Clearview has announced a significant adverse deterioration in claims and higher than expected lapses for the half-year ended in December, 2019, which are likely to impact its life insurance underlying net profit after tax (NPAT) by -4.7 million and -$1.4 million, respectively, while actual HY20 results are still being finalised.
In the announcement made to the Australian Securities Exchange (ASX), ClearView explained the adverse claims impact, relative to the assumptions adopted in June 2019, by providing a breakdown by product as follows:
- ClearView LifeSolutions lump sum portfolio -$0.9m (1H FY19: -$0.5m; 2H FY19: +$0.5m)
- ClearView LifeSolutions IP portfolio -$2.6m (1H FY19: -$1.4m; 2H FY19: -$3.5m)
- Direct portfolios (closed to new business) -$1.2m (1H FY19: -$0.2m; 2H FY19: -$0.1m)
At the same time, lapses remained elevated with a loss totalling to $1.4m in HY20 against the assumption adopted in June 2019 (1H FY19: -$2.9m,2H FY19: -$2.7m).
According to Clearview, the key contributors to the poor lapse and income protection (IP) claims included, among the others, poor wages growth, rising consumer costs, step premium rating structures, IP product design issue and social trends.
The firm stressed that it remained supportive of the Australian Prudential Regulation Authority’s (APRA) intervention due to the prolonged underperformance of the life insurance sector which included the introduction of IDII Sustainability Measures aimed at imposing a number of measures such as Pillar 2 capital charge across the industry.
“ClearView is a nimble player and is in a strong position to implement any necessary changes relatively quickly. Given APRA’s recent policy measures and the continued underperformance of the IP portfolio, ClearView has already commenced a comprehensive review of its LifeSolutions IP product series with a focus on reviewing product pricing claim rates,” the firm said in the announcement.
“Some insurers appear to be engaging in ‘honeymoon’ discounting to maintain market share rather than focusing on delivering long-term sustainable products and transparent pricing to customers. Clearview is not participating in this approach which is impacting ClearView’s current new business volumes.”
As far as the firm’s wealth management results were concerned, it said the underlying NPAT for the half-year ended in December, 2019 were expected at $1.7 million while funds under management (FUM) would be up 10% to $2.28 billion due to string net inflows of $66 million against of $81 million outflows in 1h FY19).