ZURICH (Reuters) - Zurich Financial Services Group (ZURN.VX: Quote, Profile, Research) posted its best ever nine-month net profit on Thursday, despite high claims from U.S. hurricanes, sending its shares to a more than three-year high.

Improving life operations and rising investment income helped the insurance heavyweight post a 21 percent jump in net income to $2.26 billion, easily above the average in a Reuters poll of 12 analysts of $1.97 billion.

Chief Executive Officer Jim Schiro declined to give a forecast for the full year, but noted return on equity in the first nine months stood at 14.9 percent, comfortably above the company's 12 percent target.

"The guidance I have is that return on equity is 12 percent and I feel very good that we've exceeded that target today," Schiro told journalists in a conference call.

Shares in Zurich jumped 4 percent on the news to 248.5 Swiss francs, their highest level since June 2002, adding to a more than 25 percent rise so far this year as the firm recovers from two loss-making years in 2001 and 2002.

Natural catastrophes caused a total of $1.1 billion in claims, causing an underwriting loss in Zurich's non-life business. The combined ratio -- which measures costs and claims over premium income -- worsened to 100.9 percent, but remained below the 101.6 percent average predicted in the poll.

The company said it expected to book net claims from U.S. storm Wilma under $300 million in the fourth quarter, having already given estimates of $650 million for U.S. storm Katrina and $100 million for Alpine floods.

Zurich, whose rivals are other top European players such as Germany's Allianz (ALVG.DE: Quote, Profile, Research), France's Axa (AXAF.PA: Quote, Profile, Research) and Italy's Generali (GASI.MI: Quote, Profile, Research) has been shedding non-core assets over the last few years to improve core profitability.

The group announced further cost savings of $1 billion in the next two years, making a total of $1.5 billion in the three years ending in 2007. It said it was well on its way to meet a $500 million cost savings goal for this year.

"Even if not all of that may trickle through to the bottom line, we think that this will boost our estimates as well as those in markets," said Alain Kupferschmid at Julius Baer, who is reviewing his price target on the shares.

The stock, though having recovered, still trades at a hefty discount to the sector. It changes hands at 9.5 times expected 2005 earnings, compared to a sector average multiple 12.75, according to Reuters data, based on Wednesday's close.

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