PROMINA Group is confident of meeting its targets for the full year, despite paying out claims of between $40 million and $50 million for Cyclone Larry.

The insurer, whose brands include AAMI and the Australian Pensioners Insurance Agency, is the last of the major Australian general insurers to disclose its claims losses from the cyclone in far north Queensland last month.

Like its rivals Suncorp, Insurance Australia Group and QBE Insurance, Promina expects to be able to absorb the impact without significantly cutting into its profits. "We expect this event to lead to claims of between $40 million and $50 million pre-tax," the chief executive, Mike Wilkins, told the annual general meeting in Sydney on Friday.

"This will have an impact on our general insurance margin for the first half, however we do not expect the impact on our full-year result to be detrimental to achieving our full-year targets," he said.

Promina expects compound average annual growth in gross written premium of at least 5 per cent a year for the next three years. The group also anticipates an average insurance margin of more than 10 per cent over that time, with an average return on equity of more than 15 per cent.

Promina has received more than 4,500 claims related to Cyclone Larry and will have to pay all the costs itself because its reinsurance contracts, which help insure the company against huge losses, do not come into play until the losses exceed $60 million.

Analysts say the benefits insurers have gained from the surging sharemarket in the past few months will help to offset the cyclone losses.

Mr Wilkins said that even with the cyclone costs Promina was tracking ahead of plan after the first quarter. However, he said some companies were still using irrational pricing in some property and liability classes of commercial insurance.

He singled out some income protection products as having problems with the size of the benefits and definitions for disability but said these commercial classes comprised less than 4 per cent of its total insurance book.

Mr Wilkins scotched speculation of potential mergers between insurers. "We can't see any great catalyst to make anyone want to take Promina over, nor indeed Promina wanting to take over any of our major rivals in this market at the moment," he said.

Earlier this month, QBE chief executive Frank O'Halloran said his company could make better acquisitions overseas than in Australia based on present share prices.

Promina shareholders voted in favour of a capital return of 15c per share, or about $156 million, with the group to conduct an on-market buyback of up to $75 million by the end of the year.

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By Roz Alderton

Copyright © 2006. The Sydney Morning Herald