FILE PHOTO: Small toy figures are seen in front of displayed IAG (Insurance Australia Group) logo in this illustration taken, November 8, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) -Insurance Australia Group posted higher annual cash earnings on Wednesday, beating estimates, as increased premiums and lower-than-expected natural peril costs improved performance and allowed the top domestic general insurer to lift its dividend.

The company reported cash earnings of A$1.17 billion ($763.54 million) for the year ended June 30, up from A$905 million last year and slightly above Visible Alpha's consensus estimate of A$1.15 billion.

Shares in the firm gained 2.8% to A$8.74 in early trade, hitting their highest since August 8.

Net earned premium gained 8% to A$9.98 billion, driving insurance profit to A$1.74 billion. The company now expects to log a reported insurance profit of A$1.45 billion to A$1.65 billion for fiscal 2026.

Favourable weather helped the firm keep peril costs below its budget, while sustained premium growth and operational improvements across its home market underpinned stronger earnings.

Natural peril costs for the year came in at A$1.09 billion, about A$200 million below provision. The company will be allocating A$1.32 billion towards its provision for natural perils during fiscal 2026.

IAG declared a final dividend of 19 Australian cents a share, bringing the full-year payout to 31 cents, up 15% from last year.

Analysts at Citi said the results beat consensus and the guidance update "looks at least as good as consensus if not a bit better".

Citi also hailed strong renewal rates in both Australia and New Zealand, expecting the stock to trade flat to up.

IAG said its recently announced alliances with the Royal Automobile Clubs of Queensland and Western Australia were expected to add about A$3 billion in gross written premium and lift insurance profit by at least A$300 million.

The insurer, in mid-May, said it would invest A$1.35 billion to buy the underwriting business and brand of the Royal Automobile Club of Western Australia, following a similar deal with the club in Queensland.

($1 = 1.5323 Australian dollars)

(Reporting by Rishav Chatterjee & Sherin Sunny in Bengaluru; Editing by Mohammed Safi Shamsi and Alan Barona)