TAL chief concedes challenges
Jim Minto said he expected life insurance to be "even more difficult" this financial year, with the trend of increased claims and policy lapses difficult to fix in the short term.
"TAL is planning an improvement on 2012-13 but it will be a challenge to deliver that," he said.
Mr Minto said the patchy economy had prompted more disability and stress-related claims, and delays in people returning to work. Furthermore, while life insurance policies are designed to stay in force for some years, people were changing their policies more frequently as they cut costs and consolidated their super.
For the year to March, TAL's underlying profit - stripping out elements such as interest rate changes and one-off expenses - increased by 14 per cent to $123 million. Premium and other income increased 14 per cent to $1.86 billion and investment income soared 164 per cent to $281 million.
But provisions for policy reserves and others skyrocketed 83 per cent to $459 million and benefits and claims increased by 7 per cent to $1.178 billion.
The results are contained in the accounts of TAL's Japanese parent, Dai-Ichi Life, which bought TAL, formerly known as Tower Australia, two years ago for $1.2 billion.
TAL sells policies direct to customers, via financial planners, and through group and workplace superannuation schemes. A deal with industry fund AustralianSuper comprises about $300 million of its $1.6 billion in premiums.
Mr Minto said group prices were soaring by 25 to 50 per cent, a correction from prices that were too low.
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TAL posted an 8% fall in ordinary profit to $131 million. While ordinary profit fell, underlying profit (excluding interest rate changes and one‑off expenses) actually rose 14% to $123 million. The company also reported premium and other income up 14% to $1.86 billion and investment income soaring 164% to $281 million.
TAL’s chief executive, Jim Minto, said a surge in disability and stress‑related claims, plus delays in people returning to work, helped push up benefits and claims by 7% to $1.178 billion. Provisions for policy reserves and other items also jumped 83% to $459 million, increasing overall cost pressure on the business.
The article says customers are changing policies more frequently—churning or lapsing policies—as they cut costs and consolidate superannuation. That industry‑wide customer churning is affecting revenue stability and contributed to the tougher short‑term outlook TAL’s management described.
Jim Minto said he expected life insurance to be “even more difficult” in the coming financial year. He highlighted that increased claims and policy lapses are difficult to fix quickly, and that the patchy economy is triggering more disability and stress claims and slowing returns to work.
TAL is owned by Japanese insurer Dai‑Ichi Life. Dai‑Ichi Life bought TAL (formerly Tower Australia) two years earlier for $1.2 billion, and TAL’s results are included in Dai‑Ichi Life’s accounts, according to the article.
TAL sells policies direct to customers, via financial planners, and through group and workplace superannuation schemes. The deal with industry fund AustralianSuper accounts for about $300 million of what the article describes as roughly $1.6 billion in TAL’s premiums, making it a significant group relationship.
TAL’s CEO said group prices are rising by 25–50% as a market correction after periods where prices were too low. That means employers and superannuation funds are paying substantially more for group cover now, which can improve insurer margins but may also affect demand or scheme design.
From the article: TAL faces higher claims and bigger reserve provisions even as premium and investment income rose. Management expects a tougher short‑term environment for life insurers, with pricing corrections in group business. Everyday investors should note these reported trends—rising claims, higher reserves and pricing shifts—when watching life insurer results or considering exposure to the sector.
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