UPDATE 1-Swiss Re capital stronger, Q3 profit tops f'cast

* Q3 net profit 334 million Sfr vs forecast 115 million Sfr profit

* Excess capital at AA level over 6 bln Sfr

* P&C combined ratio 84.5 percent vs 93.1 percent forecast

* Outlook "encouraging"

ZURICH, Nov 3 - Swiss Re strengthened its capital in the third quarter, boosting its chances of repaying a costly convertible loan from Warren Buffett as it beat forecast on strong operating profit in its core businesses.

The world's second-biggest reinsurer on Tuesday posted a net profit of 334 million Swiss francs ($327 million) for the third quarter, against an average estimate of 115 million francs profit in a Reuters poll.

The company's shareholder equity increased by 2.4 billion francs to 26.2 billion francs by the end of the quarter.

"During the first nine months of 2009, our excess capital at the AA level improved to over 6 billion Swiss francs," Chief Executive Stefan Lippe said in a statement. "The outlook for our company is encouraging."

The combined ratio in property and casualty, a measure of profitability, was 84.5 percent, much better than 99.6 percent a year earlier and showing wide margins. A combined ratio below 100 percent shows insurance operations are profitable.

The Zurich-based reinsurer's shares hit a record low of 11.88 Swiss francs in March, shortly after capital levels depleted by billions in writedowns on illiquid assets forced it to accept a 3 billion franc convertible investment from rival Warren Buffett's Berkshire Hathaway.

The stock has recovered to close at 42.40 francs on Monday, prompting some analysts to argue Swiss Re should raise fresh capital from shareholders and repay Buffett early in a show of renewed vigour to investors and rivals.