Abstract
Any analysis of the financial sector has to be dominated at present by the
global financial crisis. The
Australian companies are financially strong
and were almost untouched in terms of any direct
involvement in the
subprime crisis. However, they are of course impacted by global events and
especially
the collapse in stock market prices. The leading Australian
indicator, the ASX 200 index, fell from 6,754
at the end of October 2007
to 5,215 at the end of the financial year on 30 June. It continued to fall,
most
dramatically in October, to close at 3,722 on 31 December, down 45%
from its peak.
The general insurers have been reporting severe impacts on
their results from the combination of
investment losses and an increase in
catastrophe claims. Market leader Suncorp Metway (Suncorp), for
instance,
reported that its non-life insurance profits fell to AUD307mn for the year
ended 30 June 2008,
as compared to 835mn a year earlier.
Hard numbers
for the life companies have not yet been published but anecdotal evidence
suggests that
there has been a big fall-off in new business as prospects,
firstly, anticipate lower savings and secondly,
see less reward by way of
investment returns.
In the non-life sector, the processes of industry
consolidation by way of merger and acquisition have
resulted in an
extremely concentrated industry dominated by just four players. In the life
sector the top
three firms produced 72% of the premium income.
The
non-life sector is growing as one would expect the industry to grow in a fully
developed mature
economy, that is, roughly in line with growth in GDP.
Growth in the life sector is dominated by contributions to Australia’s
superannuation regime. This part of
the industry is still growing at over
10% pa and is likely to do so throughout the planning period. The
linkages
between superannuation and life insurance mean that the biggest players are
the local financial
services groups, which combine strong local brands
with distribution power and, usually, a bancassurance
offering. ING,
through its relationship with ANZ Banking Group, is the only multi-national
titan to take
advantage of this.
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