Wesfarmers Insurance has downgraded its full-year profit outlook after “unparalleled” storm claims wiped nearly $30 million from its bottom line.

MD Rob Scott says the insurance division has been hit by $29 million in claims from natural events so far this year. That’s more than double what the company was expecting.

Speaking to investors at a Wesfarmers briefing in Sydney last Thursday, he said the storms in Melbourne and Perth in March each cost Wesfarmers’ $10 million, triggering its reinsurance. Additional weather events in Queensland accounted for the remaining $9 million in claims.

Total insurance sector losses from the Melbourne and Perth storms currently stand at $1.85 billion.

Wesfarmers’ underwriting business Lumley Insurance was also stung by $14 million in builders’ warranty claims, adding to the $6 million incurred in the second half of 2009. 

Lumley stopped writing builders’ warranty insurance in January.

Mr Scott previously expected full-year earnings before interest, tax and amortisation (EBITA) to double the $63 million the insurance division lodged in the first half of fiscal 2010; but he is now forecasting full-year EBITA of about $112 million.

This represents an 8% improvement on the previous year, but is still 17% shy of Wesfarmers Insurance’s fiscal 2008 result.

The long-term outlook is more favourable, with Mr Scott highlighting premium growth of 6%, while interest rates rises are boosting investment returns. He says investments in HR and IT are also realising cost savings.

Eight weeks into Lumley’s move into direct personal lines via Kmart Tyre and Auto, the company says it’s seeing “very good conversion rates”. Mr Scott says online channels for personal insurance have huge potential in Australia, with only 10% of all personal insurance transactions conducted via the internet.

More than 500 brokers are now connected to Lumley’s online broker placement system, myPlace. Mr Scott says Lumley sold about $3 million in BusPack cover through myPlace in one month, the same amount sold by Lumley through electronic data interchanges in all of 2009.

“The underlying improvement in Lumley is helping to offset these one-off weather events,” he told insuranceNEWS.com.au.

Lumley has also officially launched its new corporate solutions team.

Mr Scott says the group is on the hunt for bolt-on acquisitions but hasn’t found anything that meets earnings criteria. Wesfarmers will release its full-year earnings in August.