Insurance Australia Group (IAG) said it expects to boost premiums by up to 20 per cent this year as it lifted full year profit by 59 per cent to $1.23 billion.

IAG – the owner of brands such as NRMA and CGU – achieved an insurance margin of 18.3 per cent, at the upper end of its guidance, and an increase from 17.2 per cent in 2012/13.

That margin measures the profit it makes on premiums.

IAG’s insurance profit of $1.58 billion in 2013/14 was up 10.6 per cent.

The insurance giant’s guidance for 2014/15 comprises gross written premium growth of 17-20 per cent, largely as a result of consolidating the Wesfarmers business it acquired in Australia and New Zealand.

Its gross written premium in 2013/14 increased by three per cent to $9.8 billion.

IAG said its insurance margin in the current year is expected to be lower, at 13.5-15.5 per cent.

A fully franked dividend of 26 cents was up from 25 cents a year earlier.

IAG chief executive Mike Wilkins said the company benefited from lower than expected claim costs from natural perils, favourable credit spreads on fixed interest investments and higher than originally expected reserve releases.

The company’s 2012/13 result included a $287 million loss on a UK business it sold.

The 2013/14 natural peril claim expense of $553 million was higher than the previous year but still below its allowance, reflecting relatively benign weather in Australia.