Last year was a strong one for the life insurance industry, with net premium income in calendar 2011 up 12.8% to $43.34 billion from $38.42 billion in the 12 months to June 30 2011.

Investment-linked funds generated $27.80 billion net income and non-investment-linked funds $17.4 billion, according to figures published by the Australian Prudential Regulation Authority (APRA).

Net payments to policyholders rose 19.9% to $41.69 billion last year, compared to $34.77 billion in the 2010/11 financial year.

Payments from investment-linked funds accounted for $31 billion, or 74% of the total, and non-investment-linked funds paid out $12.48 billion.

Commissions on new business totalled $1.42 billion, while trailing commissions stood at $1.64 billion. Total commissions rose 1.8% to $3.06 billion.

Industry revenue fell 13.4% to $16.83 billion. Investment revenue accounted for $3.79 billion of the total, policy revenue $10.42 billion and management fees $2.37 billion.

Non-investment-linked funds generated 96% of the total.

Lower expenses more than made up for the revenue fall, declining 28% to $13.19 billion. Of this total, operating expenses accounted for $6.29 billion and net policy expenses $6.11 billion.

Net policy liabilities fell by $139 million, while retained profits grew by $108 million.

Non-investment-linked funds accounted for the lion’s share of expenses at $12.26 billion, while investment-linked funds accounted for only $623 million.

Industry profitability grew 6.7% to $2.79 billion. Non-investment-linked funds provided $2.05 billion in net profit, compared to $570 million for investment-linked funds. Net profit after tax for risk products was $1.15 billion.

Total assets held by the industry in 2011 fell 2.4% to $229.58 billion compared to $235.09 billion previously.

Investment assets accounted for 87.9% of the total and 8% was held in cash.

Total liabilities fell 3% to $210.9 billion. Liabilities with investment-linked funds stood at $150.25 billion, while the figure with non-investment-linked funds was $59.59 billion.

The sector had net assets of $18.68 billion.

Overall the return on net assets for the industry was 15.4%. Investment-linked funds returned 39.4% while non-investment-linked funds returned 14.8%.

The industry’s financial strength stood well above regulatory benchmarks. Solvency reserve coverage stood at 1.79 times the benchmark, and capital adequacy coverage for the industry was 1.42 times. Prudential capital coverage was 1.97 times.