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      Analysis into insurers' financial results under AASB 17

      KPMG’s Life Insurance Insights report offers a comprehensive analysis of the financial performance and trends within the Australian life insurance market, based on data available up to 30 June 2025. The 2025 analysis, which traditionally relied on APRA data, was enhanced to include insights derived from insurers' financial results under AASB 17. By leveraging the detailed disclosures afforded through AASB 17, this report provides a deeper understanding of the industry’s financial landscape.



      Sustainability: A key focus area for the life insurance sector

      Sustainability remains a key focus for the life insurance sector. While profitability for Income Protection (IDII) and Group Salary Continuance (GSC) products appears to have stabilised, Group and Individual lump sum products saw a decline in profits during FY 2025. Losses in the Group lump sum segment, for example, are understood to be influenced by factors such as an increase in adverse Total and Permanent Disability (TPD) experience and higher levels of mental health-related claims – trends that have been widely observed across the sector. This challenge is highlighted by the recent decision by a reinsurer to pause new business activities in Australia from October 2025 citing sustainability concerns particularly for TPD.

      These trends have unfolded within a challenging economic environment, characterised by inflation and interest rates remaining above pre-COVID levels, contributing to rising cost-of-living pressures and an uptick in unemployment. While the dashboard analysis concludes on 30 June 2025, data from September 2025 indicates a reversal in the downward trend of inflation observed since December 2022, alongside continued increases in unemployment. Although higher interest rates can reduce the cost of claim reserves for insurers, the associated cost-of-living pressures may lead to increased claim rates.

      The transition to AASB 17 changed balance sheets and profitability patterns, however obviously this is a change only to accounting profitability with underlying profitability unchanged.

      Equity decreased by 31% for direct insurers and 9% for reinsurers, as many companies used the transition to AASB 17 as an opportunity to write-off of historical acquisition costs, particularly within portfolios measured under the Premium Allocation Approach.

      This shift is expected to contribute to the higher reported profitability levels for IDII portfolios compared to prior years.



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      Life company profits and statutory fund profits were similar

      at $1.1b FY2025. APRA data is not available for the first quarter of FY2024, but the 9 months of profit to 30 June 2024 ($0.3b) was less than half of the equivalent FY2025 period $0.7b.

      The profit of $1.1b in FY2025 comprised $1.7b of insurance service result1, $6.8b investment result, -$2.5b other2 and $1.1b tax.

      Results at a more detailed level are only available for the insurance service result.

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      Annuities and Non-Risk Products

      are now reported partly under AASB 17 and partly under AASB 9. Annuities and retirement income products more broadly have been identified as a potential growth area for the industry. These products are typically measured under AASB 17 and their insurance service result was $115M and stable result in the 9 months to 30 June was similar for FY2024 and FY2023

      The investment linked products which are measured under AASB 9 generated profits of $24m, compared to -$6m in the 9 months to 30 June 2024. Investment and other products measured under AASB 17 generated an insurance service result of $0.5b. The result in the 9 months to 30 June was similar for FY2024 and FY2023.

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      Reinsurance

      provided a positive impact to the insurance service expense (meaning it was profitable to the insurer and presumably unprofitable to the reinsurer) for IDII (where over 50% of the net result came from reinsurance) and group lump sum risk where 72% of the negative insurance service result experienced at the gross level were offset by the positive reinsurance service result.

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      Annual reported profits

      (noting that year ends differ by company) had most insurers experiencing profits. Direct insurers reported profits of $1.0b with 10 of the 14 insurers reporting profits and reinsurers reported profits of $0.2b with all reinsurers reporting profits.

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      Risk Products

      reported insurance service results of $1.1b in FY2025. APRA reported profits in the 9 months of FY2024 were $0.5b, compared to $0.7b over the equivalent 9-month period in FY2025. The increase in profits since FY2023 ($0.4b calculated under AASB 1038) will include an improvement in profitability due to the effective write-off of $6.6b (presumably primarily related to risk products) at transition.

      All product types other than group lump sum products reported a positive insurance service result, noting that this excludes movements in insurance liabilities due to changes in discount rates.

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      TBD claims

      increased significantly with the ratio of claims to premium moving from 78% in 2023 and 81% in 2024 to 91% in 2025. This is the likely driver of the negative insurance service result for group lump sum risk.

      Although not reported in APRA or financial stats an increase in mental health claims has been discussed widely across the industry as a key driver of the increase in overall claim costs with the Council of Australian Life Insurers recently stating that “In 2024, insurers paid out more than $2.2 billion2 in mental health claims – almost double the amount paid just five years ago3".

