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Insurance Facts and Figures 2007 Editors: Kim Smith Scott Fergusson

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Insurance Facts and Figures 2007 Editors: Kim Smith Scott Fergusson Insurance facts and figures 2007 Editors: Kim Smith Scott Fergusson Publication Team: Antoinette Chan Gillian Cass Renae Cooper Contributors: Alexandra Russ Pat Murray Amy Johnson Paul Daly Billy Bennett Peter Kennedy Damian Hollingsworth Rachel Hutchinson Daniel Levine Rod Balding Darren Mack Sam Hinchliffe Deepa Neelakantam Scott Hadfield Joanne Gorton Yasser El-Ansary Kathy Pratley Vanessa Shum Mark Falvo This publication is designed to provide an overview of the accounting, tax and regulatory environment relating to insurance. Information contained in this booklet is based on the law and Government announcements as at 31 March 2007. The information represents a summary of the significant features and should be used as a guide only. Readers are advised that before acting on any matter arising in this publication, they should discuss the situation with a PricewaterhouseCoopers Insurance partner. Insurance Facts & Figures 2007 © 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 144 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders. (“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.) WL 58261 Insurance facts and figures 2007 Contents Introduction 2 1 Industry information 3 Top 15 general insurers 4 Top 15 life insurers 6 Top 15 health insurers 8 Top 10 government insurers 10 Investment performance indicators 12 Inflation indicators 14 General insurance 15 Life insurance 20 Health insurance 22 2 Regulation and supervision 25 Developments 26 Framework 30 • Reserve Bank of Australia 30 • Australian Prudential Regulation Authority 30 • Australian Securities and Investments Commission 33 • Private Health Insurance Administration Council 33 Authorisation 34 Supervision and compliance 40 Solvency and capital adequacy requirements 49 Investment policy 65 Reinsurance 66 3 Policyholder protection 71 Framework 72 • Insurance Council of Australia 73 Product disclosure 75 Pricing and competition 77 Sales practice regulation 79 Ability to pay claims 80 Use of personal information 81 Sources of redress 82 ii 4 Financial reporting 85 Developments 86 Framework 92 • Australian Accounting Standards Board 92 • Australian Prudential Regulation Authority 93 • Australian Securities & Investments Commission 95 • Australian Stock Exchange 95 • Private Health Insurance Administration Council 96 • Medicare Australia 96 • Life Insurance Actuarial Standards Board 96 Accounting standards 98 Annual accounts 119 Other returns 122 Key dates 129 5 Taxation 135 Developments 136 Personal taxation 147 Levies and premium taxation 148 Stamp duty 149 Goods and services tax 151 Key dates 155 6 Insurance legislation 157 Commonwealth legislation 158 State and territory legislation 163 Industry codes 163 7 Insurance directory 165 Government authorities 166 Industry associations 170 Complaints review services 181 Registered general insurers 183 Registered life insurers 188 Registered health insurers 190 Government insurers 192 PwC Australian offices and industry experts 193 iii Glossary AASB Australian Accounting Standards Board ACCC Australian Competition and Consumer Commission ADI Authorised Deposit-Taking Institution AFSL Australian Financial Services Licence AGAAP Australian Generally Accepted Accounting Priciples AHIA Australian Health Insurance Association AIFRS Australian Equivalents to International Financial Reporting Standards AML Anti-Money Laundering APRA Australian Prudential Regulation Authority ARPC Australian Reinsurance Pool Corporation ASIC Australian Securities and Investments Commission ASX Australian Stock Exchange ATO Australian Tax Office AUASB Auditing and Assurance Standards Board AUSTRAC Australian Transaction Reports and Analysis Centre BCM Business Continuity Management CEO Chief Executive Officer CFO Chief Financial Officer CPI Consumer Price Index CTF Counter-Terrorism Financing CTP Compulsory Third Party DAC Deferred Acquisition Costs DAM Decreasing Adjustment Mechanism ECS Exceptional Claims Scheme FASB Financial Accounting Standard Board FATF Financial Action Task Force FCR Financial Condition Report FICS Financial Industry Complaint Service FID Financial Information Declaration FSR Financial Services Reform GAAP Generally Accepted Accounting Principles GST Goods and Services Tax HCCS High Cost Claims Scheme iv HIC Health Insurance Commission (now Medicare Australia) HPPA Hospital Purchaser Provider Agreements IAA Institute of Actuaries of Australia IASB