About our business
Wesfarmers Insurance operates in the general insurance and financial services sector. Our insurance businesses include Lumley Insurance and WFI in Australia and Lumley General Insurance New Zealand (LGNZ). Our insurance broking businesses include OAMPS Australia, OAMPS United Kingdom and Crombie Lockwood in New Zealand. We also have premium funding businesses and financial management operations. We are represented in 124 locations in Australia, 38 in New Zealand, five in the United Kingdom and one in New Caledonia. At 30 June 2011 we employed 3,684 people. For further information on our businesses, visit ww w.wesfarmersinsurance. com.au

Year in review
This year, the business reported a 77.1 per cent decrease in earnings before interest, tax and amortisation from the previous year. This was a result of the impact of an unprecedented level of natural disasters on claims and reinsurance costs. The number of catastrophe events in Australia and New Zealand, such as the earthquakes in Christchurch, New Zealand, floods in Queensland and Victoria, Cyclone Yasi and other severe weather events around Australia, tested the resilience of the affected communities and our business. These natural disasters have been extremely challenging for the insurance industry and have resulted in a significant number of claims.

While the financial effect of these events has been significant, we have been pleased by the response of our claims teams to our clients in their time of need. We have started the new financial year with a strong reinsurance program in place with continued support from many longstanding reinsurance partners. Our sustainability as a business depends on the skills, commitment and behaviour of our employees in Australia, New Zealand and the United Kingdom.

We continue to focus our efforts on attracting, retaining and developing the best industry talent and have undertaken key initiatives to ensure we keep improving our organisational capability. The Wesfarmers Insurance 'My Voice' survey plays an important role in influencing our people strategy. Key strengths reported this year include teamwork, supervision, common purpose and culture and values. Areas for improvement include communication and cooperation, performance and feedback, reward and recognition, and learning and development. Our direct contribution to a range of local community partnerships supporting initiatives such as farm safety, local community welfare organisations and education was $407,056.

Our total energy consumption was 75,579 gigajoules and our greenhouse gas emissions decreased from 13,405 to 10,393 tonnes. However, this year for the first time, we have included air travel emissions, bringing our total to 12,789 tonnes.

Material issues

• Unprecedented number of catastrophe events in Australia and New Zealand
• Increases in catastrophe reinsurance costs
• Insurance premium rate increases evident in property classes, particularly on higher risk exposures
• Federal Government review of natural disaster insurance in Australia
• Continue to improve our safety management frameworks to improve safety across the division
• Develop our community programs to optimise benefits to the communities in which we operate

People
We continue to invest in our people and fortify our leadership and culture. We have expanded our internal leadership development curriculum and talent management processes to ensure robust succession planning and the identification of our future leaders from within. Overall employee engagement scores in the 'My Voice' survey increased from 71.8 per cent to 73.5 per cent, with the most positive division-wide scores being recorded for the areas of culture and values; teamwork and supervision/leadership.

While we continue to invest in the growth and development of all employees, a particular focus has been made this year on the identification and mentoring of key female talent. We are pleased to report that we have met our goal of increasing the representation of women at senior levels in our business by at least two per cent.

As part of our ongoing commitment to the Wesfarmers Reconciliation Action Plan, this year the business nominated two employees to participate in the Jawun Indigenous Corporate Partnerships program.

The five week program provides employees an opportunity to support Aboriginal organisations in the East Kimberley, Western Australia.

Our commitment to creating a safe and inclusive workplace continues and we recognise this is a long-term investment. Our safety performance continues to improve with an LTIFR rate of less than one.

Environment
The 80 megalitre estimate of our water use is based on actual data from our WFI Bassendean office in Western Australia and LGNZ Auckland office (representing 20.5 per cent of our total employees), which is used to calculate a per capita water use figure that is applied across the remainder of our business.

