Wesfarmers Insurance will target higher returns from underwriting and bolt-on acquisitions in broking this year.

It aims to increase underwriting returns through disciplined risk selection in commercial lines and growth in personal lines via Coles supermarkets, according to Wesfarmers’ annual report.

The outlook for Wesfarmers Insurance appears positive, assuming no significant catastrophes, the parent group says.

Broking earnings are expected to grow following targeted recruitment, acquisitions and productivity improvements, but planned systems upgrades will constrain margin improvement in the short term.

The division’s earnings before interest and tax was $205 million for the year to June 30, up from $5 million the previous year, while revenue grew 9% to $2.1 billion.

Premium revenue increased 10% to $1.68 billion and net claims fell 1% to $920 million.

Improved profit was achieved through disciplined underwriting, with a focus on portfolio remediation, rate increases and exposure management, the report says.

“Claims from natural perils were broadly in line with internal expectations and most portfolios had a favourable claims experience, although this was partially offset by a deterioration in the builders’ warranty portfolio, which is in run-off.”

Coles had issued more than 200,000 policies by financial year-end.

Wesfarmers says revenue and earnings growth in broker OAMPS Australia has been challenging, reflecting difficult trading conditions for SMEs.

Subdued economic conditions in Britain also led to flat earnings from broking there.

In New Zealand, the Crombie Lockwood broking business achieved strong revenue and earnings growth as acquisitions were integrated. The underwriting arm returned to profitability after the Christchurch earthquakes and achieved average rate increases of 5.6% across the portfolio.