Results show signs of life in insurance
Australia’s life insurance industry is recovering from the economic impact of the pandemic, according to the latest statistics released by the prudential regulator.
The industry reported a net profit of $1 billion for the year ended March 2021, a marked improvement on the previous year, which the regulator put down to “improved investment market performance.
This was a marked turnaround from last year when the industry posted a loss of $1.8 billion.
Total revenue for the industry for the 12 months ended March 2021 was $22.2 billion, up 14.2 percent from the $19.5 billion posted in the year ended March 2020.
Meanwhile, total expenses during the year ended March 2021 decreased 9.3 percent to $20.4 billion.
Data from APRA also revealed that risk products posted a combined net loss after tax of $165.7 million for the 12 months to March 2021.
Disability income insurance (also known as income protection insurance) reported a loss of $331.2 million during the year, which is a $1.1 billion improvement on the previous year’s result.
Group lump sum insurance reported a $91.8 million loss and group disability income insurance posted a $58.3 million loss. Individual lump sum achieved a profit of $316.5 million.
The industry PCA coverage ratio increased from 1.76 times to 1.85 times over the year mainly driven by capital injections in response to the IDII capital charge that came into effect on 1 October 2020 and the fall in the insurance risk charge as a result of the increase in bond yields.
“For the March quarter, the industry made a modest profit of $159.1 million, which was primarily driven by the favourable performance of the individual and group DII business,” APRA said.
“These were partially offset by the fall in investment revenue as the equity/bond market did not perform as strongly as during the December quarter.”
As for general insurance, the industry achieved a net profit of $1.1 billion for the year ended March 2021 a 28.3 percent drop on the previous year.
Natural catastrophe claims costs, declines in investment income and provisions for business interruption claims were major factors in the result, according to APRA.
However, the industry posted a $19 million profit for the March quarter up from a $622 million loss in December.
Gross incurred claims expense dropped from $14.7 billion in the December quarter to $9.4 billion. This was because the impact of provisioning under business interruption claims in the December quarter did not recur in March.
Underwriting improved to $657 million compared to a loss of $1.1 billion in the December quarter.