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Milliman Estimates Impact Of Swine Flu On Employer Revenue And Profits

August 31, 2017

Modelling carried out by Milliman actuaries estimates that a severe swine flu pandemic has the potential to reduce a typical UK employer's revenue by 4%-5% and its profit rate by five to six percentage points during the quarter of the pandemic.

Actuaries at the international consulting firm Milliman estimate that even a moderate pandemic influenza scenario could reduce a typical employer's revenue by 2% and profit rate by two to three percentage points. Employers engaged in service industries that rely on face-to-face contact and where working from home is less viable, such as the retail industry, would be expected to fare much worse than the average.

Milliman's analysis is based on a widely quoted infection rate assumption of 30% and further assumes that all waves of the pandemic occur within one fiscal quarter. The analysis focuses on business disruption caused mainly by worker absence leading to reduced revenue. In addition to workers who become ill, this also includes those who are forced to miss work to care for family members who fall ill. Additional disruption and expense stems from the dire event of employees dying during the pandemic and the associated cost of replacing them. The analysis does not generally include additional medical expenses.

"At the current time, the economic impact of swine flu to the typical UK employer has been relatively small, little more than that expected with a bad bout of seasonal influenza," says Lisa Morgan, in Milliman's UK Health Practice. "However, employers should not be complacent. If infection rates were to rise to a level similar to that of previous pandemics, some employers could face a significant fall in revenue and profits as a result of employee absence and death."

"The potential impact would be exacerbated by the ripple effects on demand, which will vary widely by industry sector and further squeeze revenues," says Simon Moody, a consulting actuary in Milliman's UK Health Practice involved in the analysis. "A severe swine flu pandemic is the last thing that the UK commercial community needs as the country emerges from recession."