An increase in mortality risk decreases the profits made by the insurer. This is because mortality risk is the risk that policyholders will die sooner than expected due to factors such as epidemics, pandemics, and wars. When mortality risk increases, policyholders live for shorter periods of time than expected and therefore make fewer premium payments to the insurance company before the insurance company needs to make payments for the sum assured. The insurance company will receive less in payments but still be required to pay the policy assured amount to beneficiaries. This reduces the profitability of the life insurance business.

Choice A is incorrect. An increase in mortality risk does not increase the profits made by the insurer. In fact, it's quite the opposite. Higher mortality rates mean that insurers have to pay out more death benefits, which reduces their profitability.

Choice C is incorrect. Mortality risk has no direct impact on the return on investment to the policyholder. The return on investment for a life insurance policyholder is determined by factors such as premium payments, cash value accumulation and dividends, not mortality rates.

Choice D is incorrect. Mortality risk certainly affects profitability of life insurance contracts as it directly influences claim payouts from insurers. Therefore, stating that an increase in mortality risk has no effect on profitability is inaccurate.