The life insurance sector posted a gain in net profit after tax of nearly six percent for the past year with much of its driven by non-investment related activity, according to quarterly statistics released by the Australian Prudential Regulation Authority (APRA).
APRA found the overall results for the sector were positive over the past quarter and the past year, to the end of June 2016, with net profit after tax for the June quarter at $693 million compared with $651 million for the March 2016 quarter.
Non-investment linked businesses contributed the bulk of the overall figure for the quarter at $534 million compared to the contribution of $136 million from investment-linked businesses in the June quarter 2016.
This increase was also seen in the yearly figures where net profit after tax was $2.9 billion, up 5.7% from the previous 12 months, and where non-investment linked businesses contributed $2.2 billion and investment-linked businesses contributed $614 million to the total net profit after tax figures for the year ended June 2016.
“…net profit after tax was $2.9 billion, up 5.7% from the previous 12 months…”
The statistics from APRA also detailed the net profit after tax figures for various product sectors with a total figure of $300 million for all risk products in the June quarter 2016.
Lump sum risk was a positive contributor of $333 million in the Individual Lump Sum Risk category and $164 million in the Group Lump Sum Risk, while Disability Income was a drag across the board with Individual Disability Income Insurance contributing -$167 million and Group Disability Income Insurance contributing -$31 million.
This was reflected in the annual figures as well with net profit after tax for the year ending June 2016 at $1.4 billion with Individual Lump Sum Risk contributing $1.3 billion,
Individual Disability Income Insurance contributing -$381 million, Group Lump Sum Risk contributing $468 million and Group Disability Income Insurance contributing -$24 million.
APRA also released the results from its first stress test if the life insurance industry conducted last year, stating while the initial impact of the testing scenario was severe the outcomes demonstrated the sector could restore capital positions with reasonable management actions. These actions included repricing, a reduction or suspension of dividends and capital injections.
According to APRA the hypothetical scenario was based on a downturn in the Chinese economy leading to a decline in global growth and a recession in Australia, with GDP falling by 5% and unemployment increasing to 14%.
The regulator said the scenario impacted liability classes, in particular disability income insurance and Total and Permanent Disablement (TPD) as well as asset classes with severe downturns in property and equity prices and government bond yields, and an increase in credit spreads.
