News: QBE UPDATE 1-Australia's QBE Insurance annual profit beats forecast on lower catastrophe...

(Adds chairman's comments, details, background on cost-cutting measures)

Feb 25 (Reuters) - Australia's QBE Insurance Group Ltd (QBE) posted a better than expected annual cash profit on Monday, underpinned by higher premiums and a drop in catastrophe claims.

Profit after tax on a cash basis came in at $715 million for the year ended Dec. 31, compared with a loss of $262 million a year ago and topped analyst expectations of $707.02 million, according to Refinitiv IBES data.

"We saw a reduced incidence of natural catastrophes this year in contrast to the record losses that impacted the global insurance and reinsurance market in 2017," said Chairman W. Marston Becker.

To better protect itself from catastrophes, such as in 2017 when earnings were marred by massive natural disaster claims, the Sydney-based firm finalised a reinsurance program that took effect from Jan. 1 this year.

Larger rivals Insurance Group Australia Ltd (IAG) and Suncorp Group Ltd (SUN) have posted a drop, however, in their interim profits, hurt by claims from a Sydney hailstorm in December, which was declared a catastrophe by the Insurance Council of Australia.

QBE flagged higher overall profitability in 2019 as it embarked on a three-year cost-cutting drive, targeting net cost savings of $130 million and an expense ratio of around 14 percent in 2021. The company added it would incur one-off costs in 2019 as a result of the cost-cutting measures.

Over the year, the insurer has divested several of its overseas businesses in a move to streamline operations. QBE added that the disposals had generated sale proceeds of about $550 million.

QBE said its combined operating ratio (COR) - claims payouts against premium income - in 2018 was 95.7 percent, falling within the expected target range of 95 percent to 97.5 percent. As a result, it set a lower COR target range in fiscal 2019 between 94.5 and 96.5 percent.

The country's third biggest insurer by market value wrote $13.66 billion worth of gross premiums in fiscal 2018, compared with $13.33 billion a year ago.

The company declared a final dividend of 28 Australian cents per share, higher than 4 Australian cents per share last year.