Headwinds slow progress at Wesfarmers Insurance
Wesfarmers Insurance has reported improved performance from its broking and underwriting activities but expects thinning margins and investment returns to offset improved earnings.
Speaking after last week’s investor briefing in Sydney, MD Rob Scott told insuranceNEWS.com.au the latest results are encouraging.
“We are very pleased with the Lumley NZ performance, given five of the top six managers there are new,” he said.
Lumley General NZ recorded a $NZ14 million ($11 million) turnaround in profit before interest, tax and amortisation deductions in the first half of the 2008/09 financial year.
The group’s underwriting businesses include Wesfarmers Federation Insurance, Lumley Australia and Lumley NZ.
The broking firms earned $214 million in the last calendar year while underwriters contributed $1.39 billion in gross written premium.
Wesfarmers’ broking operations include OAMPS operations in the UK and Australia, and Crombie Lockwood in NZ. Mr Scott says OAMPS Australia’s revenue growth is improving, while OAMPS UK has reported strong performance from its London market operations.
He expects the underwriting divisions to record lower earnings this year due to rising claims, poor performance from legacy units in run-off and the impact of lower interest rates on investment income.
On the upside, Mr Scott told insuranceNEWS.com.au the underwriters have achieved rate increases of about 5% in short-tail classes, though liability rates remained low.
“We haven’t seen rate increases in liability lines,” he said. “I think some insurers are still chasing market share, and it is taking time for the claims impact to flow through.”
Mr Scott said Wesfarmers is likely to pursue selective bolt-on acquisitions but believes some vendors are maintaining “unrealistic expectations” in light of the current economic conditions.
Speaking after last week’s investor briefing in Sydney, MD Rob Scott told insuranceNEWS.com.au the latest results are encouraging.
“We are very pleased with the Lumley NZ performance, given five of the top six managers there are new,” he said.
Lumley General NZ recorded a $NZ14 million ($11 million) turnaround in profit before interest, tax and amortisation deductions in the first half of the 2008/09 financial year.
The group’s underwriting businesses include Wesfarmers Federation Insurance, Lumley Australia and Lumley NZ.
The broking firms earned $214 million in the last calendar year while underwriters contributed $1.39 billion in gross written premium.
Wesfarmers’ broking operations include OAMPS operations in the UK and Australia, and Crombie Lockwood in NZ. Mr Scott says OAMPS Australia’s revenue growth is improving, while OAMPS UK has reported strong performance from its London market operations.
He expects the underwriting divisions to record lower earnings this year due to rising claims, poor performance from legacy units in run-off and the impact of lower interest rates on investment income.
On the upside, Mr Scott told insuranceNEWS.com.au the underwriters have achieved rate increases of about 5% in short-tail classes, though liability rates remained low.
“We haven’t seen rate increases in liability lines,” he said. “I think some insurers are still chasing market share, and it is taking time for the claims impact to flow through.”
Mr Scott said Wesfarmers is likely to pursue selective bolt-on acquisitions but believes some vendors are maintaining “unrealistic expectations” in light of the current economic conditions.