IAG has increased its insurance margin forecast after lower-than-expected natural peril claims, but it says gross written premium (GWP) growth will be at the bottom of a previously flagged range.

The company expects an insurance margin of 18-18.3% for the year to June 30, up on its previous forecast of 14.5-16.5%.

Second-half net natural peril expenses were about $220 million – $100 million below the company’s allowance – as benign experience in Australia was only partly offset by storms in New Zealand.

Credit spreads have also contributed to the improved margin forecast, which is based on underwriting and investment income as a percentage of net earned premium.

IAG has forecast GWP growth of about 3%, at the bottom of its previous range of 3-5%, with an absence of cost pressures muting the need for increases. GWP is expected to rise more than 4% allowing for the end of the Victorian fire services levy.

Net earned premium for the fiscal year is expected to be $8.64 billion.

The financial results, to be released on August 19, will include about $20 million of costs related to the Wesfarmers underwriting acquisition and $50 million of costs from an overhaul of the IAG operating structure.

IAG has acquired reinsurance for the Wesfarmers business in Australia and New Zealand, with a main catastrophe cover for losses up to $1.35 billion. The group’s maximum event retention has increased as a result, to $225 million on July 1 from $175 million.