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.

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