Home / Local / Insurance bounces back with $1 billion quarterly profit
31 August 2020
Australia’s general insurance industry is back in the black, recording $1 billion in net profit after tax in the June quarter as domestic motor underwriting profits and a rebound in investment income supported earnings.
The industry had made a $1 billion loss in the March quarter, impacted by last summer’s bushfires and immediate fallout from the pandemic.
The latest data from the Australian Prudential Regulation Authority (APRA) says that for the year to June 30 industry-wide net profit shrank 70.5% to $1 billion from a year earlier.
Its regular update based on filings from 95 insurers shows earnings took a hit from storm events in late December and early this year, as well as from the catastrophic summer bushfires and negative market impact from COVID-19 on investment returns.
Gross incurred claims rose 13% to $42.8 billion during the year because of elevated natural catastrophe claims costs and strengthening of long-tail claims reserves.
“This strengthening in reserves was mainly due to falls in bond yields which were particularly pronounced in the March quarter with the impact of COVID-19 on investment markets,” APRA says.
Gross earned premium increased 5.2% to $51.2 billion from a year earlier, boosted in part by hardening rates in most classes of businesses particularly in fire, industrial special risks (ISR) and professional indemnity (PI).
Investment income declined 60.3% to $1.4 billion.
For the June quarter, gross earned premium fell 3.2% to $12.7 billion from the preceding three-month period and gross incurred claims decreased by a sharper margin of 45.6% to $8.3 billion.
The industry booked an investment income of $683 million, reversing the $81 million recorded in the March quarter.
Key business classes that made an underwriting profit during the June quarter include houseowners/householders ($146 million), domestic motor vehicle ($661 million), commercial motor vehicle ($167 million), compulsory third party motor vehicle ($110 million), professional indemnity ($29 million) and employers’ liability ($64 million).
In the red are fire and industrial special risks ($176 million) and public and product liability ($38 million).