Australian general insurers will enjoy “peak profitability” for longer than expected, according to Finity.

The actuarial consultant’s latest Pendulum report, compiled with Deutsche Bank, says a cyclical turn is building but has been delayed by significantly lower reinsurance costs.

Finity previously predicted the insurance cycle would peak last year, but now it believes peak margins will be enjoyed until the middle of next year.

“We believe this period of ‘extra time’ will prove short-lived, with emerging top-line pricing pressure likely to accelerate in commercial and turn negative in personal lines where challenger brands and banks continue to take share,” the report says.

“Nevertheless, upgraded earnings expectations for the year ahead for the listed domestic [general insurers] will likely see investor sentiment remain stronger for longer, especially given the appealing dividend yields on offer.”

The report’s lead author, Andy Cohen, told insuranceNEWS.com.au last financial year turned out “really good” for insurers.

“Falling reinsurance rates will help offset the impact of slowing top-line growth, meaning peak performance seems set to continue for another year,” he said.

“We saw reinsurance rates dropping, but the strength of the fall is more than we would have thought. There are good times here at the moment, but insurers need to expect to come off that peak and it is important for them to manage that retreat.

“There is competition, but it is rational. You would therefore expect that we wouldn’t go into a period of loss making.”

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