Wesfarmers Insurance has reported a slight drop in gross written premium for the year ending June 30.

Premiums fell 0.8% to $1.34 billion, while commissions and expenses rose 16% to $348 million.

Nevertheless, the division’s earnings before interest and tax and amortisation (EBITA) were up 27.8% to $131 million.

The bulk of its premium income was from motor insurance (25%), commercial (22%), personal insurance (20%) and liability (19%).      

While things were looking up in underwriting, Wesfarmers’ broking operations saw commissions and income flat at $184 million for the year while EBITA was down 5.7% at $50 million.

Wesfarmers Insurance MD Rob Scott says the division’s improved profitability is due to better claims management and a focus on profitable underwriting.

But a number of factors did have an impact on underwriting profitability during the year, including severe weather claims and its crop insurance portfolio as well as losses from the wind down of builders’ warranty as well as seven Lumley agency agreements.

Mr Scott says the global financial crisis has impacted on broker earnings as clients face financial hardship.

Although no figures were released for individual brands, Wesfarmers says the Lumley Insurance Australian and NZ operations have improved due to an ongoing focus on strong underwriting and claims management.

The Australian business was hit by hailstorm claims in both Perth and Melbourne in March, but Lumley’s NZ business improved its bottom line due to more favourable weather conditions.

OAMPS UK profits were hit by claims in its scheme business and OAMPS Australia also suffered from lower revenue.   

Mr Scott says he expects growth in premium income during the next 12 months due to technology and retail opportunities such as Coles selling car insurance.

“Broking earnings growth will remain challenging in the current environment.”

And the company is still in a mood to buy – the division’s report says acquisitions that can be integrated easily into existing operations will continue to be looked at in both Australia and the UK.