Insurance Australia Group Ltd (ASX: IAG) expects to post a decrease in annual profit in fiscal 2010. The company said it forecasts better performance next year and has made changes to its executive team.

Annual earnings to June 30 will decline from $181 million to $91 million in fiscal 2009, IAG said in a statement on Tuesday.

In line with guidance, insurance margins for the 12 months to June 30 would be 7 per cent.

The company expects an insurance profit of $493 million for the year, slumping from $515 million in fiscal 2009.

This would be accomplished on net earned premium of $7.1 billion, a decrease from $7.2 billion in 2009.

The group would pay a fully franked final dividend of 4.5 cents.

IAG chief executive Mike Wilkins said the FY10 result indicated a further improvement in the underlying performance of the company's Australian and New Zealand businesses during the year.

"While this year's financial result does not reflect the expectations we held at the outset of the year, I'm encouraged by the clear and ongoing improvement in the operational performance of our businesses in our home markets of Australia and New Zealand," he said in a statement.

"The results of these three businesses, which represent almost 90 per cent of our GWP, have improved year on year, providing evidence were continuing to benefit from our refined corporate strategy.

"The second half of the 2010 result has borne in excess of $200 million of net pre-tax claim costs in respect of the unprecedented Melbourne and Perth storms in March 2010, as well as the $367 million charge required in our UK business following the deterioration in bodily injury claim experience," the company said.

"I'm confident our performance will improve significantly in FY11.

"This is evidenced by our guidance which remains unchanged, and comprises an insurance margin of 10.5 per cent to 12.5 per cent."