Australian general insurers' 2020 net profit nosedive 99% to $26.8m

Catastrophe claims and BI provisions were amongst the reasons.

The Australian general insurance sector’s net profit after tax plunged 99% to $26.8m (A$35m) in 2020, triggered by catastrophe claims costs, provisions for business interruptions (BI) and downturn in investment income, according to the Australian Prudential Regulatory Authority (APRA).

Insurers reported increases in gross earned premium in most classes of business, especially in the householders, fire and ISR, and professional indemnity classes as insurers hiked up premiums in response to rising claims costs.

Gross incurred claims costs were significantly higher in 2020 with the recognition of pandemic-related BI provisions. Other main drivers include claims costs from bushfires and storm events and a stronger long-tail claims reserves.

On the other hand, gross incurred claims costs for the domestic motor vehicle class dropped in 2020 due to lower vehicle usage stemming from pandemic-related social restrictions.

Investment income fell in 2020 due to lower returns in equities, fixed interest investments and indirect investments, particularly during Q1.