Insurance Australia Group expects to follow a trebling in profit over the year to June with more growth this year, despite taking a less aggressive stance on premium rises than rival Suncorp.
The insurance group said earnings rose 275 per cent to $776 million last financial year, and it would pay a bigger than expected final dividend of 25¢ a share.
While the profit surge was influenced by an unusually low number of claims, chief executive Mike Wilkins flagged a better performance over 2013-14 and improved profit margins in its core Australian businesses.
"We're confident that the momentum we have will continue in 2014," Mr Wilkins said.
He said the insurer expected total premium income to rise from $9.5 billion by 5 to 7 per cent this year, with premium increases in the "low single digits" for home and car cover.
In contrast, Suncorp this week set higher guidance for premium growth of 7 to 9 per cent a year, and flagged "high single digit" rises in the price of home cover and slower rises for motor insurance.
Mr Wilkins said the slower price increases were not an attempt to protect its market share, but the insurer was no longer passing on higher reinsurance costs, which rose after a spate of disasters in recent years.
"We expect the price movements to be much more moderate than they've had to be over the last couple of years because we're not going to see the reinsurance increases," he said.
IAG, which owns the NRMA and CGU brands and sells insurance through RACV, said the surge in profits was due to lower claims from natural disasters, which came in at $464 million, compared with $620 million it had budgeted for.
In its largest business unit in Australia, gross written premium grew 6.6 per cent to $4.6 billion, and underlying insurance margins fell slightly to 13.5 per cent.
Weather conditions have been unusually kind to insurers this year, with few major claims aside from ex-tropical cyclone Oswald and bushfires in NSW and Tasmania. Even so, analysts said the less-volatile measures of IAG's performance were also strong, with its underlying insurance margin widening from 12 to 12.5 per cent.
Andrew Martin, at fund manager Alphinity, said the bigger than expected dividend was the main positive surprise in the result.
The final dividend is equal to 64.7 per cent of cash earnings, close to the upper limit of IAG's pledge to pay out 50 to 70 per cent of profits. It will be fully franked and is due to be paid on October 9.