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      Group Lump Sum Risk

      reported a negative insurance service result and the ratio of insurance service result to gross insurance revenue decreased by 0.5% for individual lump sum risk. The ratio increased by 7% for IDII and 11% for GSC. 

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      The overall capital position

      across the industry remains strong, noting that the published APRA statistics do not include any supervisory adjustments imposed by APRA and therefore the capital position shown may be stronger than the true underlying capital position. The capital base of the industry decreased by $6.6b at the transition to AASB 17, however this was matched by a corresponding decrease in capital adjustments, the capital position (surplus assets over APRA regulatory requirements) was not impacted by AASB 17.

      Market size

      The size of the market as measured by annual premium has not grown, with life insurance premium income (excluding reinsurance) of $18.3b compared to $18.4b in FY2024 and $18.2b in FY2023. 

      The number of lives insured by the market increased with 1% more lives at 30 June 2025 than the previous year. Premiums have been sustained through increases reflecting inflation where benefits increase each with inflation, age increases as well as premium increases.

      In the individual advised (retail) channel premium rates over the past 12 months increased by 3.2% for death cover (similar to inflation), 5.4% for TPD cover (indicating that repricing of TPD due to adverse experience may be occurring) and 1.6% for IDII cover. The lower increase for IDII likely reflects that premium rates on new business are lower due to the new sustainable product design which came into effect on 1 October 2021.  By contrast the average premium in the group superannuation channel decreased by 6% over the last 12 months largely driven from decreases in TPD and GSC which reflects changes in benefit design as well as genuine premium decreases. 

      Lapse rates for individual advised business decreased in the 6 months to 30 June 2025 (16% lapses for death cover) after peaking in the 6 months to 30 June 2024 at 22%. Lapse rates are similar to pre-COVID levels suggesting that the cost of living pressures on the industry have decreased.

      The number of registered IFA’s in the market has marginally decreased over the past 2 years with 15,869 advisers at 31 December 2024 compared to 16,350 advisers at 31 December 2022. Despite the 3% decrease in adviser numbers, new business rates have increased although still below pre-COVID levels. Death new business rates were 3.4% over the 6 months to 31 December 2024 compared to 3.0% a year earlier and 2.7% in the prior year.  


      Financial performance

      Industry profits of $1.1b were recorded in the year to June 2025, which reflected profits were generated in the Insurers’ Statutory Funds. APRA data for the first 3 months of the prior year is not available but profits the 9 months to 30 June 2025 ($0.7b) were more than double the equivalent period in the prior year ($0.3b).

      Product level profitability insights are limited to the insurance service result. The $1.7b of insurance service result underpinned by $1.1b within individual and group lump sum and disability income benefits with the balance coming from conventional products ($0.4b), annuities ($0.1b) and other investment products.

      The insurance service result was negative over FY25 for group lump sum risk and individual lump sum risk (level premium4).

      The insurance service result of level premium benefits improved by $0.3b in the 9 months to 30 June 2024 compared to the prior period. This improvement may reflect the increased focus on level premium products with AASB17 requiring them to be reported separately to stepped premium. By contrast the insurance service result of stepped premium products decreased by $0.1b, predominantly due to disability income insurance. Group lump sum risk decreased by $0.2b which was mostly offset by an increase of $0.2b in GSC.

      The gross claims experience5 increased in the 9 months to 30 June 2025 compared to prior period by 20% ($0.5b) for individual lump sum risk and 12% ($0.1b) for individual disability insurance.

      Other insurance expenses as a proportion of premium increased from 15% in the 9 months to 30 June 2024 to 18% in the 12 months to 30 June 2025. This reflects companies' ongoing focus on embedding business efficiencies to improve profit outcomes with the industry providing limited growth. 


      4. This is Other Premium in the APRA statistics and will include level premium and hybrid premium outcomes.
      5. Incurred claims and changes in liabilities for incurred claims


      AASB 17


      Companies have made a range of different decisions in implementing AASB 17 which impact profit patterns. These include risk adjustments with 7 insurers in FY2024 having an insurance risk margin of 75%, but the margins range from 55% to 90%.

      The average reinsurer risk margin was 71% compared to the average insurer risk margin of 79%.

      • Eleven insurers insurers including all 7 reinsurers value their entire portfolio using the General Measurement Model and if applicable the Variable Fee Approach. Amongst direct insurers for example 4 insurers use the Premium Allocation Approach and 3 use the General Measurement Model to value group risk contracts and 6 insurers use the Premium Allocation Approach and 6 use the General Measurement Model to value stepped premium contracts.
      • Twelve companies increased their LIC between their 2023 and 2024 accounts.
      • Two companies companies in FY2024 had loss components larger than their CSM and a further 3 companies had loss components larger than 50% of their CSM. Three companies had more losses than CSM recognised on their new business contracts. One company had new CSM greater than the released CSM.



