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APRA releases life insurance statistics for December 2018

Wednesday 27 February 2019

The Australian Prudential Regulation Authority (APRA) has released its Quarterly Life Insurance Performance Statistics publication for the December 2018 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 2017 December 2018 Change
Net policy revenue $15.7 billion $17.7 billion +12.1%
Investment revenue $17.6 billion $2.1 billion -87.8%
Total revenue $36.8 billion $23.7 billion -35.7%
Net policy expenses $9.5 billion $10.1 billion +6.2%
Operating expenses $8.7 billion $9.5 billion +9.4%
Effective movement in net policy liabilities $13.9 billion $3.1 billion -77.4%
Total expenses $32.3 billion $23.3 billion -28.0%
Net profit after tax $2.6 billion $0.6 billion -77.2%
Total assets $232.4 billion $222.3 billion -4.3%

Total entity net profit after tax fell significantly to $0.6 billion for the 12 months to December 2018. The main drivers of the decline in the most recent quarter were adverse movements in financial markets (e.g. a 9.0 per cent fall in the ASX 200), which negatively impacted insurers’ investment revenue, along with an increase in expenses caused by a discrete write-off of goodwill for one insurer.

Risk product net profit after tax for the life insurance industry in the year ended 31 December:

Risk product December 2017 December 2018 December 2018 quarter only
Individual lump sum $1,164.5 million $408.0 million $9.7 million
Individual disability income insurance -$160.1 million -$473.7 million -$259.5 million
Group lump sum $254.3 million $101.0 million $18.7 million
Group disability income insurance $188.8 million $57.0 million $9.0 million

For the 12 months to December 2018, risk products contributed a much lower proportion of the profit, just $92 million in total (down from $1.4 billion). All product groups deteriorated, particularly Individual Lump Sum and Individual Disability Income Insurance. This is mainly driven by an increase in the effective movement in net policy liabilities in individual risk products, resulting from a recognition of capitalised losses caused by persistent adverse claims experience, which exceeded an increase in revenue.

Key ratios for the life insurance industry in the year ended 31 December:

  December 2017 December 2018 Change
Return on net assets 10.0% 2.3% -7.7 pp
Prescribed capital amount coverage ratio 2.07x 1.77x -0.30x

The ‘highlights’ section in the Quarterly Life Insurance Performance Statistics publication provides additional detail for the movements in key performance statistics.

The December 2018 Quarterly Life Insurance Performance Statistics publication is available on APRA’s website at: https://www.apra.gov.au/publications/quarterly-life-insurance-performance-statistics

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 trillion in assets for Australian depositors, policyholders and superannuation fund members.