APRA releases life insurance statistics for December 2019
The Australian Prudential Regulation Authority (APRA) today released its Quarterly Life Insurance Performance Statistics publication for the December 2019 quarter.
The Quarterly Life Insurance Performance Statistics publication provides industry aggregate summaries of financial performance, financial position, capital adequacy and key ratios.
Key performance statistics for the life insurance industry in the year ended 31 December:
| December 2018 | December 2019 | Change |
|---|---|---|---|
Net policy revenue | 17.7 | 15.8 | -10.5% |
Investment revenue | 2.1 | 24.6 | 1,049.7% |
Total revenue | 23.7 | 42.7 | 80.2% |
Net policy expenses | 10.1 | 10.7 | 5.2% |
Operating expenses | 9.5 | 8.4 | -11.9% |
Effective movement in net policy liabilities | 3.1 | 22.1 | 608.5% |
Total expenses | 23.3 | 41.4 | 77.6% |
Net profit after tax | 0.6 | -0.2 | -142.8% |
Total assets | 222.4 | 203.3 | -8.5% |
The life insurance industry’s performance continues to decline. The $19.0 billion increase in 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. Industry net loss after tax was $0.2 billion for the year to December 2019, a reduction from $0.6 billion profit for the year to December 2018. This persistent decline is primarily caused by poor performance of risk business (see below).
Risk product net profit after tax for the life insurance industry in the year ended 31 December:
Risk product | December 2018 | December 2019 | 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 |
For the 12 months 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. All risk products deteriorated with the only exception being the Individual Lump Sum product. 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.
Key ratios for the life insurance industry in the year ended 31 December:
| December 2018 | December 2019 | Change |
|---|---|---|---|
Return on net assets | 2.3% | -1.0% | -3.3 percentage points |
Prescribed capital amount coverage ratio | 1. 80x | 1.68x | -0.12x |
Please refer to the ‘Highlights’ section in the Quarterly Life Insurance Performance Statistics publication for an analysis of material movements in the key performance statistics.
The December 2019 Quarterly Life Insurance Performance Statistics publication is available on APRA’s website at: Quarterly life insurance performance statistics.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6.5 trillion in assets for Australian depositors, policyholders and superannuation fund members.
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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.