      KPMG Life Insurance Insights Dashboard

      KPMG's Life Insurance Insights Interactive Dashboard presents analysis based on a combination of leading analytics applied to APRA published statistics, supported by insights from our Life Insurance specialists.



      Life insurance market snapshot

      An infographic snapshot of life insurance market data to June 2025.

      Industry Size and Capital Strength

      $18.3bn – Direct Premium as at 30 June 2025, a slight decrease from $18.4bn in prior year.

      33% – Allocation of Reinsurance Premiums as a proportion of Insurance Revenue as at 30 June 2025, an increase of 14% from the prior year.1

      29.1m – The sum of lives insured across cover and channel types as at 30 June 2025, which is stable from the prior year.2

      -1.2m – Reduction in the sum of lives insured across cover types in the Individual channel in the three years to 30 June 2025.2

      2.0 – The industry capital coverage ratio which remains stable as the prior year.

      Industry Profits

      $1.1bn – Profit across the Life Insurance industry in the 12 months to June 2025. In the prior year $0.3bn of profits were reported in the 9 months to June 202.3

      $0.1bn – Increase in the insurance service result on Risk Products in the 9 months to 30 June 2025 compared to the same period in the prior yar. The insurance service result totalled $1.1bn as at 30 June 2025.

      4 – Insurers experienced losses in their FY2024 financial statements totalling $0.5b.4 All the reinsurers reported profits.

      $2.0bn – Increase it the liability for incurred claims at 30 June 2025 from 30 June 2024.

      Product Revenue and Distribution

      68% – Proportion of Risk Product Gross premium relating to Lump Sum (Retail & Group) as at 30 June 2023.

      61% – Annual premium sold through Individual channels (as opposed to Group) at 30 June 2025. 52% of the market is sold through the individual advised channel.

      -2.7% – Decrease in new business premium volumes at 30 June 2025 compared to the prior year.4

      83% - Proportion of Risk Product Gross Annual Premium written by top 5 companies based on annual premium (as at 30 June 2025).

      36% – Proportion of Risk Product Gross Annual Premium relating to the Group Superannuation channel.

      Customer Impact

      -2.1% – Decrease in the average premium per policy for Risk Products in the 12 months to 30 June 2025.

      +17% – Increase in the Individual TPD average premium per policy in the two years to 30 June 2025.

      97%–98% – Acceptance rates for death cover (Group and Individual Advised).

      9%–17% – Decline rates for TPD (Group and Individual Advised). Group Super decline rates increased from 8% to 8.5% across the industry over the last 12 months.

      -4.8% – Decrease in the lapse rate at 30 June 2025 compared to the prior year.4



      Life insurance market outlook

      The industry is currently focused on a significant increase in TPD claims relating to mental health. The impact of this increase has not significantly impacted profits. This reflects that there is often a 1-2 year delay in changes in claims experience being incorporated into actuarial assumptions as companies assess whether the adverse experience represents a step change in underlying experience or is due to volatility.

      The recent decrease in lapse experience is positive however new business volumes are still not sufficient to replace lapses. It is unclear how advances in AI may disrupt the current distribution channels.

      The adoption of longevity products remains low but represents a potential growth area as advisers and superannuation funds explore solutions to meet diverse customer needs. Key drivers include advice reforms, APRA's focus, and the Treasury's consultation on retirement best practise principles and reporting frameworks. Life insurers can play a pivotal role by supporting fund education and member engagement, as well as collaborating with advisers to enhance distribution and customer alignment.

      We expect the following to be key areas of focus for life insurers during the next 12 months and beyond.

      Although the impact shown in the financials is limited, industry level claims analytics and anecdotal discussions across industry are showing significant and sustained increases in TPD experience particularly from mental health claims. It is unclear how the workers’ compensation changes in Victoria to limit mental health claims and proposed legislation in NSW may further impact claims experience.

      Organic market growth continues to prove challenging for the industry.

      Group insurance

      The group life market remains concentrated among a few providers, with APRA’s push for superannuation fund consolidation further contributing to this trend. While the market contracted significantly after regulatory changes like Protect Your Super (PYS) and Putting Members’ Interest First (PMIF), it has stabilised over the past two years. Group super benefits declined from 29.7m in 2019 to 21.9m in 2025. Super funds continue their focus on managing account erosion impacts from premium rates when adjusting premiums or insurance design. Growth opportunities lie in enhancing member personalisation through digital tools and education, while insurers continue investing in technology to streamline processes and improve alignment with customer expectations. These advancements aim to better serve unadvised members and strengthen connections with advisers, addressing member retention challenges.

