Australian general insurers posted their first combined quarterly loss since at least 2002 as investments fell due to the fallout from the coronavirus pandemic while claims from catastrophic brushfires rose.
The insurers posted a A$1 billion ($660.00 million) loss in the quarter ended March, official data from Australian Prudential Regulation Authority (APRA) showed on Thursday.
They posted investment losses of about -0.5% during the quarter due to extreme market volatility triggered by the global coronavirus crisis.
Meanwhile, claims in the year to March were 1.7 times the premiums earned selling insurance to protect properties from fires that ravaged Australia in 2019 and early 2020.
"Investment income is key for the earnings of these insurers, so realised and mark-to-market losses in their fixed income portfolios due to the pandemic and the global lockdowns have put a lot of pressure on profitability," Morningstar analyst Nathan Zaia said.
"I expect some of that will reverse as markets and economies recover."
The double whammy led to the industry's lowest annual profit in 17 years, according to the APRA data, with profit after tax falling 56.7% to A$1.5 billion in the year to March.
It was also the sharpest annual fall in profit since at least 2004 for the industry, which is dominated by Insurance Australia Group <IAG.AX>, Suncorp Group <SUN.AX>, QBE Insurance Group <QBE.AX> and Germany's Allianz SE <ALVG.DE>.
Shares of QBE, IAG and Suncorp have fallen between 18% and 27% this year.
Investment losses and higher claims also hit life insurers, the APRA data showed, with the industry posting A$1.8 billion in losses in the year to March, versus a A$759 million profit in the previous year.
(Reporting by Paulina Duran in Sydney; Editing by Ana Nicolaci da Costa)
