Life Insurance Winners and Losers in Turbulent Year for Stocks

See our interactive chart that shows how individual life insurers performed during a rocky year for thestock market.

By Aaron Smith|January 4, 2023

Covid-19 deaths dropped last year, and some public insurers saw stock gains partly as a result.

Shares of Globe Life climbed 29%, and those for Unum Group soared 67%.

“If you look at the standouts, many of those benefited from the improving mortality landscape,” said John Barnidge,managing director and senior research analyst for Piper Sandler, in an interview.

He said Globe Life, which sells a lot of life insurance to consumers, was one of the hardest-hit carriers early in thepandemic. Unum reported a double-digit boost in sales during the third quarter, propelled by a 35% gain in sales forgroup long-term disability insurance.

The Dow Jones U.S. Life Insurance Index, which includes 15 carriers, edged up 3.8% in 2022. Life insurers faredrelatively well, considering the S&P 500 Index fell 19% and the Nasdaq plunged 33%.

Another standout last year was MetLife, which saw its stock price jump 16% last year. MetLife reported strong growthacross most products.

Barnidge said insurance stocks also did well because “in a world of volatility, life insurance was a safe haven.”

But not all carriers did well. Shares of Corebridge Financial, American International Group’s life and retirementdivision that was spun off last year, slipped 0.6% from the initial public offering on Sept. 12.

Brighthouse Financial edged down 1%, Prudential Financial dropped 8% and Lincoln National plunged 55%.

Barnidge said the companies that didn’t do as well were more sensitive to market volatility, or they faced actuarialassumption charges.

Lincoln’s stock price took a 30% hit when it reported an unexpected $2.57 billion loss in the third quarter, including a$2.2 billion blow to operating income. When CEO Ellen Cooper spoke at the annual Goldman Sachs investmentconference last month, she said it will “take some time” to mend its balance sheet, triggering another 11% hit to thestock price.

Also, Prudential Financial took a $1.4 billion mortality charge last year after annual revisions to its actuarialassumptions.

Headwinds Ahead

Life insurance stocks could be under pressure this year.

For one, some sales performances may be hard to match, according to Tim Zawacki, an analyst for S&P GlobalMarket Intelligence.

He noted that variable universal life insurance had remarkable sales inthe first half of 2022, but now carriers face a “steep hurdle” to post bigyear-over-year gains again. Variable life sales fell 12% in the thirdquarter of 2022, compared to 104% growth in the third quarter of 2021,according to Limra.  sales early in the pandemic, as consumers bought coveragesooner than they ordinarily would have because of the higher risk ofdying.

He said people are also dealing with inflation. “If inflation continues, the capacity of a consumer to make a purchaselike a life insurance policy could be diminished,” he said.

But group life sales remain a strong point for the industry, he said, given the resilience of the job market and itsrelatively low unemployment amid market turmoil.

Covid Wanes

Fitch Ratings senior director Jamie Tucker said in a report last month that the life insurance industry has been helpedby an uptick in interest rates over the last year. But he also said this is offset by “continued macroeconomic volatility”and the expectation of a mild recession this year.

And while the Covid-19 pandemic has flared up in China, Tucker forecasts a diminished effect on the U.S. lifeinsurance industry.

“Fitch expects the impact of Covid-19 to continue to wane, absent a new variant,” he said in the report.

Covid-19 has caused 1.09 million deaths in the U.S., according to data from Johns Hopkins University. But themortality rate has slowed since the death toll crossed one million in May 2022.

“Moving into 2023 it’s going to be choppy waters because the economy is probably already in recession or movinginto recession,” Peter Cardillo, chief market economist for Spartan Capital Securities, said in an interview. “We expectan overall positive year in stocks, but it’s going to choppy.”