Claims, remediation hit BTFG earnings

07-Nov-2017

By Sarah Kendell

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BT Financial Group’s (BTFG) cash earnings fell in the 12 months to September 2017 as a result of increased claims in its insurance business and the impact of a number of customer remediation programs in superannuation.

Westpac’s full-year results, announced yesterday, revealed subsidiary wealth management division BTFG’s earnings fell 11 per cent year-on-year to $771 million, despite an increase in funds under management and funds under advice across the group.

Life insurance premiums in-force rose by 10 per cent during the year, but increased claims in BTFG’s general insurance business as a result of Cyclone Debbie impacted on the group’s overall result, Westpac said in a statement.

Additionally, the group’s earnings in the six months to September 2017 were also down 6 per cent on the previous six months as advice income fell, regulatory costs increased and the impact of margin pressure was felt from customers migrating to low-cost MySuper products.

Westpac chief executive Brian Hartzer said BTFG “had a softer year” compared to the broader bank, which increased its statutory net profit by 7 per cent and cash earnings by 3 per cent year-on-year.

“While the underlying [BTFG] business continued to grow, results were impacted by some infrequent items and higher claims,” Hartzer said.

BTFG’s results were also affected by a number of customer remediation programs in relation to insurance in super, which cost the group $118 million over the course of the year, he added.

“We’ve been reviewing our products and services and the way we have engaged with our customers [and] where we have found issues that we need to put right, we ensure that no customer has been disadvantaged from those past practices,” he said.

“For example, a review into our superannuation disclosure is resulting in payments to some customers with pre-existing conditions who did not have the benefit of our improved disclosure practices and who previously had their claims denied.

“We are also refunding customers who were entitled to certain product discounts, but may not have been aware that they needed to specifically request them.”

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