April 7 (Bloomberg) -- QBE Insurance Group Ltd., Australia's largest property and casualty insurer, said income from insurance sales may rise as much as 13 percent to A$10.6 billion ($7.7 billion) this year because of a decline in the Australian dollar.

Chief Executive Officer Frank O'Halloran forecast in February premium growth of 10 percent. He said today that target may rise 3 percent if the currency stays at current levels. The local dollar fell 4.7 percent the past year, hitting an 18-month low last week. It bought 73.15 U.S. cents at 4:56 p.m. in Sydney.

QBE gets three quarters of its earnings overseas and increased profit by 20 percent to a record A$600 million in the six months ended Dec. 31 after buying competitors. O'Halloran said today he's in talks to buy more assets in Europe, the U.S., Latin America and Asia. He wasn't more specific.

``QBE remains our preferred general insurance sector pick, reflecting superior premium growth prospects relative to domestic peers,'' said Tony Jackson, an analyst at Macquarie Bank Ltd., in a report April 4. He rates QBE ``outperform'' with a 12-month stock price target of A$24.02.

QBE reiterated its insurance margin, a measure of the profitability of policies, will be as high as 17 percent in 2006 and profit will rise more than 10 percent. ``We remain confident in meeting our profit targets,'' Chairman John Cloney told shareholders at QBE's annual meeting in Sydney.

QBE's previous sales growth forecast was based on an Australian dollar worth 77 U.S. cents and 43 U.K. pence, O'Halloran told reporters today. The local dollar bought 41.80 pence in Sydney. A 5 percent change in the value of the local dollar has a A$50 million effect on QBE's profit, he said.

``We are sticking to our core view that the Australian dollar will under-perform major currencies this year,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney, who forecasts it to decline to 68 U.S. cents by mid-year.

O'Halloran said the insurer isn't ``currently'' in discussions with any domestic competitors. Still, he told reporters he keeps the share prices of Insurance Australia Group Ltd., the nation's largest auto and home insurer, Promina Group Ltd. and Suncorp-Metway Ltd. in his Blackberry.

Insurance Australia stock is down 11 percent the past year, and Promina, the nation's second-largest auto and home insurer, is up 14 percent -- the worst performers in the seven-member S&P/ASX 200 Insurance Index, which has gained 28 percent. QBE is up 57 percent, the most in the index.

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