

4 Min Read

Oponion

From Minimalist to Maximalist—The Finest Synthetic Christmas Timber for Each Fashion

From Minimalist to Maximalist—The Finest Synthetic Christmas Timber for Each Fashion

We could obtain a portion of gross sales if you…

November 18, 2024

How the Pandemic Changed E-Commerce—and Where It Goes Now

Journal Reports: TechnologyWhat’s Happening With the…

October 30, 2022

Able to Shake Up Your Morning Routine? You Need to Attempt Bullet Journaling

We could obtain a portion of…

September 22, 2024

CarMax Is Far From Maxing Out

The chip shortage is turning out…

September 30, 2021

Jack Ma’s Ant Group Revamps Its Board

Ant Group Co., the Chinese financial-technology…

June 1, 2022

You Might Also Like

Apple warns court docket ruling in App Retailer case might price ‘substantial sums yearly’
Markets

Apple warns court docket ruling in App Retailer case might price ‘substantial sums yearly’

 Moffettnathanson Analysis co-founder and senior analyst Craig Moffett discusses the affect of commerce negotiations on the corporate on The Claman…

4 Min Read
Credit score Suisse penalized greater than 0 million for serving to rich US purchasers evade taxes
Markets

Credit score Suisse penalized greater than $510 million for serving to rich US purchasers evade taxes

Take a look at what's clicking on FoxBusiness.com. The Division of Justice (DOJ) mentioned Credit score Suisse Providers AG pays…

5 Min Read
AstraZeneca unveils new manufacturing facility as a part of multibillion-dollar funding in US manufacturing
Markets

AstraZeneca unveils new manufacturing facility as a part of multibillion-dollar funding in US manufacturing

The ability is a part of AstraZeneca's $3.5 billion funding in U.S. analysis and manufacturing. AstraZeneca, as a part of…

4 Min Read
Skechers to go non-public following .4B cope with 3G Capital
Markets

Skechers to go non-public following $9.4B cope with 3G Capital

Try what's clicking on FoxBusiness.com. Non-public fairness agency 3G Capital reached a deal to purchase Skechers and take the footwear…

4 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?