A stronger than expected third-quarter net profit of $1.2 billion at Swiss Re boosted hopes that the reinsurance group will join the slew of insurers sharply raising their dividend payouts.

Swiss Re's profit rise reflected lower disaster payouts compared with the prior-year period. Analysts had expected a net profit of $891 million.

Major European insurers are offering shareholders a bigger share of their earnings in dividends this year, as a low level of payouts for damage claims has allowed them to build up large cash piles.

Swiss Re's rival Munich Re for instance has been returning surplus capital to shareholders by buying back its own shares and raising its dividend.

Swiss Re chief financial officer David Cole said it was too early to comment on a special dividend on its 2014 results and the issue would be addressed in February, when the reinsurer reports full-year earnings.

'Our shareholders should expect us to approach this with the same discipline and the same philosophy that we have demonstrated over the last several years,' Cole said yesterday after Swiss Re posted a 14 per cent rise in net profit in the third quarter.

However, investors saw potential for an increased payout after the results.

'Solvency levels remain at record high and together with another very solid cash-generating quarter, dividend prospects have further improved,' said Vontobel analyst Stefan Schuermann. 'Barring major losses in the fourth quarter we clearly expect a special dividend to be paid for the full-year 2014.'

Swiss Re said it sees reinsurance prices stabilising in some areas as the sector tries to ride out competition from institutional investors such as pension funds venturing into the market.

It expects to book an after-tax loss of less than $200 million in the fourth quarter after the sale of US life insurance arm Aurora National Life Assurance Company.-Reuters