The company, which is part of ASX-listed Suncorp, says its annual profit after tax of $6 million was down 79.3% compared to the previous year.
It blames the fall on significantly lower investment returns and higher claims experience compared with the prior period.
"Growth in planned profit margins and favourable lapse experience was offset by significant adverse market adjustment impacts from interest rate movements, net adverse claims experience compared to the net positive experience in the pcp, and increased IFRS17 implementation costs," the company said.
“Investment returns have had a major impact on the life insurance business in the last few months, largely driven by rising interest rates,” Suncorp chief executive Jimmy Higgins says. “But the business remains very stable with good profitability and retention.”
Asteron Life's in-force annual premium sits at $295 million with the bulk of that, $231 million, coming from the adviser channel. However, the adviser channel only grew 1.3% in the past financial year. Direct, which presumably includes AA Life, was flat and "group and other" was up 25%.
In-force premium growth was supported by CPI and age-related premium growth. New business excluding CPI, was in line with the the previous year, with new business in the group channel largely offset by lower business in the IFA channel compared to the previous year.
"Retention rates continue to be above system."
Underlying profit after tax was $13 million in the most recent financial year compared to $22 million in the previous year. However, "market adjustments" were a loss of $7 million this year compared to a gain of $7 million the previous year. This is a $14 million turnaround.
"Market adjustments were significantly impacted from the interest rate environment across all durations of policy liabilities and adverse investment income returns. The prior year was impacted by downward movement in interest rates with the opposite impact occurring in the current half due to the significant upward movements in the yield curve."
“Life insurance is a long-term product and growth, profit and retention need to be looked at over a longer period compared to general insurance," Higgis says in a statement.
"Asteron Life has sustained its sound underlying performance and is in a great position to continue improving its current offering in the market,” he said.
Positive claims experience across both lump sum and income protection in the previous year was replaced in the current half with lower but still positive lump sum experience and negative income protection experience, the company said.
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