Improving financial markets have provided a much-needed shot in the arm for life insurers, helping the sector record strong growth in full-year profitability.

The life insurance industry has benefitted from the rise in global investment markets. Last year they achieved net profits of $2.53 billion, according to the latest quarterly report from the Australian Prudential Regulation Authority.

The prudential regulator has only been collecting information on the life insurance industry since the second quarter of 2008. However, average profitability in 2009 was up 22% on the nine months of data collected in 2008.

Net profits in the December quarter were $749 million, more than double the previous corresponding quarter.

Investment returns in 2009 were a welcome boost to underlying profitability at $370 million; in the last three months of 2008, total investment revenue was just $8 million.