Several other key environmental initiatives in the business include:

• WFI's business improvement program, 'Time for Action', which has led to the introduction of electronic claims management and lodgement, is expected to create a major saving in paper use across the business
• WFI participated in the Mobile Muster recycling campaign where old phones and accessories are collected for recycling and the proceeds used for community projects. Last financial year, WFI contributed about 26 kilograms of used phones and accessories
• implementation of new electronic operations systems, which has reduced paper use across the Australian underwriting operations. In Lumley Australia, two additional product lines were released on the my.place@lumley electronic distribution platform for insurance brokers
• more than 200 employees started participating in a pilot of SameTime, a unified communication product that enables desk-based collaboration and virtual meetings via audio, video or text. This software is anticipated to reduce the need for travel to attend meetings.

Greenhouse emissions
Our total greenhouse gas emissions were estimated to be 12,789 tonnes of CO₂e, down 4.6 per cent on last year (our total this year includes air travel for the first time). This equates to approximately seven tonnes of CO₂e per million dollars of revenue, down 12.5 per cent on last year. 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 75,579 gigajoules, down 6.9 per cent on last year. Our total energy consumption per million dollars of revenue was estimated to be 43.5 gigajoules, down 9.0 per cent on last year. This energy use is broken down into mainly fuel (29.4 per cent of total energy consumption) and electricity (42.0 per cent).

Governance
Our governance framework includes the policies and principles that guide our board and management team as well as a system of controls that defines how we work. During the year, we continued to strengthen the risk management frameworks within each of our businesses. In particular, the Australian underwriting businesses undertook a review of the systems in place for the identification and assessment of key risks and implemented a more robust process for the management and monitoring of insurance risks.

Our New Zealand businesses, Lumley and Crombie Lockwood, initiated significant projects to prepare these businesses for the introduction of new regulatory regimes which are to apply to the New Zealand insurance sector and are to be phased in over the next two years.

No significant regulatory breaches were recorded by any business within the division. Our businesses self-reported two breaches to relevant regulators and in both instances no action was taken by the relevant regulator.

We actively partnered with the Insurance Council of Australia and contributed submissions on a range of matters affecting the future of insurance in Australia, including:

• changes to the General Insurance Code of Practice, Australian Privacy Principles
• improved disclosure of financial services products
• flood insurance, including the National Disaster Insurance Review
• the Future of Financial Advice
• consolidation of APRA prudential standards.

Community
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:

• WFI annually sponsors rural health and safety information promotions by a leading not-for-profit farm improvement group, the Kondinin Group in Western Australia. WFI also supports the 'Day in the Shed' events in Western Australia's wheatbelt areas to support the health of country people facing tough times as a result of drought. WFI also sponsored the Women on Farms program and contributed to the Royal Flying Doctor Service
• LGNZ supported a number of its social club fundraising initiatives through dollar for dollar matching and donating prizes for charity auctions to the value of $15,987. These funds were used to support 14 different charitable organisations
• OAMPS team members participated in The Bottlemart Smiddy Challenge, The Ballarat Cycle Classic, NIBA mentor program, MOAMPS for Movember and the Global Corporate Challenge.

Economic investment
During the past year, we made provisions to pay $1,538 million in claims to our customers who suffered insured losses. This included support for customers affected by various natural catastrophes in Australia and New Zealand during the period. We paid $288 million in wages and salaries to our employees. Several other key broking and underwriting strategies and important milestones achieved include:

• the acquisition of a New Zealand-based insurance broking business, FMR Risk, by Crombie Lockwood
• the successful sale of OAMPS Super
• delivering on OAMPS business support improvements, including a new client prospecting tool and other broker information system enhancements
• targeted recruitment of specialist brokers to improve our capabilities in OAMPS United Kingdom
• enhancements in insurance portfolio management and pricing capabilities across our underwriting business
• broadening our Coles personal online insurance offer to include additional services such as 24/7 roadside assistance
• strong take-up on the my.place@lumley, an electronic distribution platform for insurance brokers.