WRAPUP 2-European insurers struggle to hike prices

* Price rises not offsetting claims - analysts

* Zurich Financial Q3 business oper profit $1.5 bln

* Munich Re Q3 net 644 mln eurosvs 700 mln f'cast

* European insurance stock index down 1.4 pct (Adds further analyst comment, ZFS detail; updates index)

LONDON, Nov 5 (Reuters) - European non-life insurers are struggling to absorb rising claims as recession-weary policyholders put up stiffer-than-expected resistance to higher prices.

At the start of the year, insurers had hoped the economic downturn would ease competitive pressures as some players pulled out of the market, paving the way for a broad rise in premium rates.

But trading updates from a clutch of European insurers on Thursday showed progress was slower than hoped, analysts said.

"The message is that they're all running very hard to stand still," said ING analyst Kevin Ryan.

"There's nothing in these numbers to get people saying 'yippee, the world's a different place.'"

Insurance claims typically rise during a recession, reflecting companies' and consumers' tighter financial circumstances and with some of the increase due to higher levels of fraud.

The Dow Jones index of European insurance shares was down 0.26 percent by 1530 GMT, underperforming the broader European stock market index, which was 0.8 percent higher.

PROFIT PRESSURE

Zurich Financial Services (ZFS) , Europe's third-biggest insurer, illustrated the problem afflicting the sector, where non-life profits are being squeezed between higher claims and at best-sluggish price increases. [ID:nL498066]

ZFS's third-quarter combined ratio -- claims and expenses as a proportion of premium income, a key indicator of underwriting profit -- was 98 percent, the company said, exceeding the 96 percent pencilled in by analysts.

That weighed on ZFS's overall third-quarter profit, which came in at $1.5 billion, below the $1.6 billion expected by sector watchers, according to a Reuters poll.

"The combined ratio is disappointing, with a sequential uptick in the attritional claims ratio," analysts at Keefe Bruyette & Woods wrote in a note.

Munich Re , the world's biggest reinsurer, was also gloomy on prices, saying it expected no rate increases outside the market for natural catastrophe cover, which is still benefiting from the impact of hurricanes Ike and Gustav last year. [ID:nL4645165]

"In most other segments and markets, price levels will probably move sideways," the company said as it reported a third-quarter net profit of 644 million euros ($956.3 million), below analysts' expectation of 700 million euros.

Trends in primary insurance pricing tend to be passed on to the reinsurance market, as insurers facing price pressures in turn resist efforts to raise reinsurance rates.

BUCKING TRENDS

"Non-life underwriting is under some pressure," said Nomura analyst Nick Holmes. "Pricing in most European countries is rising slightly, but the price rises are not really sufficient to offset the higher claims."

However, there was better news from RSA , Britain's biggest commercial insurer, which unveiled a 7 percent rise in rates in its key UK motor division in the year to September. [ID:nL5166223]

But the company, best known in Britain for its More Than motor and home insurance business, acknowledged the pricing environment was weak, with nine-month sales up just 4 percent as it walked away from unprofitable business.

Bermuda-based property and casualty insurer Catlin also reported better pricing on Thursday, with average premium rates climbing 6 percent in the first nine months of the year, while sales rose 10 percent. [ID:nL5383313]

Also on Thursday, Anglo-South African life insurer and asset manager Old Mutual (LSE: OML.L - news) unveiled a 4 percent drop in life insurance sales, and a 53 percent jump in unit trust sales in the third quarter, beating analysts' expectations. [ID:nL5375797] ($1=.6734 Euro) (Additional reporting by Jonathan Gould in Frankfurt, Jason Rhodes in Zurich, and Paul Hoskins in London; editing by Erica Billingham and Karen Foster)