(Reuters) -Australian insurer Suncorp reported better-than-expected full-year cash earnings on Thursday, driven by improved insurance margins and higher investment returns, and announced a share buyback plan of up to A$400 million ($261.72 million).

Suncorp, now a pure-play general insurer since exiting its banking and life insurance divisions, benefited from favourable natural hazard costs, improved margins on higher policy prices and increased returns on investments in the year ended June 30.

The margin improvement was "driven by the earn through of price increases that reflected inflation and a higher natural hazards allowance, especially in Consumer and New Zealand," the Brisbane-based insurer said.

Cash earnings for the year rose 8% to A$1.49 billion, beating the Visible Alpha consensus estimate of A$1.47 billion, while statutory profit soared 52% to A$1.82 billion on one-off gains from the sale of its banking unit.

"The market should like the higher-than-expected share buy-back, while the small beat relative to consensus should also be received positively," Citi analysts wrote in a note.

Suncorp's shares were trading over 3% higher at A$20.725 by 0030 GMT, after jumping as much as A$20.970 earlier in the day.

The company's underlying insurance trading ratio, a key profitability indicator, ticked 8 basis points higher to 11.9% in the year to June 30, while its net investment returns jumped 16% to A$766 million.

Natural hazard costs came in at A$1.36 billion, more than A$200 million below its allowance for the year.

Suncorp's gross written premiums rose 6% to A$15.01 billion in 2025, and are expected to grow in mid-single digits in the current fiscal year. The underlying insurance trading ratio is targeted to be in the top half of the 10% to 12% range.

The general insurer also announced an on-market share buyback of up to A$400 million, just six months after it returned A$4.1 billion capital return through share consolidation. It declared a final dividend of 49 cents per share.

Earlier this month, Suncorp's rivals QBE Insurance ( QBEIF ) and Insurance Australia Group also reported higher profits on the back of lower catastrophe claims and natural peril costs, as well as higher premiums.

($1 = 1.5284 Australian dollars)