Wesfarmers Insurance has blamed catastrophes in Australia and New Zealand for a slide in pre-tax earnings from $131 million to $30 million in the year to June 30, but MD Rob Scott says the underlying business is performing well and he is looking for acquisitions.

Mr Scott told insuranceNEWS.com.au that while 2010/11 was disappointing financially for all underwriters, Wesfarmers made good progress in setting its course for future growth.

“We are keen to grow business and are always on the lookout for good people,” he said.

The company’s operating revenue rose 2.4% to $1.7 billion.

Its combined operating ratio was 109.3% and the earnings before tax and amortisation margin from broking was 27.5%.

Mr Scott says the company handled a record number of claims. Event claims and reinsurance reinstatement costs exceeded the budget by $110 million and the cost of reinsurance rose.

He says the gross loss was split roughly 50/50 between Australia and New Zealand, but the frequency of events in Australia meant that at a net level the loss was greater here.

New growth initiatives such as Coles Insurance and Lumley’s my.place are “gaining traction”.

He sees opportunities to improve the profit margin in underwriting, and says Lumley’s reputation among brokers has increased significantly in Australia and New Zealand.

Broking contributed $62 million before tax, up 5.1% and Mr Scott says this year’s earnings will benefit from a full year’s contribution from New Zealand broker FMR Risk, targeted recruitment of specialist brokers and a focus on premium funding. 

“It was good to see our insurance broking operations grow both revenue and earnings over the past year, notwithstanding the strengthening Australian dollar,” he said. “We are confident that recent bolt-on acquisitions and strategic hires will provide further growth momentum for our broking operations.” 

In the UK, the company has focused on building expertise and has hired specialists in trade credit, fine arts and the life sciences, while OAMPS in Australia is continuing to strengthen its position in the corporate area and increase its presence in WA. 

Mr Scott says Wesfarmers has the capital “to make some substantial acquisitions of good businesses”.