* Net profit of 1.94 bln euros above expected 1.88 bln euros
* CEO says productivity gains substantial
* Combined ratio drops to 93.1 pct vs 96.9 pct a year ago (Updates with comments from CFO, share price, analyst comment)
FRANKFURT, Nov 9 (Reuters) - Allianz is "highly likely" to reach the upper half of its 2018 profit target range, Chief Financial Officer Giulio Terzariol said as the German insurer cited lower costs and claims in its third quarter results on Friday.
The group aims for full-year operating profit of 11.1 billion euros ($12.59 billion), give or take 500 million euros.
Allianz and the insurance sector are bouncing back from losses incurred by hurricanes, fires and earthquakes in North America in 2017 -- the industry's costliest year ever.
In the third quarter to the end of September, net profit attributable to shareholders surged 24 percent to 1.94 billion euros, rising from 1.57 billion a year ago and beating consensus for 1.88 billion in a Reuters poll.
Chief Executive Oliver Baete said the company had performed strongly across the board so far this year and productivity gains were substantial.
"We are very confident to reach our targets also for this year," Baete said.
Analysts at Baader Helvea Equity Research called the quarterly earnings "overall solid". Allianz shares traded 1.1 percent higher early in Frankfurt, outperforming a decline in the broader DAX index of bluechip stocks.
The company is conducting a strategy review of its property and casualty business. Executives have said the review would not result in a major shake-up and results are expected this month.
Allianz's combined ratio in its property and casualty division, a key measure of profitability, was 93.1 percent in the third quarter, down from 96.9 percent a year ago. Readings below 100 indicate profitability.
Lower losses from natural catastrophes and reduced expenses were behind the decline, the company said.
Allianz said that its asset management unit, which includes PIMCO, contributed to profitability.
Third-party assets under management rose by 23 billion euros to 1.487 trillion euros. ($1 = 0.8818 euros) (Reporting by Tom Sims Editing by Sherry Jacob-Phillips and Keith Weir)