Results released by parent company Dai-ichi Life reported TAL’s underlying profit increased by 14 per cent to $123 million in the full year ending March 31, despite claims levels challenging the industry.
“The underlying business has grown well and the profit largely reflects the growth in the underlying business with a couple of caveats,” TAL group chief executive and managing director Jim Minto told InvestorDaily.
“There has been a strong upsurge in claims that have come through, so while we’re very happy with the underlying result, we’re very mindful that the underlying market is very problematic, especially around claims and lapses.”
TAL saw higher claims levels over the year with total claims paid and provided for reaching $1098 million, up 25 per cent on the previous year.
The company noted an independent claims analysis from Risk Store that reported total life claims paid in Australia in 2012 hit the record figure of $4 billion.
“What the industry is seeing right across the board is … a massive upsurge in disability claims and protection claims across the industry and they are really knocking big holes in profitability,” Mr Minto said.
“It’s to do with the tougher economic times; there are far more claims arriving than expected and people are taking longer to end their claims.”
TAL’s net profit after tax was $91 million, down from $93 million in the year to 31 March 2012, as a result of non-cash changes in discount rates.
The company’s embedded value grew by 10 per cent of $1.762 billion over the year to 31 March 2013, while in-force premiums rose 13.4 per cent to $1.579 billion.
Looking forward, Mr Minto said the life insurance industry needs to address the challenges in claims rates.
“Just to have a flat result in this industry would be a really good outcome because some people are tracking very much poorer results period on period,” Mr Minto said.
“The key thing for life insurers now is managing expected levels in your budgets of claims or policy lapses and of expense.
“Those things are going to determine whether a life insurer can be profit keepers.
“It’s been a very strong, buoyant industry for the last 10 years; now it’s proving to be a really challenging one from a profitability perspective.”
