Australia: Life insurance market returns to profits in 12 months to 30 June 21 – Asia Insurance Review
The life insurance industry in Australia recorded a return to profitability in the 12 months to 30 June 2021, with the return on net assets increasing to 3% (up from minus 6% in the preceding year), according to the “2021 APRA Year in Review” report released on 28 January.
Despite the return to profitability, industry returns remain significantly below the 10-year average of 9%. The main driver of poor profitability in recent years has been material declines in total profits from both investment-linked and non- investment-linked products, with COVID-19 and its related economic impacts such as the prolonged period of low interest rates, further exacerbating the decline.
Although financial performance improved in the 12 months to June 2021, risk products remained unprofitable, owing mainly to the persistent adverse claims experience within Individual Disability Income Insurance (IDII) and recent losses in group insurance business.
COVID-19
The risk of worse-than-expected claims experience as a direct result of COVID-19 is likely to persist over the short-to-medium term. The uncertainty concerning the longer- term impacts of COVID and delays in diagnosis of other non-COVID-related serious illnesses, including mental health-related illness, on future claims may also challenge the industry in the longer term.
Key life insurers
Australia’s key life insurers posted mixed earnings results, reveal data filed with APRA for financial years ended in the 12 months to 30 June 2021.
The results of the life insurers (in descending order of net policy premiums) are:
Insurer
Financial
yearend
Net policy
premiums
A$ m
Net policy
expenses
A$ m
Net
profit/loss
A$ m
TAL
March
2,034
1,194
99
Challenger Life
June
1,601
853
628
MLC
December
1,438
965
-243
AIA Australia
December
1,042
688
-128
OnePath Life
December
818
503
-8
AMP Life
December
795
1,517
234
MetLife
December
585
382
13
Zurich
December
558
153
105
Asteron Life & Superannuation
December
493
228
-218
ClearView Life
June
177
45
11
Source: APRA
APRA says that the life insurance industry remains reasonably concentrated. The top five life insurers accounted for 68% of total industry assets, up from 62% in the previous year. This was owing to continued acquisition activity amongst the larger life insurers. The trend towards increased foreign ownership of the industry also continued.
At 30 June 2021, 27 APRA-authorised life insurers and 11 friendly societies were operating in Australia, with no new life insurance licences granted and one licence revoked.
