Life Insurance Risk Profitability Update: September Quarter 2016

Life Insurance Risk Profitability Update: Sept 2016

In November, APRA released the September quarter life industry aggregate summaries of financial performance, financial position, as well as details of the performance of individual product groups.

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Profits for risk products halved in the September quarter, compared to June ($148m vs $300m).

Key highlights

  • Retail Lump Sum Risk profit reduced by 42 percent to $194m after two consecutive quarters of $300m+ profits.
  • Group Life profits declined significantly this quarter to 1 percent of net policy revenue, mainly due to the superannuation business.
  • Disability Income business continues to report losses, albeit at lower levels.

Quarterly profit by product

The life insurance industry reported $148m profit* for the September 2016 quarter:

  • Retail Lump SumRisk $194m profit
  • Group Life $13m profit
  • Group Disability Income $14m losses
  • Retail Disability Income $45m losses.

* Net of reinsurance and net of tax

Trends: Lump Sum products continue to be profitable, but indicate significant softening

  • Group Life shows significant weakening in profits.
  • Losses continued for Disability Income products, with retail indicating reduced losses in the latest quarter.

Group Life profits reduced to 2014 levels.

  • Superannuation Group Life profits reduced significantly from $148m in the June 2016 quarter to $15m in the September 2016 quarter.
  • Ordinary Group Life business reported losses this quarter.

Reserve for Group Life increased this quarter after three quarters of reduction.

  • The results indicate that the decrease in profit in the September quarter is partly due to increase in reserves.

Disability Income report losses for the third consecutive quarter.

  • The results show that the Disability Income has produced losses for seven out of the last ten quarters.
  • The losses are partly driven by strengthening in reserves, while some cases include an allowance for future deterioration in experience due to selective lapsation.

Life Insurance Financial Results – November 2016

The November 2016 reporting season showed growth in operating earnings amongst life risk insurers.

 
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