Life insurance industry’s 143% net loss

The life insurance industry has experienced a net loss after tax of $200 million, down 142.8%, for the year to December 2019, according to data compiled by the regulator.

Statistics release by the Australian Prudential Regulation Authority (APRA) found this was a reduction from the $600 million profit for the year to December 2018.

APRA said the decline was primarily cause by poor performance of risk businesses. Over the year to December 2019, risk products reported a combined after-tax loss of $1.3 billion, a reduction from the $34 million profit for the previous 12 months.

Risk product net profit after tax

Risk product

December 18

December 19

December 2019 quarter only

Individual lump sum

495.2 million

648.3 million

-120.9 million

Individual disability income insurance

-567.1 million

-1,467.4 million

-701.2 million

Group lump sum

93.6 million

-206.5 million

-203.3 million

Group disability income insurance

12.4 million

-262.8 million

-125.3 million

Source: APRA

“All risk products deteriorated with the only exception being the individual lump sum product,” it said.

“In particular, individual disability income insurance (also known as income protection insurance) reported a substantial loss, primarily driven by loss recognition as adverse claims experience persists.”

Source: APRA

The report noted the $19 billion increase in the life insurance industry’s total revenue, mainly due to the favourable outcome of the investment market, was offset by the $17.8 billion rise in total expenses and a $1.8 billion increase in tax expense.

“The significant increase in expenses was primarily driven by reserve strengthening as insurers recognised losses from the enduring adverse claims experience,” APRA said.

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The Profit for 2018 should read $600 million, not billion.

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