Life/risk sector still struggling

The life/risk industry continued to struggle through the closing months of 2018, particularly around disability products, according to the latest Australian Prudential Regulation Authority (APRA) data.

At the same time as the life/risk industry contemplates the Government’s intended changes to insurance inside superannuation, the APRA data has painted a sobering picture of the industry.

It revealed that total entity net profit after tax was a loss of $519 million in the December quarter, with Individual Lump Sum risk products contributing a profit of $10 million, Group Lump Sum contributing a profit of $19 million, Group Disability Income Insurance contributing a profit of $9 million and Individual Disability Income Insurance contributing a loss of $260 million.

In the 12 months to 31 December, net profit after tax was $593 million, with Individual Lump Sum Risk products contributing a profit of $408 million, Group Lump Sum Risk products contributing a profit of $101 million, Group Disability Income Insurance contributing a profit of $57 million and Individual Disability Income Insurance contributing a loss of $474 million.

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The APRA commentary noted that the industry’s after-tax loss of $519 million was significantly down from a profit $189 million for September, with the main drivers of the loss being adverse movements in financial markets in the December quarter which negatively impacted life insurers’ investment revenue, along with an increase in expenses caused by a discrete write-off in goodwill for one insurer.

It said that next to the write-off, individual risk products comprised the bulk of this loss, continuing the negative trend seen in the preceding four quarters with the largest drop in profits being in Individual Lump Sum (from a profit of $111 million to a profit of $10 million), caused by reductions in both net policy revenue and investment revenue, as well as an increase in tax outlays.