YEAR IN BRIEF

Lumley General Insurance Australia’s results were impacted by higher than expected claims as a result of the storms in Newcastle and Victoria and Cyclone George in Western Australia. While good revenue growth was achieved, the market was very competitive with discounting of premiums prevalent across all portfolios and particularly the commercial motor, property and liability portfolios. Good growth was underpinned by the integration of the Australian International Insurance Limited portfolio and new agencies Dual and Nautilus. The insurance margin decreased to 7.0 per cent compared with last year’s 17.1 per cent as claim ratios increased. Net Earned Premium (NEP) increased by 7.8 per cent compared with the previous corresponding period.

Lumley General Insurance New Zealand’s results were substantially impacted by intense competition and falling premium rates.
Commercial motor rates fell further during the year. The insurance margin decreased to 5.2 per cent compared with last year’s 13.0 per cent, due to reduced premium, higher claims and write-offs of capitalised information technology costs. The challenging trading environment placed pressure on loss and expense ratios culminating in a disappointing overall profit margin. In response, plans were put in place to mitigate this.

Wesfarmers Federation Insurance generated a record profit despite a modest agricultural growing season and lower business confidence in drought-affected regional areas. The results were also affected by several significant events, including Newcastle and Victorian storms and bushfires in Western Australia. Growth was achieved from the expanded national distribution network and the insurance margin increased slightly to 16.1 per cent compared with 15.7 per cent in the previous corresponding period. NEP increased by 2.5 per cent over the previous year. Alliances were formed with a number of new partners during the year.

Earnings contribution from OAMPS and Crombie Lockwood, acquired in November 2006 and March 2007 respectively, were in line with expectations.

OAMPS Australia performed well in the face of competitive market conditions. With its successful integration into the division largely complete, the broking business is in a strong position for further growth. The United Kingdom operation continued to expand organically and, combined with a small bolt-on acquisition, delivered increased earnings for the year, despite a decline in rates.

Crombie Lockwood’s strong earnings from March were supported by the acquisition of the Law Mooney Williamson insurance broking business. Generally lower premiums were offset by new business growth to produce an acceptable level of brokerage income.

The premium funding operations performed well in a very competitive environment. In addition to their positive contribution to profit, these businesses facilitate a broader relationship with supporting brokers.

Koukia continued its development of a new general insurance software technology, with a high level of interest from potential Australian and overseas customers.