Standard & Poor’s (S&P) Ratings Services says the credit quality for non-life insurers in Australia should remain strong over the next couple of years, supported by strong profitability revealed in the latest round of reporting results.

Credit analyst Kate Thomson says the outlook for profitability in the coming 12 to 18 months is strong, despite many insurers flagging a drop in insurance margins.

She says the industry is unlikely to achieve the same levels of very strong profits achieved in previous years. “Insurers’ profitability, which is not immune from the negative influences currently in the market, will moderate as the very strong premium rate increases achieved in recent years (2001-2003) retreat further in 2006.”

Profitability was very strong for the Australian non-life insurers in the period to June 30, despite difficulties brought by increased storm activity in eastern Australia, and rate reductions for corporate and commercial lines.

Ms Thomson says the outlook for premium income over the next two years remains mixed across the major insurance groups, “with some expecting relatively flat premium income levels while others expect a continuation of reasonable growth”.