Australian non-life sector ready to take advantage of upturn
Fitch Ratings has said the Australian non-life insurance sector is well placed for 2009.
"Earnings during 2008 have been impacted by an increase in significant loss events and lower investment returns due to the global financial crisis. However, the larger players appear well positioned to take advantage of rising domestic rates and capital pressures at international competitors," said John Birch, associate director in Fitch's Financial Institutions Group.
- net profit for the sector was down 42% year on year at 30 June 2008,
- the decline impacted by underwriting results down 48%
- investment income down 25%.
During 2009, Fitch expects insurers will increasingly move to offset declining investment returns with stronger underwriting results. Premium rates appear to be rising and where 2008 saw insurers experience significant losses from an increased frequency in large weather related events, 2009 has seen this risk mitigated to some extent by additional reinsurance protections.
While not immune to the effects of mark-to-market accounting and declining equity values, Fitch views as positive the fairly conservative approach taken by the industry to investments.
Direct exposure to sub-prime mortgage assets and associated structured investments has been avoided and exposures to failed financial institutions are minimal. The sectors exposure to equities is relatively light and constituted only 5.4% of total investments at 30 June 2008.
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