International Accounting Standards Board IBD Insurance Brokers Disputes Limited IBNER Incurred But Not Enough Reported IBNR Incurred But Not Reported ICA Insurance Council of Australia IFRS International Financial Reporting Standards ILVR Insurance Liability Valuation Report KYC Know Your Customer LAT Liability Adequacy Test LIASB Life Insurance Actuarial Standards Board LMI Lenders Mortgage Insurers LTHC Life Time Health Cover LVR Loan-to-Value Ratio MAA Motor Accidents Authority MCR Minimum Capital Requirements MDO Medical Defence Organisation MER Maximum Event Retention MII Medical Indemnity Insurer MOU Memorandum of Understanding MSE Management Services Element NIBA National Insurance Brokers’ Association NOHC Non-Operating Holding Company OCR Outstanding Claims Reserve PAIRS Probability and Impact Rating System PDS Product Disclosure Statement PHIAC Private Health Insurance Administration Council PHIO Private Health Insurance Ombudsman PML Probable Maximum Loss PST Pooled Superannuation Trust RAS Reinsurance Arrangement Statement RD Reinsurance Declaration RE Responsible Entity v REMS Reinsurance Management Strategy RHBO Registered Health Benefits Organisation RMD Risk Management Declaration RMS Risk Management Strategy ROCS Run-off Cover Scheme SEA Segregated Exempt Assets SO Senior Officer from Outside Australia SPV Special Purpose Vehicle Stage 2 Stage 2 of APRA’s general insurance reforms TOFA Taxation of Financial Arrangements UMP SP United Medical Protection Support Payment UPR Unearned Premium Reserve VPST Virtual Pooled Superannuation Trust vi Introduction Continued profitability Welcome to the annual PricewaterhouseCoopers’ Insurance Facts and Figures which shows continued profitability and capital strength by the Australian insurance industry. FACTS AND FIGURES A few highlights from the past year: • The general insurance industry posted strong profits for the fourth year running following the dramatic turnaround in the sector’s profitability in 2001-2002, with the industry maintaining positive underwriting results in 2006. Over the past three years, the direct insurers have generated returns on shareholders’ equity in excess of 20 per cent. • Health insurance pre-tax profits increased from the prior year, with membership numbers remaining stable. • The life insurance industry also improved its results on the prior year, on the back of continued strong growth in total assets held by the sector. The insurance industry has produced these results despite increasing competition and further regulatory requirements coming into force during 2006. It seems unlikely that 2007 will bring respite from either of these. I hope you find our 2007 edition of Facts and Figures interesting and informative as you deal with the many challenges ahead. Kim Smith Australian Insurance Leader PricewaterhouseCoopers 2 Industry information 1 Top 15 general insurers 4 Top 15 life insurers 6 Top 15 health insurers 8 Top 10 government insurers 10 Investment performance indicators 12 Inflation indicators 14 General insurance 15 Life insurance 20 Health insurance 22 Top 15 general insurers Ranking Measure: Performance: Net earned premium Underwriting Investment Result result result after tax Entity Year Current Prior Prior % Current Prior Current Prior Current Prior end $m $m Rank Change $m $m $m $m $m $m 1 QBE Insurance Group 12/06 8,158 7,386 1 10% 1,200 808 822 718 1,483 1,091 2 Insurance Australia Group 06/06 6,132 6,144 2 -0% 533 430 905 1,043 862 928 3 Promina 12/06 3,092 2,940 3 5% 263 186 307 327 549 507 4 Suncorp 06/06 2,527 2,471 4 2% 230 131 241 313 916 991 5 Allianz Australia 12/06 1,991 1,892 5 5% 213 94 243 280 349 276 6 Wesfarmers 06/06 783 735 6 7% 130 142 35 43 1,048 702 7 Zurich Australian Insurance 12/06 700 689 7 2% 104 75 161 146 232 246 8 Swiss Re 12/06 523 648 9 -19% 150 58 66 77 123 115 9 Munich Re 12/06 521 661 8 -21% 96 198 77 112 109 193 10 RACQ 12/05 347 340 10 2% 26 11 51 51 54 38 11 Chubb Insurance 12/05 231 229 11 1% 39 47 31 28 48 52 12 AIG (American Home Assurance) 12/06 225 224 13 0% 62 99 39 31 55 77 13 Westpac 09/06 182 162 15 12% 84 78 21 17 67 62 14 ACE Insurance 12/06 170 182 14 -7% 60 53 17 21 57 44 15 General Reinsurance Australia 12/05 136 203 12 -33% 52 (20) 42 27 51 (5) Source: Published annual financial statements or Insurance Act Return, including segment reporting for organisations with significant non-general insurance activities Notes: World wide premium is ranked for those companies/groups based in Australia, while only premium under the control of the Australian operations are included for those with overseas parents. Where
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