      Individual advised

      Lapse rates decreased in the year to 30 June 2025, across lump sum and IDII benefits, and new business rates increased, however the number of lives insured still decreased over the year. This will be influenced by several factors, including the low number of registered IFAs, increasing premium rates and the economic environment.

      Individual non-advised

      The direct market was heavily impacted by the reforms following the Royal Commission, with lives insured decreasing to 2.7m at 30 June 2025 from 5.7m at 30 June 2018, with most of the change flowing from the decrease in Consumer Credit Insurance (moving from 3.0m to 0.8m lives insured). 

      The number of benefits insured, summed across cover and channel types has stabilised as the initial impacts of the PYS and PMIF legislation have flowed through.

      The average premium per policy continued to increase for individual advised business, although at a slower pace. Disability insurance and TPD with increases of 2% and 5% respectively over the past year and 21% and 28% respectively over the past 3 years.

      By contrast, the average premium per life insured has decreased over the past year in group superannuation. Disability insurance and TPD with decreases of 9% over the past year with decreases of 13% and 0% respectively over the past 3 years.

      Decline rates decreased across the industry over the last 12 months. TPD traditionally has the highest decline rate at 8.5% for Group Super (increased from 7.7% last year) and 17.1% for Individual Advised (increased from 16.5% last year).

      Life insurers successfully implemented AASB 17, but many processes remain heavily reliant on manual workarounds—tactical processes that supported AASB 17 compliance but were not originally intended to support in the longer term. These manual processes increase operational risk and consume valuable time each reporting date.

      Automation offers a clear path forward for insurance finance teams, enabling insurers to streamline data flows, reduce spreadsheet dependency, and embed real-time controls that improve accuracy and audit readiness.

      The most significant potential lies in using AI to evolve these manual compliance-orientated processes into intelligent, automated workflows and freeing up capability to focus on more complex and enriching initiatives. AI-driven solutions are capable of conducting real-time reconciliations, producing timely initial commentary on financial performance, generating and validating financial disclosures, and verifying complex calculations efficiently – with a human-in-the-loop to provide governance and oversight. In KPMG's AI in finance report, 96% of the cohort of leading AI adopters globally said that the ROI from AI in their finance process was beating their expectations.

      Progressive insurance finance teams are adopting automation to expedite reporting cycles, strengthen governance, and position finance departments as strategic collaborators fostering growth and resilience.

      Operational Resilience CPS230

      With the implementation of CPS 230 effective from 1 July 2025, insurers should have operationalised and embedded their Operational Resilience frameworks in compliance with the new regulatory standard. The focus now shifts to strengthening organisational resilience and risk management practices across the enterprise to proactively address emerging risks, respond to evolving regulatory obligations, and achieve sustained business value.

      Levels of maturity across operational risk, third-party risk management, cyber security, controls, governance, and business continuity will vary between organisations, as will the extent of enhancement required.

      Insurers with robust comprehensive risk and resilience frameworks, supported by consistent behaviours and practices throughout the business, are better equipped to meet increasing expectations from regulators and to respond effectively to existential threats.

      In contrast, those at earlier stages of maturity are prioritising where they need to uplift – and how to achieve this efficiently including through the use of intelligent automation, technology and data.

      Systems and data

      Regulatory changes and requirements have driven and continue to drive developments in data quality and systems and companies move from resolving the increased complexity around systems, data and analysis introduced by APRA’s IDII requirements and AASB 17 to considering APRA’s data collection roadmap.

      Beyond APRA’s growing expectations of the industry, data continues to be high on the agenda for all insurers. Many insurers have moved beyond data strategy, data quality improvements or the upgrading of systems and data infrastructure. Insurers are not only experimenting but also yielding benefits from Artificial Intelligence and other advanced technologies to test specific use cases around claims management, underwriting, customer experience and general productivity improvements. The key challenges with these initiatives include prioritisation, ensuring an acceptable rate of return, accessing the right expertise, risk and ethics considerations and change management.



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      Footnotes

      1. Prior year measured based on 9 months to 30 June 2024 in the APRA statistics.
      2. Calculated as the sum of lives insured across each cover and channel types. This doesn’t represent the number of individuals insured (as an individual may have multiple covers).
      3. Reflects profits of Life Insurance Statutory Funds, as opposed to the Entity in the APRA Performance Statistics.
      4. Calculated as a weighted average rate across different cover and channel types using the APRA Claims and Dispute statistics which contains only Risk Products.