Australian general insurer profits surged to $6.1 billion last year amid a reprieve from natural catastrophes and a boost from investments, but the industry is far from making super-normal earnings, KPMG says.

The industry profit – triple the previous five-year average of $2 billion – was lifted by the timing of natural disasters, with no declared catastrophes between Queensland floods in December 2023 and Cyclone Alfred last month.

KPMG partner Scott Guse says the result reflects the industry’s cyclical nature and the impact in previous years of significant weather.

Gross written premium rose 3.8% to $68 billion, and the industry made a $3.1 billion profit excluding investment income.

“That’s less than 5% return, and I could invest my money in the bank and get four-and-a-half per cent or something like that, so insurance companies have not made super normal profits at all when you consider it in that sort of context,” Mr Guse told insuranceNEWS.com.au. “Each of the five major banks individually makes more profit than the [insurance] industry as a whole.”

Investment income provided a $3 billion boost after tax, compared with the previous five-year average of $1.03 billion.

The KPMG General Insurance Insights and Analysis report draws on Australian Prudential Regulation Authority and Insurance Council of Australia data.

Insurers made a profit on home cover for the first time since 2019. Mr Guse says it is likely premium increases will now move back to single-digit levels after recent double-digit gains.

“We’ll still see increases because inflation is still out there and insurance is affected by a lot of inflationary factors across its supply chain,” he said. “The only way I can see us getting sizeable decreases in premiums is if the government spends a lot of money on resilience factors, and that will be targeted for certain pockets of communities and the like, so you won’t see it across the board.”

Mr Guse says this year is looking reasonably positive, with damage from Alfred largely covered by the reinsurance pool and other underlying fundamentals heading in the right direction.

“Inflationary factors are starting to taper and come down, insurers are starting to get more efficiencies into their business, and reinsurance markets have at this stage stabilised. There’s a positive lining there for insurers, but they are at the mercy of the weather.”

US President Donald Trump’s tariffs, which have caused financial market turmoil, are not a major risk for insurer investments, he says, with funds mostly in fixed-interest securities that have been less volatile than equities markets.

The KPMG report shows losses from natural hazards last year totalled $566 million, compared with $2.36 billion the year before.

Another lift came from the release of provisions set aside for covid business interruption claims after the Federal Court last year stopped related claims proceeding as class actions. 

The report identifies trends and forces that will drive the industry this year and beyond, including resilience; digital and artificial intelligence; environmental, social and governance; simplification and cost optimisation; regulation and compliance; and cyber.