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Nat cats dent underwriting performance of Australian insurers in Q1: APRA

24th May 2019 - Author: Luke Gallin

Statistics on the performance of general insurers in Australia in the first-quarter of 2019, released by the Australian Prudential Regulatory Authority (APRA), shows that claims from natural catastrophe events contributed to a 32.4% decline in the underwriting result.

australia-townsville-floodsThe Quarterly General Insurance Performance Statistics report released by the APRA, shows that the underwriting result in the first-quarter of 2019 declined by 32.4% to AUD 2.8 billion (USD 1.9 billion), compared with AUD 4.2 billion (USD 2.9 billion) in Q1 2017.

The underwriting result was negatively impacted by catastrophe events in the period, including the Sydney hailstorm and Townsville floods, as well as a strengthening of claims reserves in both professional indemnity and mortgage classes.

APRA data shows that net incurred claims expenses of AUD 23.2 billion (USD 16 billion) in Q1 2019 is an increase of almost 15% on the AUD 20.2 billion (USD 13.9 billion) recorded in Q1 2018. Year-on-year, the net loss ratio increased by 5 percentage in the first-quarter of 2019, to 67%.

Last month, the Insurance Council of Australia (ICA) increased its insured loss estimate to AUD 1.271 billion (USD 910 million) for the hailstorm that affected Sydney and New South Wales in December, 2018. In January of this year, PERILS provided an initial property loss estimate of AUD 635 million (USD 462mn) for the storm.

The city of Townsville and the surrounding area in northeastern Queensland experienced torrential rain and flash flooding throughout much of February. In March, the ICA updated its industry loss estimate for the event to AUD 1.04 billion (USD 737.4 million), while PERILS updated its insured loss estimate to AUD 1.041 billion for the event earlier this month.

Net earned premiums for the sector jumped 6.4% to AUD 34.5 billion (USD 23.8 billion) in Q1 2019, compared with AUD 32.5 billion (USD 22.4 billion) in Q1 2018.

Largely offsetting the negative impacts of catastrophe events in the quarter, net investment income increased by a huge 42.2% to AUD 3.1 billion (USD 2.1 billion) in the first-quarter, which the APRA says is a result of unrealised gains on firms’ fixed interest investments driven by falling bond yields.

Despite the substantially improved investment return, the sector recorded a reduced after-tax net profit of AUD 3.6 billion (USD 2.5 billion) in the first-quarter of 2019, which is a decline of 4.7% on the AUD 3.7 billion (USD 2.6 billion) recorded in the first-quarter of 2018.

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