Bushfires and other costly natural disasters from last summer plus the fallout from COVID-19 on financial markets have significantly affected general insurance earnings, the Australian Prudential Regulation Authority (APRA) says.

APRA’s latest prudential update shows the industry recorded an annual 73.3% fall in net profit after-tax to $900 million for the year to September and a 2.8% decline on a quarterly basis to $836 million during the three months to September.

“This was due to lower underwriting results from the catastrophic bushfire and storm events in late December and early 2020, and large falls in investment income mainly from the negative impact of the COVID-19 pandemic on investments markets in the March quarter,” APRA says of the year to September earnings fall.

Underwriting profit dropped 16.4% to $1.6 billion and investment income fell 68.2% to $1.2 billion during the 12-month period while gross claims expense increased 11.4%.

“Within the underwriting results, insurers reported increases in gross earned premium in most classes of business,” APRA says. “This was particularly evident in the householders, fire and [industrial special risk] and professional indemnity classes as premiums increased in response to rising claims costs.”

Householders’ gross earned premium increased to $9.88 billion from $9.3 billion a year earlier, fire and industrial special risk to $5.46 billion from $4.86 billion and professional indemnity to $2.46 billion from $2 billion.

For the September quarter underwriting profit grew 9% from the preceding quarter to $1.1 billion but investment income slumped 8.3% to $626 million and gross claims expense increased 7.7% to $9 billion.

APRA says domestic motor underwriting profit of $514 million held up earnings during the quarter.