Sydney-based QBE Insurance Group, the second largest underwriter in the Lloyd's of London market, has reported a 20% increase in first half profits and upgraded its expected insurance margin by 1% to between 17% and 18%.

Australia’s largest general insurer by premium income posted an operating profit after tax of A$591 million for the first half of the year ended June 30, 2006. The insurer says the increase is a result of the premium growth from acquisitions during 2005, along with improved insurance margins and higher than expected overall premium rate increases for the group.

Following the strong performance QBE upgraded its previous 2006 insurance profit target of between 16% and 17% of net earned premium to between 17% and 18%.

The group, which earns around three-quarters of its premium income offshore, also recorded an increase in the interim dividend from 33 cents per share to 40 cents per share, which represents a payout of $322 million, up 27% from the previous half year.

QBE profits during the half were affected by slightly lower investment income due to reduced realized and unrealized gains on equities of $11 million after tax compared with $39 million after tax for the same period last year.