The Australian general insurance industry has demonstrated a remarkable showing in fiscal year 2024. As per Finity’s “Optima” report, it achieved an estimated return on equity (ROE) of 15%, which is a significant milestone as it marks the second consecutive year of double-digit ROE. This achievement is a testament to the sector’s resilience and adaptability in a dynamic economic environment.
In FY 2024, the gross earned premium registered a growth of 11%. While this was marginally lower than the 12.5% increase in FY 2023, it still represents the third consecutive year of double-digit growth. Insurers’ rate hikes in response to inflationary pressures had an impact, with the reported net loss ratio worsening to 71.5%, 3.5 percentage points up from FY 2023. The performance was a mixed bag, with Personal Lines short-tail classes showing improvement, but Commercial Lines deteriorating, partly due to the lack of favorable factors like COVID-19-related business interruption reserve releases. However, investment returns soared to 6%, the highest in over a decade, which compensated for the higher combined ratio and contributed to enhanced profitability.
Looking ahead, Finity anticipates FY 2025 to be another profitable year, with an estimated ROE of 15%. The forecast for gross earned premium growth is 9%, led by short-tail classes, and the reported net loss ratio is expected to remain stable. Despite a slight projected decline in investment returns to 5.4%, the expense ratios are likely to improve on the back of robust premium growth. This outlook signals continued strength and potential for the Australian general insurance industry, providing optimism for stakeholders and investors alike.
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