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Australia Insurance Report 2009
Business Monitor International, March 2009, Pages: 72
The Australia Insurance Report provides independent forecasts and competitive intelligence on Australia's insurance industry.
Any analysis of the financial sector has to be dominated at present by the global financial crisis. The Australian companies are financially strong and were almost untouched in terms of any direct involvement in the subprime crisis. However, they are of course impacted by global events and especially the collapse in stock market prices. The leading Australian indicator, the ASX 200 index, fell from 6,754 at the end of October 2007 to 5,215 at the end of the financial year on 30 June. It continued to fall, most dramatically in October, to close at 3,722 on 31 December, down 45% from its peak.
The general insurers have been reporting severe impacts on their results from the combination of investment losses and an increase in catastrophe claims. Market leader Suncorp Metway (Suncorp), for instance, reported that its non-life insurance profits fell to AUD307mn for the year ended 30 June 2008, as compared to 835mn a year earlier.
Hard numbers for the life companies have not yet been published but anecdotal evidence suggests that there has been a big fall-off in new business as prospects, firstly, anticipate lower savings and secondly, see less reward by way of investment returns. In the non-life sector, the processes of industry consolidation by way of merger and acquisition have resulted in an extremely concentrated industry dominated by just four players. In the life sector the top three firms produced 72% of the premium income.
The non-life sector is growing as one would expect the industry to grow in a fully developed mature economy, that is, roughly in line with growth in GDP. Growth in the life sector is dominated by contributions to Australia’s superannuation regime. This part of the industry is still growing at over 10% pa and is likely to do so throughout the planning period. The linkages between superannuation and life insurance mean that the biggest players are the local financial services groups, which combine strong local brands with distribution power and, usually, a bancassurance offering. ING, through its relationship with ANZ Banking Group, is the only multi-national titan to take advantage of this.
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