While life and general insurers both saw growth last quarter brokers profitability took a fall as business volumes declined, according to the latest PricewaterhouseCoopers (PwC) Financial Services Survey.
In relation to the broader financial services sector, insurance had a slow quarter with only marginal growth in sales and profitability. But it grew nonetheless which marked two years of consistent growth from the life insurance sector.
This is what PwC thought about the insurance sector last quarter:
Grew slowly which completes two years of business volumes and profitability growth. Incomes have remained relatively flat which has made life insurers less optimistic than they were three months ago. Firms fear lower volumes, incomes and profits next quarter. While staff turnover fell, staff volumes rose and this trend is expected to continue.
Last quarter saw very marginal growth in premium income and business volumes, but this is expected to pick up during the next quarter. Lower than expected profitability was recorded because of higher costs and investment income values dropping for the second successive quarter. Employment numbers dropped and the value of claims rose for the sixth consecutive quarter.
A fall in the volume of business and value of premium income saw profitability fall last term for brokers. While overall operating costs fell, the loss of business was enough to push the average cost-per-transaction ratio up strongly. Much of the same is expected for this quarter, with more marginal falls in profitability.
Howard Scott, insurance partner at PwC, said, “Intense competition in the retail market, especially in home and motor insurance, coupled with the recent run of natural catastrophes and increasing value of claims continues to put pressure on general insurers’ profits.”
He added, “Insurers’ hopes for the early part of 2012 rest on growth in commercial lines and an anticipated recovery in business with overseas customers. General insurers continue to plan further headcount reductions in response to the tough market conditions.”