ZURICH (Bloomberg) – Swiss Reinsurance Co., the world's largest reinsurer, yesterday reported third-quarter profit that surpassed analysts' estimates as taxes fell and damage claims remained low.

Swiss Re rose the most in three-and-a-half years in Zurich trading after the company said profit fell five percent to 1.47 billion Swiss francs ($1.28bn), above the 1.13bn-franc median estimate of nine analysts surveyed by Bloomberg.

"The third-quarter of 2006 was exceptionally mild" with very few natural catastrophes, said Rene Locher, an analyst with Bank Sal. Oppenheim in Zurich who has a "neutral" recommendation on the stock.

For the second straight year no major hurricane made landfall in the US, keeping damage claims below average for the third quarter and cushioning the impact of a decline in prices for reinsurance. Profit was also underpinned by lower tax rates in Germany and Britain and a release of 170 million francs of reserves, Swiss Re said.

The stock rose as much as 4.1 percent, the most since March 25, 2004, and was up 2.5 francs, or 2.5 percent, to 104.3 francs. The shares have gained 0.8 percent this year, compared with a 3.8 percent decline in the 28-member Bloomberg Europe 500 Insurance Index.

Munich Re, the second-biggest reinsurer, yesterday reported a 69 percent increase in third-quarter profit, buoyed by a tax gain. Operating profit fell 13 percent amid pressure on prices. Billionaire Warren Buffett's Berkshire Hathaway Inc. said on November 3 that profit surged 64 percent as it reaped an eightfold gain on a stake in PetroChina Co., even as reinsurance earnings fell.

Swiss Re has said it may reduce natural catastrophe coverage in the US should rates drop too low. Falling prices in the US pushed rates during July contract renewals two percent lower, with overall renewals dropping nine percent, chief financial officer George Quinn said in August.

Swiss Re, which helps insurers such as Allianz SE shoulder risks, forecast industrywide claims for storms, floods and earthquakes would rise to $35bn this year from $12bn in 2006.

The results for the property and casualty unit, Swiss Re's biggest, "benefited from low natural catastrophe claims" and compare with "an outstanding" year-earlier period, Swiss Re said in its statement.

Claims and costs at the property and casualty reinsurance unit amounted to 83.4 centimes of every franc in premium income, down from 86.5 centimes in the year-earlier period. A reading below 100 indicates that the business was profitable. The unit posted an operating profit of 1.54bn francs.

"Despite the short-term market conditions we're very confident in our ability" to meet targets for a 10 percent increase in earnings per share and a return on equity of 13 percent over the reinsurance cycle, Mr. Quinn said in an interview.