Julia Gillard has complained analysts and reporters are too gloomy on the true nature of the Australian economy. Today’s statement by Australia’s biggest life insurer, AMP, would suggest the Prime Minister’s assessment of economic conditions is too rosy.
AMP said it has had $32 million of experience losses in the first five months of 2013. Experience losses are more insurance claims. In the case of AMP they are more claims for life, income protection, trauma and disability insurance, than the company’s own actuaries have estimated.
About half of the $32 million of experience losses are for income protection. This signals more AMP insurance policy holders have either lost and found it difficult to get another job after losing a previous one. AMP has a 19 per cent market share in Australia’s life insurance market and writes $1.7 billion worth of business annually. The company’s experience losses figure suggests economic conditions are far tougher than headline numbers suggest. Economic growth in the three months to March 31 was 2.5 per cent.
“The industry is experiencing increased pressure on insurance claims and policy lapses,” AMP’s statement to the ASX said. Not news the prime minister wanted to hear after rounding on economic forecasters who have been less than bullish on the Australian economy.
AMP chief executive Craig Dunn may want to have a word or two with his actuaries who do the experience loss forecasts as it has affected the company’s bottom line.
AMP’s underlying profit for the six months to June 30 is $425 million, a 13 per cent decrease compared with the $491 million in actual profit for the six months to June 30, 2012.
Dunn’s wealth protection unit is forecast to have a $54 million profit in the six months to June 30, a 60 per cent plunge in profit compared with $134 million in the first six months of 2012.
AMP shares have gained 31 per cent in the last 12 months. The S&P/ASX200 Index has risen 18 per cent during the same period.