Praise "prudent, disciplined" insurers
21 Nov 2016
Australian general insurers will achieve combined operating ratios of about 95% next year, even as premium growth remains flat, according to S&P Global Ratings.
And the industry is still treading carefully with its investment portfolios, despite the low-yield environment, the ratings agency says.
“We continue to have a stable outlook for the Australian non-life sector,” Senior Director and Credit Analyst Mark Legge told insuranceNEWS.com.au.
“Insurers are producing reasonably good performance given the environment. We continue to see a prudent approach to investments… They are being disciplined about that.”
Insurers in the wider Asia-Pacific region will probably see premium growth slow, and in some markets greater competition and rising claims tails will lead to a deterioration in combined operating ratios.
“In our view the profitability of non-life insurers will further weaken due to lower investment yields,” S&P says in an industry review.
“Low interest rates and volatile capital markets will continue to pressure earnings.
“Over the next two years we anticipate mounting pressure on Asia-Pacific insurance companies’ profitability and capitalisation, given the volatile investment performance and persistently low interest rates.”
Chinese insurers’ combined operating ratios will stay above 100% next year, underlining the struggle for profitability as economic growth slows in the world’s second-largest economy.
“Chinese insurance groups are dealing with intensifying profitability pressure due to falling interest rates and subdued earnings,” S&P says.
“We expect some insurers to face liquidity pressures, given their aggressive sale of short-term policies during the start of [this year].”