S&P Report Concludes Australian P/C Industry Stable
The credit outlook on Australia’s nonlife insurance industry will remain stable in 2005, despite moderation in earnings, according to Standard & Poor’s Ratings Services latest industry report card on Australia’s P/C insurance sector.
“Advances in underwriting quality, operational efficiencies, and the pressure from shareholders for appropriate returns will ensure underwriting profits are maintained in 2005,” indicated S&P credit analyst, Michael Vine. “It is unlikely that the insurance cycle lows of past years, driven by previous ownership and market dynamics, will be repeated in the next downward cycle,” he continued.
S&P noted: “In 2004, the nonlife insurance industry enjoyed favorable conditions, with premium rates still at healthy levels, relatively low claims frequency, and continued control of expenses and claims cost size. Competition and increased capacity in the commercial lines and corporate property sectors continues to place pressure on premium rates, but personal lines rates are expected to hold firm.
“Public liability and professional indemnity rates continued to firm in 2004, depending on the profile of the industry. In future, rates for professional indemnity and other liability classes may ease because of announced changes in state legislation and tort reform.”
The bulletin pointed out that in the last six months S&P has upgraded both Promina Group Ltd. (trading as Vero) and Allianz Australia Insurance Ltd. given their sustained performances over recent years. “The industry rating outlook in 2005 remains stable with underwriting profits expected, despite evidence that the insurance cycle peaked in mid-2004,” Vine added. “With premium rates softening in a number of major lines, weather conditions normalizing after a benign period, and increased capacity in the market, it is unlikely that 2005 results will match the very strong results of 2004.”
The publication – “Industry Report Card: Nonlife Insurance — Australia” -is available on RatingsDirect, Standard & Poor’s Web-based credit analysis system, at www.ratingsdirect.com. The report can also be found on Standard & Poor’s public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar select Commentary & News.