The business of death is booming—for now

So while Thomas Ryan, chief executive officer of the intuitively named Service Corp International, recently said that “2021 has exceeded our expectations” but his company “expects COVID to have a negative impact on revenue and earnings, He may be talking about exercise bikes, furniture or video streaming subscriptions.

But he was referring to the dire, primary consequence of COVID-19: America’s leading death care company had its best year ever in 2020, and 2021 is – unfortunately for its customers and their loved ones – even better. To shape to be.

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

It actually earned $1.32 per share. Conversely, the only period that hasn’t exceeded expectations since the start of the crisis was the second quarter of 2020. Strict social distancing norms meant that burials were intimate affairs and low-profit cremations grew in popularity. It also made it difficult to sell “pre-necessity” services – funeral and cemetery plots are often sold years in advance with the money held in escrow.

More than 800,000 Americans have died from Covid-19, according to numbers tracked by Johns Hopkins University. This is almost certainly an undercount. The Human Mortality Database shows that nearly 2.5 million more Americans have died since the start of the pandemic than was expected by actuaries – a figure that includes the effects of deferred medical care and record drug overdoses.

Last year saw the biggest drop in American life expectancy since World War II, with all gains since 2003 eroded.

We are all dead in a long time, but only once. Due to the expected wave of baby boomers turning off this mortal coil for a business that has many investors, demand has actually pulled ahead. This may not really be such a problem in terms of future profits for Service Corp and its associates.

With the latest wave of deaths concentrated especially in non-vaccinated people, by far the highest death rates have been in Americans aged 45 to 64, rather than the elderly. This grim reminder of mortality in a group less prepared for it may be behind a large increase in people prepaying for their services with revenues 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.

However, the rise in middle-aged deaths has been bad news for life insurers. People in that age group are more likely to get group life insurance through their employer or term policy than senior citizens or younger people. According to the Insurance Information Institute, death benefits paid by US insurers increased by 15% in 2020, after being flat for years. Existing policies may not change, and not engaging in smoking without vaccination is reflected in the new underwriting as a risk factor, perhaps because insurers still view COVID-19 as a temporary phenomenon.

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

This would be one of the few silver linings of a terrifying chapter.