Volatile financial instruments sliced 83 per cent from Australian insurers' investment revenue in 2011, the latest quarterly data from the prudential regulator showed.
The sector's investment revenue slid to $1.63 billion for the year from $11.3 billion a year earlier.
The main source of pressure was investment losses, with $14.17 billion in 2011 investment income largely offset by $12.54 billion in realised and unrealised losses, the Australian Prudential Regulation Authority (APRA) said in a report released yesterday.
Australia's total insurance revenue for calendar 2011 was $14.82 billion, down 37 per cent from $23.52 billion a year earlier.
The numbers showed insurers posted the biggest investment hit for the year in the three months to September, when investment revenue was a negative $7.83 billion and total revenue was a negative $4.32 billion.
Over the quarter to 30 September 2011, Australia's benchmark S&P/ASX 200 Index shed 13 per cent and Wall Street's S&P 500 slid 14 per cent.
However, sharply lower expenses and tax in 2011 held annual net profit after tax largely steady at $2.62 billion, compared with $2.65 billion in 2010.
On the superannuation side, insurers' investment revenue slid into the red in 2011, with a negative $969 million this past year from revenue of $8.73 billion in 2010.
Insurance revenue from superannuation funds totalled $5.94 billion, down from $15.07 billion a year earlier.
Again, a steep drop in 2011 expenses and tax kept annual profit mainly flat at $1.38 billion against $1.37 billion in 2010.
Insurance and other sectors have fallen short of market expectations in the latest round of earnings announcements, analysts have said.
As a result, consensus earnings expectations for the 2012 financial year had been revised down to 3 per cent growth from 7 per cent in late January and 14 per cent a year ago, AMP Capital chief economist Shane Oliver said.
"The downgrades have been concentrated in resources, insurers, other financials and media," Oliver said in a report.
