Wesfarmers Insurance (WI) operates in the general insurance and financial services sector. Our insurance businesses include Lumley Insurance (LI) and WFI in Australia and Lumley General Insurance New Zealand (LGNZ). Our insurance broking businesses include OAMPS Australia, OAMPS United Kingdom (UK) and Crombie Lockwood in New Zealand (NZ). We also have underwriting agencies, premium funding businesses and superannuation and financial management operations. We are represented in 127 locations in Australia, 28 in New Zealand and five in the United Kingdom. At 30 June we employed 3,288 people. For further information on our businesses visit www.wesfarmersinsurance.com.au

This financial year the business reported a 27 per cent increase in profit, despite it being a challenging year with the global recession and several catastrophes testing the resilience of the industry and our businesses. Performance was affected by catastrophe events, particularly the Perth and Melbourne hailstorms.

In response to the storm events across Australia, the work performed by the LI claims and assessing staff and management and WFI teams, in both Melbourne and Perth, was integral to maintaining high levels of customer service under very difficult circumstances. LI received positive feedback from brokers in Perth, commenting on its customer service excellence and its pragmatic approach.

We continue to focus our efforts on attracting, retaining and developing the best industry talent, maintaining momentum with the Lumley turnaround and financial performance, improving processes and technology platforms to achieve efficiencies and responding effectively to regulatory changes.

We are implementing our bi-annual talent review processes to strengthen our people assessment and development processes and track our leadership pipeline for succession planning purposes. Important actions resulting from these reviews have included a number of key appointments and investment in additional leadership development training.

During the year, we contributed $961,284 to a range of local community partnerships supporting initiatives such as farm safety, local community welfare organisations and education.

Our total energy consumption was unchanged at 0.08 million gigajoules and our carbon dioxide equivalent (CO₂e) emissions increased from 12,236 to 13,405 tonnes.

Our vision is to create strong leadership, which we believe will in turn be the cornerstone of our success and we are committed to helping our people achieve their full potential. We continued to build and enhance the successful Wesfarmers Insurance Leadership Development program referred to in last year’s report. An additional 100 business leaders completed the program during the year.

We launched our first employee engagement survey across the business, confirming our commitment to building an open, positive culture and help our efforts to attract, develop and retain the best people in the industry. In addition to the existing employee assistance program (EAP) in LI we launched EAP programs across our other businesses to offer support and counselling to staff.

Crombie Lockwood developed and launched the Performance Leadership program in New Zealand, run in partnership with Lumley New Zealand.

Our businesses participated in a range of employee health and wellbeing programs as well as community fundraising initiatives. OAMPS employees participated in the Ballarat Cycle Challenge in Vic, raising money for the Ballarat Cancer Research Centre and also entered a team in the Great Adventure Challenge; a nine hour race that raised money for the Starlight Foundation.

In previous years we have based our estimates of water use on actual data from our Bassendean WA office, which has been extrapolated on a per capita basis across our business. For this report we have collected actual water use data from nine offices in Australia and New Zealand, representing 49 per cent of our total staff, and used this to calculate a per capita water use figure across our business.

Several key initiatives in the Lumley business include:

• Transfer to duplex printing as a default;
• LI toners and printer cartridges are recycled via Cartridge Rescue;
• Purchase of 100 per cent recycled paper as a national standard;
• Earth Hour was participated in by all LI offices;
• The conversion from the Holden Commodore to the Holden Cruze has resulted in a 27 per cent less petrol usage for each Commodore replaced; and
• Decreased the CO₂ emissions from 246 grams per kilometre per Commodore to 179 grams per kilometre per Cruze.

Within each of our businesses, we run programs to improve our environmental performance, set targets, such as water and energy use, recycling, reducing waste, and track our progress.

We have purchased and retired sufficient carbon credits to become carbon neutral since June 30, 2009.

Greenhouse emissions

Our total greenhouse gas emissions were estimated to be 13,405 tonnes of CO₂e, up 10 per cent on last year, and this equates to eight tonnes of CO₂e per million dollars of revenue. The greenhouse gas emissions were largely due to electricity consumption in our offices.

Energy use

Our main energy use during the year related primarily to energy consumed as a result of electricity consumption in our offices. Total energy consumption was estimated to be 81,159 gigajoules, down 10 per cent on last year. Our total energy consumption per million dollars of revenue was estimated to be 48 gigajoules, down five per cent on last year. This energy use is broken down into electricity (77 per cent), fuel (22 per cent of total energy consumption) and emissions relating to the use of hire cars (one per cent).

Over the last 12 months, WI has focused on building the capability of the Risk and Compliance teams in our businesses through increased resources and the implementation of improved risk, compliance and governance systems.

In accordance with the Australian Prudential and Regulation Authority (APRA) prudential standards we established a Remuneration Committee and introduced a new Remuneration Policy to better align remuneration and risk management across the business. The committee is comprised of a majority of independent directors.

During the year APRA conducted reviews within the WFI and OAMPS Superannuation businesses with no major issues being identified.

Lumley NZ and Crombie Lockwood are working towards the introduction of a new regulatory regime for insurers and brokers. In Lumley NZ, the two most significant changes will be the move towards prudential supervision and licensing of insurers by the Reserve Bank of New Zealand and the regulation of financial advice by the Securities Commission of New Zealand.

The consolidation of the two Australian underwriting licences that occurred in 2009 and subsequent investment in systems capabilities across the underwriting businesses is expected to drive further operational efficiencies.

Our community support program is focused on the local communities where our businesses operate. Some of the community contributions we made during the year include:

• Crombie Lockwood supported United Way in New Zealand by providing free support and assistance for a number of projects from painting plunket rooms, volunteering at the summer Special Olympics and weeding wetlands. Approximately 329 staff volunteered more than 2,303 company hours. The total value of this contribution was estimated to be worth $80,605.
• WFI continues to support the Kondinin group, a leading not-for-profit farm improvement group in WA.
• OAMPS again sponsored Yachting Australia and various Australian Rules football and netball leagues.
• Lumley made a $10,000 donation to the Inspire Foundation, whose mission it is to help young people lead happier lives. The business also matched staff fundraising efforts to raise almost $7,000 for the victims of the Haiti earthquake.

During the past year we made provisions to pay $936 million in claims to our customers who suffered insured losses. This included support for customers affected by various natural catastrophes in Australia during the period.

We also purchased 26,000 Verified Emission Reduction carbon credits that comply with Australia’s National Carbon Offset Standard. This investment has enabled WI to offset our Australian emissions for the 12 months to 30 June 2010.

Several other key strategies and important milestones achieved include:

• Lumley Australia’s launch of the ‘my.place’ Electronic Data Interchange (EDI) system and the establishment of a new Corporate Solutions team;
• the launch of a new personal lines offer with Coles and Kmart Tyre & Auto Service underwritten by Wesfarmers Insurance;
• new management appointments in OAMPS and investments in technology to improve the performance of the broking system; and
• Lumley New Zealand commenced a major investment program to install a new policy administration system.