Financial instability undermines the industry’s investment earnings
Melbourne, Australia (PRWEB) April 26, 2012
The onset of the financial crisis awoke many people to the importance of financial security, including life insurance. However, growing demand for traditional life insurance has not been reflected in the Life Insurance industry's revenue performance. According to IBISWorld industry analyst Tim Stephen, ‘the lingering effects of the financial crisis are weighing on revenue streams that rely heavily on investment returns.’ In 2011-12, industry revenue is expected to decline 14.4% to be worth $55.3 billion. This is 34.2% down on 2006-07, or an 8.0% decline compounded annually.
Revenue is the sum of insurance premiums, policy deposits and investment earnings. Premiums are paid to secure protection against life risks, whereas policy deposits are paid to purchase units in investment funds. Since 2006-07, premiums have grown while policy deposits have stagnated. ‘This has been due to shaky investment conditions, subdued consumer confidence and general risk aversion,’ Stephen adds. Meanwhile, financial instability has undermined investment earnings. In 2011-12, investment conditions have remained erratic, weighed down by persistent global uncertainty. This will lead to a decline of investment returns. In the next five years better conditions are in sight. Industry revenue is forecast increase. Both investment revenue and premium income will approach levels reached in 2006-07.
As of 2011-12, the Life Insurance industry is Australia is classed as having moderate level of market share concentration. The previous decade was marked by abundant merger and acquisition activity. Recent examples include the merger between St. George Bank and Westpac; Commonwealth Bank's acquisition of BankWest and St Andrews; ANZ's purchase of Mercantile Mutual and NAB's acquisition of Aviva Australia. As a result, concentration among the top four players jumped. The finalisation of AMP's takeover of AXA (which operated as National Mutual Life Association) in March has increased market share concentration. The top four players in the industry are AMP, NAB, CBA and ANZ.
For more information, visit IBISWorld’s Life Insurance report in Australia industry page.
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IBISWorld industry Report Key Topics
Companies in the Life Insurance industry provide life insurance cover and life-based investment products. Life insurance (or life assurance) is a contract obligating the insurer to pay designated beneficiaries a sum of money in the event of the insured individual's death, disablement, or serious illness or injury. As with all insurance contracts, exclusions may apply that limit the insurer's liability, and typically include suicide, riot or war.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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