* Q2 net profit $786 mln vs Reuters poll of $659 mln
* Says good July renewals in Americas, Australia, New Zealand
* One-time factors helped cushion blow from natural disasters
* High claims from floods in Europe and Canada
By Alice Baghdjian
ZURICH, Aug 8 (Reuters) - Swiss Re shrugged off the cost of floods in Europe to post a better-than-expected second-quarter profit on Thursday and said it could beat its main annual performance target if claims remain stable in the second half.
The world's second-largest reinsurer took a heavy hit from claims for the floods across Europe as well as in Canada, pushing it into lossmaking territory according to the industry's main measure of profitability for the first time in two years.
That prompted a 1 percent drop in shares, but Chief Financial Officer George Quinn said he was optimistic on the firm's profitability target for the year and most analysts agreed, saying prospects for a dividend payout also looked intact.
Reinsurers like Hannover, Munich and Swiss Re help insurance company customers cover the cost of major damage claims like hurricanes or earthquakes in exchange for part of the premium.
Swiss Re reported a group combined ratio, which measures profitability by weighing payouts against income from premiums, of 100.1 percent in the second quarter. It was the first time it had topped 100, denoting a loss, since the Japanese earthquake and floods in Thailand in 2011.
Reinsurers' shares have climbed steadily since then as the huge natural catastrophes created market demand, which allowed them to raise property and casualty policy prices.
Swiss Re.'s net profit of $786 million for the second quarter was up from $83 million a year earlier, but it beat the average forecast of $659 million in a Reuters poll only because of unexpected one-time effects worth around $230 million.
Analysts from Kepler Capital Markets said that while the reinsurer's largest unit, which sells property and casualty insurance, is under pressure, Swiss Re can still entice investors with its pledge for shareholder payouts.
"We do not see in today's figure any threat (to the plan) for an ordinary dividend, expected to be 3.8 Swiss francs, integrated with a nice special dividend on top, although it is too early in the year however to determine the size of it," analyst Fabrizio Croce said.
In June, Swiss Re said it would focus on raising its dividend.
After falling 1 percent in morning trading, Swiss Re shares recovered to trade just down at 72.40 Swiss francs by 0800 GMT.
The Swiss reinsurer expects to beat its full-year combined ratio target of 92 percent so long as claims levels remain steady in the second half of the year.
"If all things are normal, and we have normal or average claims experience, we will, in fact, beat the 92 percent for the year given the positive experience for the first quarter," Chief Financial Officer George Quinn said on a call with journalists.
Good July policy renewals in the Americas, Australia and New Zealand and higher premium volumes, as well as a one-time tax credit helped cushion the hit from the natural catastrophes, the company said.
Flooding in central Europe as well as Canada hit the results to the tune of $477 million and there were also costs of $64 million related to last year's sinking of the Costa Concordia cruise liner.
The world's biggest reinsurer, Munich Re, reported a 35 percent fall in second-quarter net profit due to more than 600 million euros ($799.14 million) in damage claims that included the European floods in June.
British life insurer Phoenix Group said in July it was in talks to buy the Admin Re unit of Swiss Re, with the Swiss reinsurer to take a minority shareholding in the British group should a deal materialize.