Wesfarmers has revealed earnings in its insurance division could fall by more than half this financial year compared to 2010 as a result of the natural catastrophes in Australia and New Zealand.

Giving its third-quarter update to the market, the company says insurance earnings are expected to come in at $60-80 million for the 2011 financial year, down from $131 million last year. 

It also revealed a further earnings hit of $40 million, which Wesfarmers Insurance MD Rob Scott told insuranceNEWS.com.au relates to the Christchurch earthquake, additional reinsurance costs and further claims developments from the floods.

When the company’s half-year results were announced on February 17 – prior to the second Christchurch earthquake – the insurance division predicted it would take a $30-35 million hit as a result of the Australian floods and weather-related events in January and February.

The insurance division posted first-half earnings of $65 million, so the second half will see the division record a loss or small profit, depending which end of the $60-80 million estimate its earnings reach.

Mr Scott says that excluding the impacts of the catastrophes, “the underlying underwriting performance of the division continues to improve and earnings for broking operations remain in line with internal expectations”.