Latest figures from the Australian Prudential Regulation Authority (APRA) show continued insurer profitability despite tough economic times.

APRA’s six-monthly General Insurance Bulletin found industry net profit fell 32% to $3.4 billion in the year to June 30 2008. Increased claims compounded falling underwriting profits, which fell 44% to $2.1 billion.

APRA Executive Member John Trowbridge says the industry is enduring the economic climate but severe weather events have begun to affect underwriting profit.

He attributes insurer profitability to strong levels of capitalisation and “a conservative approach to investments and a generally close matching of assets and liabilities to mitigate effects of changes in interest rates on balance sheets”.

Increased claims more than offset marginal gross premium revenue improvement, moving from $20 billion to $23 billion in the last financial year. Claims for fire and industrial special risks were hardest hit, soaring 94% to $3 billion.

Total insurer assets climbed $3.1 billion or 4% to $91.1 billion as total liabilities rose 5% to $65.6 billion. Investment income slumped 11% to $3.3 billion during the period.

The industry’s capital coverage is now 1.91 times APRA’s minimum capital requirement, down from a multiple of 2.06 in 2007.