Claims and credit push industry profit into slump
Rising claims and widening credit spreads have taken a big toll on insurance industry income, with aggregate net profit falling 61% in the 12 months to December 31.
The Australian Prudential Regulation Authority’s (APRA) half-yearly report reveals the industry recorded an underwriting loss of $21 million last year as net profit tumbled to $2.05 billion from $5.4 billion.
Severe weather pushed claims 25% higher to $16.5 billion while big interest rate cuts during the second half of the year exacerbated net incurred claims by increasing liability provisions for long-tail lines.
The underwriting loss was a massive reversal of the 2007 profit of $3.25 billion.
Although gross written premium lifted 5% to $31.6 billion for the year, investment income fell 19% to $3.8 billion. The net loss ratio surged to 72% from 59%.
Industry net assets edged ahead 0.7% to $92.7 billion for the year while liabilities increased 1.2% to $66.8 billion.
The difficult financial environment reduced the average capital coverage to 1.85 times the minimum requirement from 1.91 a year earlier.
The Australian Prudential Regulation Authority’s (APRA) half-yearly report reveals the industry recorded an underwriting loss of $21 million last year as net profit tumbled to $2.05 billion from $5.4 billion.
Severe weather pushed claims 25% higher to $16.5 billion while big interest rate cuts during the second half of the year exacerbated net incurred claims by increasing liability provisions for long-tail lines.
The underwriting loss was a massive reversal of the 2007 profit of $3.25 billion.
Although gross written premium lifted 5% to $31.6 billion for the year, investment income fell 19% to $3.8 billion. The net loss ratio surged to 72% from 59%.
Industry net assets edged ahead 0.7% to $92.7 billion for the year while liabilities increased 1.2% to $66.8 billion.
The difficult financial environment reduced the average capital coverage to 1.85 times the minimum requirement from 1.91 a year earlier.