Australia’s life/risk industry is continuing to struggle to return to normal levels of profitability, according to the Australian Prudential Regulation Authority (APRA).
APRA has used its annual report, tabled in Parliament on Friday to point to the fact that the industry’s return on net assets is well below the 10-year average.
It said the industry’s return on net assets in 2016/17 of 10 per cent had declined notably in the most recent year, and was now well below the 10-year average of 13 per cent.
“Returns for 2016/17 declined markedly from the preceding year, driven largely by a deterioration in insurance risk profitability,” the annual report said. “This was driven by poor results across several product categories, but was most significant for individual disability income insurance where the industry experienced a substantial loss.”
It said that while premium rates had increased since the heavy losses reported during 2014/15, the effect had been outweighed by continuing poor experience and the need for further reserve strengthening as insurers adopted revised morbidity assumptions.
The APRA report also pointed to a continued decline in group lump sum profitability.
