Nov. 5 (Bloomberg) -- Zurich Financial Services AG, Switzerland’s biggest insurer, posted the biggest decline in almost six months in Swiss trading after third-quarter profit missed analyst estimates.

Net income rose to $909 million from $154 million a year earlier, the Zurich-based company said today in an e-mailed statement. The median estimate of seven analysts surveyed by Bloomberg was for a profit of $1.16 billion.

Gross written premiums from general insurance, including auto and homeowner policies, fell almost 10 percent in the first nine months of this year as Zurich Financial faced a “challenging environment” in North America. The insurer also reported equity, debt and mortgage impairments totaling $379 million in the quarter.

“They had some further impairments which were somewhat higher than I expected,” said Andreas Schaefer, a Dusseldorf, Germany-based analyst with WestLB. There was also a “somewhat weaker than expected result on the general insurance side, especially after Swiss Re presented some strong results.”

Zurich Financial fell as much as 6.1 percent and closed 3.8 percent lower at 228.5 francs. The stock has dropped 0.7 percent this year compared with the 6.3 percent gain in the 30-member Bloomberg Europe 500 Insurance Index.

Strong Solvency

Impairments included $100 million on equities, $158 million on debt and $121 million on “mainly mortgage loans,” Zurich spokesman Ingo Buse said in a phone interview. Net investment income dropped 15 percent to $1.83 billion.

“The result is a bit shy on the profit side,” mainly because of lower investment income, said Stefan Schuermann, a Zurich-based analyst with Vontobel Holding AG. “Overall, the result is not too bad and group solvency is very strong.”

The insurer’s solvency ratio increased to 209 percent from 171 percent a year earlier while its combined ratio, or claims compared with premium income, fell to 98 percent. That improvement came as only one named system, Tropical Storm Claudette, made landfall in the U.S.

Last September, Hurricane Ike slammed into Texas, costing the industry about $20 billion, while Hurricane Gustav produced claims of about $4 billion, according to estimates by Swiss Reinsurance Co., the world’s second-biggest reinsurer.

Zurich said it’s on course to meet targeted cost cuts of $900 million after tax, as well as additional savings of $400 million for the current year.

‘Attractive Dividend’

“We aim to pay a competitive, sustainable dividend,” Chief Executive Officer James Schiro said on a conference call today. “We’ve got a very strong current solvency level, which would support an attractive dividend at the end of this year, but in the insurance business it ain’t over til it’s over.”

The results for the first time include American International Group’s auto insurer 21st Century unit, which Zurich Financial bought in April for $1.9 billion. That helped increase gross written premiums at the company by 5.2 percent to $13 billion.

Swiss Reinsurance reported an unexpected third-quarter profit of 334 million Swiss francs ($328 million) on Nov. 3, after investment gains and as fewer catastrophe claims boosted property and casualty earnings. Larger rivalMunich Re dropped 1.7 percent at 12.42 p.m. in Frankfurt trading after its quarterly profit of 664 million euros ($955 million) missed analysts’ estimates.

To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net

Last Updated: November 5, 2009 11:42 EST