ClearView posted a 13% dip in its underlying NPAT in the first half as it repositions pricing of its life insurance and wealth management products.
The ASX-listed diversified financials has three main businesses: life insurance, wealth management and advice. Together, they posted $13.3 million in underlying NPAT for the first half of FY19.
Life insurance is ClearView's main business, bringing in $11.9 million of the company's underlying NPAT in the first half. The segment's performance was down 5% in the period.
ClearView attributes this to two factors: an adverse claims experience from its income protection portfolio, a 3% dip in sales and an adverse lapse experience of $2.9 million (driven by price positioning issues, poor outcomes with a few AFSLs and the flow-on-effect from the Life Insurance Framework's caps and rules). These offset the 12% increase in life insurance gross premiums and 15% growth in the life insurance in-force portfolio.
"Retention strategies and effects (including further implementation of LIF reforms commission caps), will take time to fully implement and flow through to overall performance," ClearView said.
"ClearView is repricing the LifeSolutions product in 2H19 based on where the portfolio claims experience has improved or deteriorated over recent periods. Pricing changes aim to ensure ClearView remains competitive and profitable across all cover types it also reflect evolving market relativities and underlying claims and reinsurance costs," it said in a statement.
ClearView recorded outflows of $81 million mainly from legacy products with retirees drawing down on investments. Total funds under management was down 4% on the back of poor performance and subdued inflows.
Clearview added a new range of model portfolios and expanded its AFSL footprint in the period, and repriced products.
"Repricing and enhancement of contemporary wealth management product ranges given competitor solutions and recent price changes are aimed at supporting net flows, with a shorter term profit impact as price changes are flowed through the in-force portfolios," it said.
Overall, the segment's underlying NPAT was down 22% to $2.1 million.
The segment's underlying NPAT plunged 93% to just $100,000.
"This result was driven by increased operating expenses (+20%) due to increasing compliance and restitution costs with $1.2 million of costs ($0.8 million after tax) being incurred in 1H FY19," ClearView said.
"[For the overall business,] the current challenging operating environment - characterised by prolonged record low interest rates, poor consumer sentiment exacerbated by the Royal Commission and the flow-on effect of life insurance commission caps under LIF - is expected to continue adversely impacting sales and performance across the industry in the short-to-medium term."