The life insurance industry posted an after-tax net loss of $1.6 billion in the 12 months to September, erasing the $220 million profit it had made a year earlier, new data from the Australian Prudential Regulation Authority (APRA) shows.

APRA says the persistent poor performance of disability income products and COVID-fuelled market volatilities in the March quarter affected investment income.

“The life insurance industry’s performance continues to be challenged,” APRA says.

The industry booked a $3.3 billion deficit in investment revenue, compared with a $15.7 billion surplus a year earlier.

Losses from risk products – comprising individual lump sum, individual disability income insurance, group lump sum and group disability income insurance – worsened to $1.5 billion from $418 million.

Individual disability income insurance was the worst-performing product, widening its loss to $1.3 billion during the period from $1.1 billion last year, which resulted from reserve strengthening and adverse claims experience.

Group lump sum lost $403.2 million and group disability income $147.9 million. Individual lump was the only profitable product, making $354.8 million during the period.

On a quarterly basis the industry performed better, with $18.5 million in net profit after-tax for the three months to September although this is markedly down from $423.2 million a year earlier.

APRA says the decline was primarily driven by lower investment revenue, as well as some further reserve strengthening within individual disability income insurance and group lump sum businesses.

Investment revenue fell 58.8% to $1.6 billion from the preceding quarter.

Risk products lost a combined $216 million during the quarter. Individual disability income insurance and group lump sum recorded $318.8 million and $95.5 million in net losses respectively. Individual lump sum made a $162.8 million profit and group disability income $35.5 million.