Wesfarmers' Insurance Division Earnings Fall 74pc

Australian company Wesfarmers (WES) is expecting a 74 per cent fall in the first half earnings of its insurance division due to the natural disasters that hit Australia.

The net claims from the bushfires in Western Australia, the Christchurch earthquake on December 23 and the Christmas day storms in Melbourne amount to $28 million over Wesfarmers' allowances. Its Lumley insurance division added another $26 million expense after increasing its reserves for the February Christchurch earthquake.

Due to different disasters, Wesfarmers expects its earnings before interest and tax (EBIT) for the first half to be $23 million, compared to the $65 million it incurred in the same period during the previous year.

According to Managing Director Rob Scott, the company was reducing Wesfarmers' exposure to higher-hazard areas and industries and focused on disciplined underwriting. He added that the premium rate increases were achieved in property and farm-related insurance classes, which were expected to balance the rising cost of re-insurance.

Other than Lumley, Wesfarmers insurance division includes OAMPS and WFI brands.