ClearView has recorded a net profit after tax of only $4 million after higher than expected life insurance claims and lapse rates and “extremely challenging” market conditions.

Its underlying after-tax profit has dropped 22% compared to the previous financial year to $25.1 million. Claims and lapse losses cost it $10.8 million.

The result includes changes to income protection claims assumptions, $3.8 million on a cost transformation program, a $6 million IT strategy review and a business reset. Its remediation program cost $2.4 million this year.

Its business reset program that is designed to take advantage of structural market changes is expected to create sustainable long-term profit growth and a rise in in-force premiums. It is capitalising on the breakdown of the vertical integration model of the big banks.

ClearView is terminating underperforming distribution relationships and improving its quality advice relationships. The insurer terminated its information-sharing deal with Sony Life 16 months after it was established because it decided it wasn’t in its best interests.

The group will focus on upgrading its life insurance and desktop technology, repositioning the financial advice segment, completing a strategic review of wealth management platforms and technology, and continue work on pricing, position and retention strategies for life insurance and wealth management products.

Market and economic conditions are likely to persist in the short to medium term, it says.

“ClearView is likely to be the beneficiary of industry disruption and the subsequent opening up of life insurance approved product lists (APL),” the company says in a statement. “Additional distribution relationships, combined with the maturation of our existing life insurance APLs, will lead to a material increase of in-force premium.”