Australia’s general insurance sector to see profitable 2025 ahead

For FY 2024, gross earned premium grew by 11%.

The Australian general insurance industry recorded a strong performance in fiscal year 2024 (FY 2024), achieving an estimated return on equity (ROE) of 15%, according to Finity’s latest “Optima” report. 

This marks the second consecutive year of double-digit ROE.

For FY 2024, gross earned premium grew by 11%, slightly below the 12.5% increase in FY 2023 but still marking the third consecutive year of double-digit growth. 

Insurers raised rates in response to inflationary pressures. However, the reported net loss ratio worsened to 71.5%, up 3.5 percentage points from FY 2023. 

Whilst Personal Lines short-tail classes improved, Commercial Lines deteriorated, partly due to the absence of favourable factors such as COVID-19-related business interruption reserve releases.

Investment returns in FY 2024 surged to 6%, the highest in over a decade, offsetting a higher combined ratio and driving profitability. 

Over the past five years, the average ROE has been 7%, but the last two years have seen the metric rebound strongly to the upper end of the target range of 10% to 15%.

Finity projects FY 2025 to be another profitable year, with an estimated ROE of 15%. Gross earned premium is forecast to grow by 9%, led by short-tail classes, whilst the reported net loss ratio is expected to remain steady. 

Although investment returns are forecast to decline slightly to 5.4%, expense ratios are likely to improve due to robust premium growth.