* Year net income $3.88 bln, vs forecast $3.27 bln
* Combined ratio improves 0.5 point to 98.4 pct
* Dividend unchanged at 17 Swiss francs
* Shares up 0.8 percent (Releads, adds shares, analyst comment)
ZURICH, Feb 14 (Reuters) - Zurich Insurance beat forecasts with a 3 percent rise in 2012 net profit after big fourth-quarter investment gains offset charges taken against its German business and Storm Sandy-related payouts.
Strong growth at recently acquired Latin American and Malaysian businesses helped boost margins at the Swiss insurer which reported full-year profit of $3.88 billion, compared with a forecast for $3.27 billion in a Reuters poll.
"Realised (fourth-quarter) investment gains of $946 million were much higher than expected. We estimated $30 million, in Q3 Zurich had $15 million - and that explains the bottom line beat," Helvea analyst Daniel Bischof said on Thursday.
The Swiss-based insurer, whose 6.6 percent dividend yield is already the highest among Switzerland's biggest companies, said it would pay a dividend of 17 francs, unchanged from the payout on 2011 profit.
"The integration of our acquired insurance businesses in Latin America and Malaysia is progressing well and contributing meaningfully to growth as evidenced in the strong contribution to profitability from these areas," chief executive Martin Senn said.
Zurich's combined ratio, a measure of underwriting profitability, was 98.4 percent, a 0.5 point improvement and compared with a forecast for 99.4 percent.
Shares in Zurich, whose rivals include Aegon and Axa, were 0.8 percent higher at 261 Swiss francs by 0950 GMT, ahead of a 0.4 percent advance in a European insurance sector index.
The group said its results were hit by above average levels of catastrophe, large and weather-related losses, including Storm Sandy, as well as charges in Germany.
In October, the company said it would take a $550 million hit to third-quarter pretax profit after a review showed its German arm had not set aside enough money to cover claims that could be made years after policies expired.
The group said on Thursday that, as a result of the review of its German business, it had raised claims provisions in the fourth quarter by a total of around $130 million.
"A number of negative items, including Sandy and the additional reserve strengthening in Germany led to the uninspiring Q4 operating performance," said Bischof.
"Trading at around 1.2 times book value. We believe upside potential is limited at this stage and we prefer some of the cheaper non-life oriented names such as Bâloise and Allianz." (Reporting by Martin de Sa'Pinto; Editing by Dan Lalor)