Allianz SE, Europe's biggest insurer, abandoned its earnings growth forecast after losses at Dresdner Bank led to a 29 per cent drop in second-quarter profit.
Allianz expects financial markets to remain difficult through 2009, meaning its target for 10 per cent compound annual growth in operating earnings "cannot be maintained," the Munich-based insurer said in a statement.
In the current business climate it's impossible to accurately predict earnings, chief executive officer Michael Diekmann said in the statement. Allianz is holding talks to sell Dresdner Bank and its Dresdner Kleinwort securities unit, where about €502 million of writedowns related to the US subprime collapse led to a fourth straight quarterly loss.
Net income dropped to €1.5 billion ($2.3 billion) from €2.1 billion a year earlier.
Total revenue decreased 9.5 per cent to €22 billion in the quarter "as the capital market crisis negatively affected revenue development in the life insurance business, and in particular unit-linked life insurance products," Allianz said.
Analysts surveyed by Bloomberg had estimated revenue of €23.5 billion in the quarter. Dresdner, bought by Allianz in 2001, had a second-quarter operating loss of €566 million.
The unit wrote down the value of asset-backed securities by €286 million, debt backed by bond insurers by €212 million, and investments in the K2 Corp. structured investment vehicle by €4 million.
Those losses add to more than €2.5 billion in subprime- related markdowns already taken.
Allianz isn't the only insurer to suffer from the subprime collapse. New York-based American International Group, the world's biggest insurer by assets, posted a $5.36 billion loss yesterday as writedowns tied to the housing slump wiped out profit for a third straight quarter.
Allianz said earnings from insurance and asset management are "stable enough" to generate annual operating profit of more than €9 billion in 2008 and 2009.