Industry on profit track: S&P
Insurance industry profits remain bullish but weather-related losses, staff shortages and falling premiums loom as show stoppers, according to global ratings agency Standard & Poor’s (S&P).
Despite losses from storms in NSW and Victoria, S&P’s annual insurance “report card” issued last week says overall industry profitability remains robust with “some fat” left in reserves.
“The industry remains well capitalised and conservatively reinsured,” it said.
“The question of reserve releases in future is a difficult one, as there is a normal amount of releases expected every year for business that is running off without any adverse divergence from expectations.
“The majority of the market remains profitable despite the relatively softer cycle.”
IAG and Suncorp, Australia’s biggest domestic insurers, are expected to reveal big hits to their full-year results on Friday.
S&P predicts IAG’s insurance margin will be cut by 2.5 percentage points to 10.8%. The insurer’s first-half profit was down 25% to $345 million. IAG will announce its full-year results next Monday.
The report says Suncorp will take a $160 million hit from the NSW storms and is also under pressure from lower premiums. Tort reform has favoured its personal injury and liability book in the first half of fiscal 2007, a trend expected to continue when Suncorp reveals its full-year result on August 27.
S&P says premiums are unlikely to rise, but this will change in future as shareholder demand for higher return on capital coincides with a severe turn in claims experience, higher frequency of catastrophes, a hardening reinsurance market and shock in the investment market.
Despite losses from storms in NSW and Victoria, S&P’s annual insurance “report card” issued last week says overall industry profitability remains robust with “some fat” left in reserves.
“The industry remains well capitalised and conservatively reinsured,” it said.
“The question of reserve releases in future is a difficult one, as there is a normal amount of releases expected every year for business that is running off without any adverse divergence from expectations.
“The majority of the market remains profitable despite the relatively softer cycle.”
IAG and Suncorp, Australia’s biggest domestic insurers, are expected to reveal big hits to their full-year results on Friday.
S&P predicts IAG’s insurance margin will be cut by 2.5 percentage points to 10.8%. The insurer’s first-half profit was down 25% to $345 million. IAG will announce its full-year results next Monday.
The report says Suncorp will take a $160 million hit from the NSW storms and is also under pressure from lower premiums. Tort reform has favoured its personal injury and liability book in the first half of fiscal 2007, a trend expected to continue when Suncorp reveals its full-year result on August 27.
S&P says premiums are unlikely to rise, but this will change in future as shareholder demand for higher return on capital coincides with a severe turn in claims experience, higher frequency of catastrophes, a hardening reinsurance market and shock in the investment market.