Life Insurance Risk
Profitability Update
December Quarter 2016
The life insurance industry reported losses of $136m for Risk Products in the December 2016
quarter, after 11 consecutive quarters of profits. The last net loss for risk products was reported
in December 2013.
Risk products net profit after tax by quarter over the last five years
($m)
500
400
300
200
100
0
(100)
(200)
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
Ordinary products made losses and
Profitability by product
superannuation products made profits in the
The loss in the December 2016 quarter was
driven by a lack of profit in Retail Lump Sum
and large losses in Retail Disability Income.
December quarter.
•
compared to $300m+ profit reported for the
first two quarters of 2016.
•
Profit/Loss ($m after tax)*
making quarter, largely due to lower
400
investment revenue.
300
•
200
Group risk products produced a small profit:
-
100
Group Life profitability in the last 6 months
has been lower than the previous 2 years.
Retail Lump
Sum
Retail Disability
Income
Group Life
Group Disability
Income
-
Group
Disability Income produced a small
Re
profit after three loss making quarters,
partly due to a reduction in reserves.
(200)
(300)
Retail Disability Income reported a loss of
$209m, making it the fourth consecutive loss
Net profit after tax by quarter
(100)
Retail Lump Sum profit reduced to $29m,
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
*All profit figures are after tax and after reinsurance. It includes both insurers and reinsurers’ results but excludes business retroceded overseas.
© 2017 KPMG Actuarial Pty Ltd ABN 91 144 686 046, Australian Financial Services Licence No.392050, an affiliate of KPMG. KPMG is an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Australia. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by
a scheme approved under Professional Standards Legislation.
Retail Risk Products recorded significantly lower profits in the December 2016 quarter.
Lower profits were due to
Retail Lump Sum experience quarter to 31 December 2016
2009. The losses in the
Superannuation - Retail Lump Sum
December 2016 quarter
Jun-16
Sep-16
ec-16
Dec-16
ec-16
Mar-16
Dec-15
Jun-15
Sep-15
Mar-15
Dec-14
(200)
Jun-14
it recorded a loss was June
Sep-14
(100)
Mar-14
risk products. The last time
Dec-13
0
most of the profits for retail
Jun-13
has traditionally generated
Sep-13
100
Mar-13
Ordinary Retail Lump Sum
Dec-12
•
200
Jun-12
small block of business.
300
Sep-12
quarter, but is a relatively
Mar-12
profits than the previous
400
Sep-11
Sum actually reported higher
500
Dec-11
Superannuation Retail Lump
600
Jun-11
Lump Sum ($105m).
Mar-11
Profit/Loss after tax ($m)
losses in Ordinary Retail
Ordinary - Retail Lump Sum
were partly due to an
increase in reserves.
reported losses for the fourth
consecutive quarter.
The graph on the right shows
1,600
1,200
the losses in the December
800
2016 quarter are partly driven
400
by negative investment
-
revenue.
The negative investment
revenue is consistent with the
Mar-16
Jun-16
Sep-16
Net Policy Revenue
Net Policy Expenses
observed increase in the
Effective movement in net policy liability
Net Profit/Loss after tax
government bond yields over
Investment Revenue
(800)
graph (below right) shows
change in the government
bond yields over the
December quarter.
Dec-16
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
the December quarter. The
Fitted forward rates on government bonds October to December 2016
(% p.a.)
•
Dec-15
(400)
5%
4%
16
•
Components of Retail Disability Income profits
($m)
Retail Disability Income
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
3%
2%
1%
0%
0
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19
Years
Oct-16
Nov-16
Dec-16
Source: RBA Interest Rates Statistical Tables December 2016
© 2017 KPMG Actuarial Pty Ltd ABN 91 144 686 046, Australian Financial Services Licence No.392050, an affiliate of KPMG. KPMG is an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Australia. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by
a scheme approved under Professional Standards Legislation.
Group Risk Products posted a small profit ($17m) in the December 2016 quarter.
profits for a second quarter,
similar to levels observed in
Components of Group Life profits by quarter
($m)
Group Life produced lower
2,000
2014 (1 percent of net
1,600
revenue).
1,200
•
The lower profits in the
800
most recent two quarters
400
are partly driven by an
increase in reserves.
0
-400
Net Policy Revenue
Effective movement in net policy liability
Net Policy Expenses
Net Profit/Loss after tax
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
Group Disability Income
made a small profit in the
December quarter, reflecting:
•
Losses in Ordinary Group
Disability Income, are offset
by a large increase in
Superannuation Group
Disability Income profits.
The graph (below) shows
that the small profit reported
in the December quarter is
50
40
30
20
10
0
(10)
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
(20)
(30)
(40)
Superannuation - Group Disability Income
partly due to a sharp
Ordinary - Group Disability Income
reduction in reserves.
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
Components of Group Disability Income profits
($m)
•
Profit/Loss after tax ($m)
Group Disability Income experience quarter to 31 December 2016
400
300
200
100
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
(100)
(200)
Net Policy Revenue
Net Policy Expenses
Effective movement in net policy liability
Net Profit/Loss after tax
Source: APRA Quarterly Life Insurance Performance Statistics December 2016
© 2017 KPMG Actuarial Pty Ltd ABN 91 144 686 046, Australian Financial Services Licence No.392050, an affiliate of KPMG. KPMG is an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Australia. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by
a scheme approved under Professional Standards Legislation.
Contact us
Hoa Bui
Life Insurance Practice Lead
Actuarial, Insurance &
Superannuation
T: (02) 9335 8938
E: [email protected]
James Collier
Partner in Charge
Actuarial, Insurance &
Superannuation
T: (02) 9335 8933
E: [email protected]
kpmg.com.au
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© 2017 KPMG Actuarial Pty Ltd ABN 91 144 686 046, Australian Financial Services Licence No.392050, an affiliate of
KPMG. KPMG is an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name
and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under
Professional Standards Legislation.