Wesfarmers Insurance Division continues to be affected by the soft market and increased claims.

The listed conglomerate's MD Richard Goyder told shareholders at last week's AGM the insurance division has suffered from "a number of weather-related catastrophes in NZ and Australia and some large commercial claims in Australia" in the first quarter of the 2007/08 financial year.

"Lower rates in commercial classes in recent years are also affecting underwriting profits," Mr Goyder added.

In the 2006/07 financial year, Wesfarmers Insurance Division's combined operating ratio blew out to 94.2% from 88.1% as Lumley's insurance margins suffered badly in the soft market, declining by more than 10 percentage points in Australia to 7% and almost eight percentage points in NZ to 5.2%.

The drought also continues to affect Wesfarmers Federation Insurance.

"After a positive start to the season, the lack of subsequent rain has reduced crop revenue for Wesfarmers Federation Insurance," Mr Goyder said. "This has been offset to some extent by good retentions and growth in small business."

But its broking arm, which is delivering a strong performance despite the soft market, has buoyed Wesfarmers Insurance.

"Broking activities in all geographies performed well notwithstanding rate pressure," he said.