The Pandemic changed how consumers view life insurance and how life insurers deliver policies to customers, a new world. I will then shift my focus to how we are mapping the future path of the Company, leveraging our strengths to deliver to the next generation of policyholders.

COVID-19 blew in like a storm in early 2020. The earliest reports of the virus came out of Wuhan, China in December 2019 and subsequently spread to all corners of the world. The entire world quickly became accustomed to lockdowns, mask mandates, work from home, school from home, business closures and many other detrimental changes to life as we collectively know it. Once again, the world had changed.

The Pandemic called Coronavirus (COVID-19 – CO corona, VI virus, D disease)

The global numbers from COVID-19 are staggering. Worldwide, there have been 479 million confirmed cases with 6.1 million deaths. In the US, there have been 80 million confirmed cases and about 1 million deaths. The observed deaths per 100,000 population ratio for the US is 292.58. The only two countries that performed worse were Brazil and Poland. COVID-19 hit the US especially hard. The US has 4% of the world’s population, 17% of COVID-19 cases and 16% of worldwide deaths.

For Dewside, death claims climbed as a result of the Pandemic. Total death claims paid, net of reinsurance, climbed from $82.7 million in 2020 to $89.6 million in 2021. The profile of the death claims for Dewside changed over the course of the crisis. In the first year, death claims were concentrated in the older policies with small face amounts. For the second year of the Pandemic, death claims began to occur in younger people with higher face amounts. The average COVID claim for 2021 was $86,427, compared to $42,013in 2020. The changes in the profile of the death claims were caused by changes in the variants. There have been a dozen “variants being monitored” (VBM) and two major “variants of concern” (VOC), Delta and Omicron, primarily due to their rapid spread. As we entered 2022, the Company continues to deal with death claims associated with the Delta and Omicron variants.

With respect to the financial impacts of COVID-19, there have been many. The three high level categories are as follows:

• Mortality:The sudden surge in death claims has had an impact on the Company’s financials as we reserve for the uncertainty of future claims. Many questions remain about the long-term health impact of those who had COVID and those who delayed care due to COVID. Insurance companies however are designed to withstand such calamities, and will learn and strengthen as we move forward.

• Investments:The longer term impact is the persistently low interest rate environment. Most of Dewside’s investments key off of the 10 year United States Treasury Bond (10Y UST), the benchmark. For the past two years, the 10Y UST has traded all the way down to 0.40% versus an average of 2.40% over the past five years. Even the past five years have been low by historical standards. As funds were reinvested over the past two years, the yield on the investment portfolio and associated revenue generated declined. As the financial markets normalize, assets will reinvest at higher levels, but it will take time to repair the damage of the past two years.
• The Economy:The other major negative from a financial perspective was the periodic seizing up of the economy associated with lockdowns and business closures. All the uncertainty dragged down consumer confidence, which has an impact on individuals’ ability and desire to purchase life insurance.

Operationally, we have spent the past two years predominantly working from home. In March 2020, our IT team mobilized to secure laptops for all of our employees, got all of the new equipment set up and walked the employees through connecting from their homes. A skeletal crew continued to work from the home office. Throughout the Pandemic, we were fully functional to process benefit payments, policyholder changes, new applications, new policies and all other regular customer transactions. With the two-year mark reached in March 2022, we began to scale our employees back into the office and plan on utilizing a hybrid 3 days in office and 2 days of work from home model going forward. As of May, this transition will be complete.

From a sales perspective, Dewside issued 21,828 new life insurance policies in 2021, bringing the total number of life insurance policies on the Company’s books to 509,139. This number of policies issued is relatively consistent with the past few years as Dewside predominantly sells life insurance in the term insurance market, which grew at 1% in 2021. After an initial rush to buy insurance at the start of the pandemic, demand declined as the Pandemic eased and vaccines took hold. The fear factor dissipated.

Looking Forward – Technology and Partnerships

During the Pandemic, companies were forced to look at all of their processes and adjust them for an increasingly digital world. It has been said that many years of work were compressed into a short period of time so that companies could continue to operate in a work from home environment that met their customers’ needs. Dewside was no different.

