All around the world, insurance companies – life and general – have taken a savage pounding from the sharemarket. Even as the industry began to recover from the impact of September 11 thanks to higher premiums, plummeting equity returns kept premiums rising along with the gloom.

Take Australia’s largest general insurer as an example. Despite a record performance from its underlying business, IAG announced a full-year loss of $25 million. New CEO Micheal Hawker attributed it to the equity  market’s “worst performance in 14 years”.  Compared to a profit last year of $358 million, the pre-tax return from investments recorded a loss of $98 million. That buried IAG’s insurance profit increase of 32% to $278 million. Underwriting profit also improved from a loss of $22 million last year to a profit of $142 million. “Despite unusually severe insurance catastrophes in the first six months and the worst performance from investment markets since the 1987 stockmarket crash, our underlying insurance business delivered an excellent result,” Mr Hawker said.

Also blaming weak equity markets, AMP also saw its half-yearly profit fall 25% to $303 million, compared with a $403 million profit in the previous half. The result included an investment loss of $6 million on shareholder capital, compared with a $25 million gain in the first half of 2001. They weren’t  alone, with the entire global industry taking big hits, pushing predictions of the insurance cycle reaching the top from mid-2003 to mid-2004 or even later.