European insurers take profit hit

It is thought that Allianz would like to sell its banking arm Dresdner

Falling stock markets and credit market volatility have taken their toll on some of Europe's biggest insurers.

Germany's Allianz abandoned its earnings target for 2008 as it posted quarterly net profit to June down 28% to 1.5bn euros ($2.3bn; £1.2bn).

Losses at its banking unit Dresdner were mainly to blame.

For the six months to June, net profit at French insurance group Axa fell 29% to 2.2bn euros, while profits at Dutch firm Aegon also declined.

Due to expected market conditions, accurate earnings predictions, especially for banking, are not feasible Allianz boss Michael Diekmann See Allianz shares See Axa shares

After the news, shares in Allianz declined 1.2% in Frankfurt to 111.6 euros, but in Paris, investors gave Axa's results a warmer welcome, pushing the French firm's shares up 5.5% to 21.5 euros.

Tough conditions

Earnings at Axa, Europe's second-biggest insurer after Allianz, were hit by credit crunch-related write-downs of 739m euros.

Investment income, asset-management fees and sales of savings products at the firm, which are all linked to stock market performance, also suffered as European shares have fallen sharply since the start of the year amid fears for the health of the global economy.

As it unveiled its results, Allianz warned it would not be able to fulfil a previously stated commitment to grow annual operating profits by 10% this year or next because of the difficult business climate.

"Due to expected market conditions, accurate earnings predictions, especially for banking, are not feasible," said chief executive Michael Diekmann.

It has been widely reported that Allianz wants to sell Dresdner, which it bought in 2001 for 23.5bn euros, to concentrate on its main business of insurance and asset management.

At Aegon, net profits in the second quarter of the year fell 58% to 276m euros, with the bank suffering from the weak dollar and write-downs related to US sub-prime mortgages.