Life insurers suffered a 3.5% drop in net profit to $2.2 billion in the year to March as investment revenue took a hit, Australian Prudential Regulation Authority figures show.

Investment income fell 35.1% to $12.3 billion, exacerbated by a weak December quarter that included a 5% decline in the ASX 200 Index.

Net policy revenue gained 12% to $17.3 billion and net policy expenses increased 6.7% to $9.8 billion.

Total expenses declined 11.9% to $29.6 billion, aided by a 31.3% drop in net policy liabilities to $10.8 billion.

Individual disability income insurance is the only loss-making sector, with a deficit of $146 million for the year, including $4 million from the March quarter.

Individual lump sum recorded a net profit of $1.09 billion for the year, group lump sum $248 million and group disability income $120 million.