* Lower disaster claims swing QBE back to profit
* Premiums rising, payout ratio improving as momentum returns
* Shares hit 18-month high (Adds market reaction, analyst quote and management quote)
SYDNEY, Feb 25 (Reuters) - Australia's QBE Insurance Group Ltd QBE.AX posted a better-than-expected full-year cash profit on Monday, underpinned by higher premiums - and a drop in disaster claims - as a management turnaround gains traction.
QBE shares hit an 18-month high in early trade after the company said it wrote more new business, raised its premiums at more than twice the rate of a year earlier and expected further improvement this year.
The strong result draws a line under a tumultuous period for the insurer that posted a record annual loss in 2017 as hurricanes swept the Atlantic and earthquakes rattled Mexico.
"They're good numbers ... basically all the metrics are heading in the right direction," said Bell Potter analyst TS Lim.
QBE shares jumped by more than 5 percent on Monday, while the broader market .AXJO edged higher.
In the year since Pat Regan took over as CEO, QBE has slimmed down and cut costs. It quit Latin America, selling operations there to Zurich Insurance Group AG ZURN.S for $409 million. It also offloaded underperforming units in Thailand and Hong Kong.
Profit after tax on a cash basis was $715 million for the year ended Dec. 31, compared with a loss of $262 million a year ago and analyst expectations for $707 million, according to Refinitiv IBES data.
"Our formula at the moment is very much targeted rate increases, strong retention of our good accounts and very selective new business ... overall that's a playbook that's working," Regan told investors on an earnings call.
QBE flagged higher overall profitability in 2019 as it cut costs and was able to raise prices significantly over 2018, lifting premiums 5 percent on average, compared with a 1.8 percent gain in 2017.
The insurer's combined operating ratio (COR) - claims payouts against premium income - improved sharply, falling from 103.9 percent to 95.7 percent in 2018, within its expected target range of 95 percent to 97.5 percent. As a result, it set a lower COR target range in fiscal 2019 of 94.5 percent to 96.5 percent.
The country's third biggest insurer by market value wrote $13.66 billion worth of gross premiums in 2018, compared with $13.33 billion a year ago. Catastrophe claims comprised about a tenth of all claims during the year, down from 15.4 percent.
The company declared a final dividend of A$0.28 ($0.20) per share, up from A$0.04 per share last year. ($1 = 1.3974 Australian dollars)