Directors’ Report
The Underlying Life NPAT margin of 11.0% (FY23: 9.9%) is at the lower end of the FY26 11-13% target range. However, the materially improved margin in FY24 (+110 bps) reflects interest rate changes between periods, the strong business momentum and benefits of the transformation program. An improving target margin (over time) is driven by scale benefits, increased exposure to underwriting risk for new business (from 1 October 2023) and the operational efficiency savings from the IT investment aligned to the technology platform implementation schedule. The FY24 Underlying NPAT margin was adversely impacted by claims experience (in particular income protection and TPD claims costs). Overall, the portfolio as a whole reported a claims experience loss of $4.3 million after tax. The year end claims reserving included the increase in the incurred but not reported claims delay assumptions, in particular for TPD claims aligned to the actuarial claims experience studies. This was offset by the impacts of assumption changes on the contractual services margin and a reduction in the claims provisions (in particular a release of the COVID-19 provision and reduction in the reopen provision for income protection claims that is assessed at each reporting period). The actuarial assumptions on the long-term income protection and TPD claims were also strengthened to allow for the increased claims costs. There was a partial offset through the reduction in trauma and non advice (closed to new business) claims assumptions. This (together with a further gross premium repricing cycle in CY25 across the relevant products) has been allowed for in the FY26 target margin range of 11% - 13%. ClearView has continued its investment in claims capability, rehabilitation programs and other initiatives to support return to work outcomes. ClearView continues to closely monitor the TPD claims experience. The claims capability, investment (including for TPD claims) and focus provides confidence in the ability to deliver with the FY26 target margin range.
The FY24 result includes a lapse experience profit of $0.9 million. Lapses have been better than the industry but there has been a more recent increased trend in lapse rates across the industry given the higher interest rate environment and cost of living pressures in a post COVID environment. ClearView’s target market and funding of premiums from superannuation (circa 40% of the advice in-force portfolios) are a risk mitigant to the increased trend albeit affordability (interest rate increases and impacts on household budgets) continues to be closely monitored in the current economic environment. The long term actuarial lapse assumptions were broadly reshaped as at 30 June 2024 with the related flow on impacts to the results. Industry participants continue to increase prices on their in-force portfolios. The final phase of the initial staggered price increases from the reinsurance price increases and material changes to the claims assumptions based on experience in 2020 has been implemented from 1 January 2024. Increases in the reinsurance expense between periods reflects changes to reinsurer pricing and the costs associated with the incurred claims treaties. Incurred claims treaties are in place to protect reinsurance recoveries for both lump sum and income protection claims to manage the counterparty risk. ClearView’s LifeSolutions and ClearChoice product ranges are substantially reinsured with Swiss Re Life and Health Australia ( Swiss Re ). ClearView increased its exposure to underwriting risk for new business from 1 October 2023. This confidence to increase the underwriting risk exposure is due to the increased size of the in-force portfolios, improved Group capital position and product sustainability measures seen in the Group’s more recent financial performance. Reinsurance price changes on the LifeSolutions in- force portfolio continue to be monitored closely.
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ClearView Annual Report 2024
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