Australian insurance industry sees net profit growth in H1: APRA

The general insurance industry saw a net profit after tax of $4.6 billion with strong underwriting results in the first half of 2023, according to statistics published by the Australian Prudential Regulation Authority (APRA).

APRA has recently released its Quarterly General Insurance Performance Statistics publication which provides aggregate summaries of financial performance, financial position, capital adequacy and key ratios for the general insurance industry.

According to the report, as well as net profit growing from the $0.9bn reported for June 2022, the industry also saw a return on net assets of 14% for the year ending June 2023. This was mostly driven by the sharp recovery of investment returns.

Additionally, despite a small decline, at $5.7bn, underwriting results remained relatively strong. These were driven by insurers raising premiums in response to recent higher claims costs. With gross earned premiums increasing 9.3%, to $66bn from $60.4bn.

Gross incurred claims decreased slightly, due to lower claims in the Householder/Houseowner and Fire/ISR lines of business – both of which saw unusually high peaks in the prior year due to the 2022 south-east QLD/NSW flood event.

Net loss ratio increased 3 percentage points in the period, to 65%. Return on assets also saw growth, increasing 11.2 percentage points, to 14.2%.

Net incurred claims increased substantially in the year (16.1%), which was largely due to a reduction in reinsurance revenue across almost all lines of business.

The industry also reported a recovery of investment returns, reaching $3bn overall, which was mostly driven by unrealised gains from interest-earning investments for the year ending 30 June 2023.

The aggregate prescribed capital amount (PCA) coverage ratio for the industry increased to 1.74x on 30 June 2023.