Life insurance industry’s 143% net loss

The life insurance industry has experienced a net loss after tax of $200 million, down 142.8%, for the year to December 2019, according to data compiled by the regulator.

Statistics release by the Australian Prudential Regulation Authority (APRA) found this was a reduction from the $600 million profit for the year to December 2018.

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APRA said the decline was primarily cause by poor performance of risk businesses. Over the year to December 2019, risk products reported a combined after-tax loss of $1.3 billion, a reduction from the $34 million profit for the previous 12 months.

Risk product net profit after tax

Source: APRA

“All risk products deteriorated with the only exception being the individual lump sum product,” it said.

“In particular, individual disability income insurance (also known as income protection insurance) reported a substantial loss, primarily driven by loss recognition as adverse claims experience persists.”

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Source: APRA

The report noted the $19 billion increase in the life insurance industry’s total revenue, mainly due to the favourable outcome of the investment market, was offset by the $17.8 billion rise in total expenses and a $1.8 billion increase in tax expense.

“The significant increase in expenses was primarily driven by reserve strengthening as insurers recognised losses from the enduring adverse claims experience,” APRA said.