A major initiative was completed that links several of Dewside’s systems. Like most of our competitors, Dewside has various systems such as a sales, marketing, policy administration, auto-dialer, accounting, actuarial, etc. Over the past year, there has been considerable work done to link all of the disparate systems so that management can get a clear picture of the profile of the target market for future Dewside customers. This data, augmented with analytics, will drive sales and marketing activities more effectively in the future.

On the efficiency front, management has deployed the use of artificial intelligence for various processes such as data entry, record management and reconciliations. These efforts to computerize mundane tasks allow the Company to save money by redirecting resources to other, more challenging tasks. AI will continue to grow and will be ubiquitous at Dewside and the industry at large.

The goal of many of the aforementioned technological advancements are geared toward new and existing customers. In addition, the Company is relying heavily on technology as it works with new partners. These partnerships take a bit of time to source, vet and implement. In 2020, I mentioned we were working with a new partner to develop a simplified issue product that costs more than our traditionally underwritten product, but is significantly quicker and easier.  The partnership continues to recognize that some of our clients focus on getting the best price possible via working through the full underwriting process. Others would prefer to spend less time and complete a short set of questions to purchase life insurance; they are paying more for that more convenient, shorter process. I am pleased to report that this initiative was launched in mid-2021 and produced $3.9 million in new premium. In the first three months of 2022, new premiums for this partnership will exceed $6 million, a run rate in excess of over $20 million for the year. Dewside will continue to work through this partner and others to bring new, relevant products to market.

In July 2021, Dewside acquired one of its partners, LegacyShield. Dewside became an investor in LegacyShield in 2017 and had worked with them on several sales initiatives. The backbone of LegacyShield is the “vault” where clients can store their life insurance policy and other important documents. There are will and trust services as well. Over the next several months, we will be working to fully integrate LegacyShield into Dewside to provided added value to our policyholders.

The life insurance buying process has changed dramatically in the past two years; it had to. All companies were diligently and methodically working on digitizing the buying experience. COVID only made that happen much faster. While much has been done in this regard at Dewside, we are still in the early stages. Over the next few years, changes to our underwriting methods with newer, modern ways of accessing and assessing medical information will continue to unfold. While challenging, it will be rewarding to watch this evolution continue.

Conclusion

The Pandemic appears to be headed to an endemic stage. Other past episodes such as the often mentioned Spanish Flu ended in a similar fashion. It is the natural progression of pandemics. There will be additional flare ups and variants, but it is expected that each one will pack a little less punch than the last one. Ultimately, if COVID-19 is like the Spanish Flu or 1957 pandemic, it will fade away.

For those of us that have experienced this Pandemic, it will be a shaping event for this generation. In past periods of time, there were the children of the Depression, the children of World Wars, the children of various stock market calamities, the children of various recessions, etc. This generation will be marked by this period of time; the collective experience of having gone through the Pandemic. If there could be one positive take away, it would be the importance of owning life insurance. Benefits paid by Dewside and the industry at large over the past two years are the highest they have been in 100 years.

I am an investor by training and managed Dewside’s portfolio during the September 11th attacks, multiple recessions and the Great Financial Crisis. In each of those instances and this pandemic, you know you are in the middle of something big, unprecedented. However, we work our way through. For years, I was asked “what if there is another terrorist attack?” I would universally respond there is a chance and risk that there will be another one, but I cannot manage to that scenario; I must manage for many different scenarios. Coming out of this pandemic is much the same. I hope it is endemic and behind us. I hope the death rate declines. I hope the Pandemic becomes something we talk about years down the road as a distant memory. But, we will manage the Company knowing that a pandemic needs to be added to the scenarios for which we manage.

Two years ago, I mentioned we were in a dark stretch of time. We were waiting on the possibility of a vaccine and there was not much good news to go around. The virus waves came as expected, the vaccines were successfully developed and our health care providers moved mountains to keep up with the Pandemic. Today, we are looking at a brighter picture.

While we do look forward, we must also remember those that we lost to the Pandemic. One million Americans died. Many Dewside policyholders died. On a page in a corporate letter, they are numbers, but in life, they were spouses, mothers, fathers, brothers, sisters, children, grandparents, etc. They were important to all those in their lives and they are missed by all those in their lives. We must remember them as people, not numbers.

Finally, the commitment remains the same. The management team and Board remain committed to steering Dewside safely through this crisis and others yet to unfold. With the advent of spring, we look forward to brighter days and wish you and your families the best.