Income Protection Insurance Delivers Quarterly Profit
The Australian Prudential Regulatory Authority (APRA), in its latest quarterly report on the life insurance industry, has determined that the individual disability income component of the income protection market delivered a profit for the quarter, reversing a nine-month trend.
At the same time, the group disability income market showed weaker results, with a small profit in superannuation business more than offset by losses in ordinary business.
After-tax profits for individual disability income amounted to $54 million, with $46 million drawn from ordinary business and the remainder from superannuation business. Total revenue came to $450 million, of which $38 million came from superannuation and $412 million from ordinary business.
Both previous quarters were marked by losses in individual disability insurance, although those losses became smaller as the year progressed. At the end of December 2011, the quarterly loss came to $29 million, a significant improvement over the quarter ending 30 September 2011. For that period, the loss amounted to $97 million.
Group disability income recorded a combined loss after tax of $6 million on revenues of $171 million. Ordinary business accounted for much of the result, showing a loss of $8 million on $56 million in revenues, while superannuation business showed an after-tax profit of $2 million on revenues of $115 million.
The APRA report highlights a number of statistics for the industry as a whole, beginning with a 4.1% decrease in net profits after tax for the year ending 31 March 2011, with profits dropping from $2.69 billion to $2.58 billion. For the quarter, net profits rose over the December 2011 quarter by 0.4%, increasing from $723 million to $726 million. Profits were lower in comparison to results for the equivalent quarter in 2011, however, when net profits after tax came to $771 million.
Although annual expenses for the industry dropped to $16.3 billion from $21.4 billion, weakened profitability may be largely explained by an even greater drop in revenue. For the year ending 31 March 2012, total revenue amounted to $19.84 billion, a decrease of $5.83 billion compared to the year ending 31 March 2011. However, quarterly revenues increased from their December 2011 level, growing to $13.98 billion from $8.06 billion, and revenues for the current quarter exceeded those of a year ago, when total industry revenue was reported at $8.95 billion.