Strong profit for Insurance Commission of WA

The Insurance Commission of Western Australia has reported a 43 per cent rise in profit in the 2018 financial year, to $277.7 million, on the back of higher investment income, improving premium revenue, and lower claims.

Premium revenue was up 12 per cent to $769.6 million in the 12 months to June, according to the commission’s latest annual report, while income from investments and other sources was $382.7 million.

That was an increase of 45.5 per cent on the previous corresponding period.

The performance in investments was underpinned by a return rate of 9.1 per cent, above the average rate of 8.4 per cent for the past seven years.

The increase in premium revenue was largely driven by the introduction of catastrophic injury support insurance over the past two years, chief executive Rod Whithear said.

He said 2018 was the first full year that all motorists paid insurance premiums for Catastrophic Injuries Support cover.

“Last year, some motorists did not have to pay for the full additional cover they received in the first year of the new cover," Mr Whithear said.

“The Insurance Commission absorbed that cost in 2017 by making a capital transfer to the CIS scheme fund.”

Claims expenses were down 7 per cent to $656 Million.

That was partially driven by a reduction in the number of compulsory third party insurance claims, down by 179 to be 3,370 in the financial year.

Notably, the commission delivered its first underwriting profit in at least four years, with that portion of the business in the black to the tune of $33.8 million.

That means premium revenue exceeded claims.

“Claims payment amounts for large claims were lower than expected during the year, which contributed to a $71 million reduction in claims payments from the $462 million paid out in 2017,” Mr Whithear said.

“As we received fewer claims, made lower claims payments and had an increase in revenue, we delivered an underwriting profit for both our motor injury insurance funds.”

The commission also paid nearly $150 million in dividends to the state government.

Mr Whithear said the commission had been adjusting its portfolio to spread risk.

“The divestment of all directly held property assets by the Insurance Commission has further diversified our investment portfolio by reducing the property strategic asset allocation from 25 per cent in 2015 to 15 per cent in 2018,” he said.

“We also increased our infrastructure investments by new positions taken in global listed infrastructure securities and global unlisted infrastructure funds, and now have a 16 per cent strategic asset allocation to alternative assets.

“We also continued our active investment management approach by regularly reviewing  external manager performance and replacing managers where required.

“This has contributed to out-performance against both short and long-term investment objectives.”