(Reuters) — Italian insurer Assicurazioni Generali S.p.A. on Thursday said it was positive on prospects for its business this year after third-quarter profit fell short of market expectations due to the impact of volatile markets.

Europe's third-largest insurer by market value said net profit in the three months to September fell 18% to €420 million ($462.3 million), below an analyst poll of €535 million ($588.9 million).

It said market turbulence in the quarter had prompted it to forgo the sale of some securities with lower realized operating gains on the previous year, as well as take asset impairments.

But net profit for the first nine months of the year was already above the whole of last year's, it said.

Generali, under the helmsmanship of CEO Mario Greco, wrapped up a three-year turnaround plan last year that involved trimming costs and selling assets to bolster its balance sheet.

But like its rivals, the Italian insurer has been faced with weak economic growth in its domestic market and persistently low interest rates that have eaten away at investment returns.

Chief Finance Officer Alberto Minali said he was confident profits this year would be significantly higher than in 2014, with solid margins in life and nonlife business boosting performance.

"Clearly if this also becomes a growing net profit in the future, it will give us room to increase returns for our shareholders," Mr. Minali told reporters.

At 1020 GMT Generali shares were down 0.86% while the European insurance index was down 0.05%.

"We believe Generali's underlying results are better than the headline miss suggests, particularly on the underwriting side in both Life and non-Life," Deutsche Bank A.G. said.

Insurers across Europe are gearing up to comply with new European Union insurance rules known as Solvency II that take effect in January. This is forcing the industry to top up capital to meet policyholder claims and withstand market shocks.

Generali's pro-forma economic solvency ratio — a closely watched measure of an insurer's financial strength — stood at 196% at the end of September. That was above consensus and only slightly below the 200% at end-June despite the market turbulence in the third quarter.

Generali was recently removed from a global list of insurers that are considered "sytemically important" and, as a result, have to put aside extra capital buffers because of their size.

"Q3 profits slid on one-offs, but the quality of the business looks good as shown by the combined ratio and the solvency numbers," Zenit fund manager Stefano Fabiani, who owns some Generali shares, said.

Generali's combined ratio — a measure of an insurer's profitability — improved in the quarter to stand at 92.7% at the end of September.