Financial services company ClearView Wealth says its first half of 2019-20 underlying profit will be down by around 23% to about $10.2 million, thanks to rising claims costs and policy lapsing.
Investors didn’t like the news and the shares fell 4.2% to 45 cents. They hit an all-time low of 42 cents.
That underlying figure will be down from $13.3 million for the first half of 2018-19 which was 13% softer than 2017-18. Underlying earnings for 2018-19 were down 22%, so the latest problems are not new to the company or its investors.
Reported profit for 2019-20 is expected to be about $9.8 million, down from $11.5 million from the December 2018 half.
Profits from Life Insurance are down due to higher claims and lapsing policies, which ClearView blamed on poor wages growth, rising consumer costs, falling interest rates, and societal trends.
Clearview reported its life insurance premiums were up 8% while policy lapse rates rose and the company suffered a 35% drop in new policies to $14.2 million. That is very bad news for Clearview as it means the company is not getting enough new business to replace the lapsing policies.
Clearview managing director Simon Swanson said the “majority” of insurers were providing products too cheaply and this was impacting profits across the industry.
“To be frank, the industry needs to make some changes.”
The Hayne royal commission and regulators have made it clear that financial services groups like Clearview have a limited future, especially if they depend on the out of date life insurance product.
Campervan manufacturer Apollo Tourism says its first-half after-tax profit is likely to drop more than 28% to $10.5 million as to subdued demand and squeezed profit margins take their toll.
“Australian last-minute bookings over the peak summer holiday period have been impacted by the bushfires and will affect the second-half 2019-20 results”, the company told the ASX on Wednesday.
“At this stage, it is too difficult to forecast the impact of the bushfires and the Coronavirus on future bookings.”
Half-year results will be announced on February 25.
Shares were eased 1.3% to 37.5 cents. A year ago they were worth $1.11.
