Wesfarmers Insurance earnings fell 4.8% to $99 million in the first half of this financial year, as Christchurch earthquake cost estimates increased.

The result included a $45 million impact on underwriting earnings from reserve increases related to the February 2011 catastrophe.

Underlying earnings before interest and tax, excluding the earthquake impact, increased 38.5% to $144 million in the six months to December 31, lifted by premium rises in personal and commercial lines.

Insurance revenue grew to $1.11 billion from $1.04 billion in the corresponding period of 2012/13, while the underlying combined operating ratio improved to 90.2% from 94.9%.

Broking earnings before interest, tax and amortisation gained 7.9% to $41 million, as a stronger New Zealand result offset softer conditions in Australia and the UK, plus costs from an IT upgrade.

Wesfarmers Insurance MD Anthony Gianotti says the Australian broking sector is affected by economic conditions in the SME sector and competition from the online market.

“We have offset that with growth through new business, but we need to do a bit more work on retaining business,” he told insuranceNEWS.com.au.

Australian average underwriting premium rate rises eased to 4.4% in the half compared with 6.5% in the previous six months.

In New Zealand average rises were 3.7%, compared with 5.6% in the six months to June 30.

Premium growth is likely to continue moderating following gains in recent years, as competition increases and reinsurance markets soften, Mr Gianotti says.

Wesfarmers expects to complete the sale of its underwriting operations to IAG in the second quarter of the calendar year, depending on regulatory approvals.

But Mr Gianotti said the group remains on the lookout for more broking acquisitions, following OAMPS’ purchase of TCIS last month.

“We clearly have a pipeline of further acquisitions that we want to continue to execute on,” he said. “There is certainly some great potential, particularly in the Australian market, which is still quite fragmented, in terms of continuing to grow through bolt-on acquisitions.”

Wesfarmers says the Coles Insurance home and motor portfolio grew to more than 260,000 policies in the half-year.