Aug. 7 (Bloomberg) -- Allianz SE, Axa SA and Aegon NV, three of Europe's biggest insurers, reported lower profit as the subprime contagion and slumping stock markets ate into the value of their holdings.

Allianz, based in Munich, scrapped its earnings growth forecast after debt writedowns at its Dresdner Bank unit drove second-quarter profit down 29 percent. Paris-based Axa said first-half earnings fell 32 percent as falling stock markets curbed sales of savings plans. Aegon of the Netherlands posted a 58 percent decline in net income on investment losses.

The collapse of the U.S. subprime mortgage market has led to almost $500 billion of credit losses and markdowns at financial institutions globally, data compiled by Bloomberg show. New York- based American International Group Inc., the biggest U.S. insurer by assets, fell the most in at least 28 years of New York trading after writing down more than $11 billion of holdings and saying it won't rule out raising capital.

``The entire industry has been affected by the tough environment,'' Allianz Chief Executive Officer Michael Diekmann said on a conference call with reporters today.

Allianz expects financial markets to remain difficult through 2009, meaning its target for 10 percent compound annual growth in operating earnings ``cannot be maintained,'' the insurer said in a statement late yesterday. Europe's largest insurer by market value fell 95 cents, or 0.8 percent, to 112.03 euros in Frankfurt trading.

Dresdner Talks

Net income dropped to 1.5 billion euros ($2.3 billion) in the second quarter from 2.1 billion euros a year earlier. Diekmann, 53, said it's currently impossible to accurately predict earnings.

Allianz is holding talks to sell Dresdner Bank and its Dresdner Kleinwort securities unit, where about 530 million euros of writedowns related to the U.S. subprime collapse led to a fourth straight quarterly loss.

``It's important for Allianz to get rid of Dresdner Kleinwort as fast as possible as that's where all the bank writedowns originate,'' said Lutz Roehmeyer, a fund manager at Landesbank Berlin Investment who helps oversee $20.5 billion, including Allianz shares.

Revenue decreased 9.5 percent to 22 billion euros in the quarter ``as the capital market crisis negatively affected revenue development in the life insurance business,'' Allianz said. Analysts surveyed by Bloomberg had estimated revenue of 23.5 billion euros in the quarter.

Subprime Losses

Dresdner, bought by Allianz in 2001 for 23.5 billion euros, had a second-quarter operating loss of 566 million euros. The unit wrote down the value of asset-backed securities, debt backed by bond insurers and leveraged buyout commitments. Those losses bring total subprime-related markdowns to about 3 billion euros.

The German bank may be worth 8 billion euros to 9 billion euros, according to Konrad Becker, a Munich-based analyst at Merck Finck. Allianz Chief Financial Officer Helmut Perlet estimated Dresdner Bank's book value at about 10.5 billion euros.

The insurer booked 490 million euros of impairments on equity investments in the quarter, Perlet said on a conference call today. A further 10 percent decline in European stock markets would lead to about 800 million euros in writedowns, and even stable equity markets would result in about 300 million euros in additional impairments, he said.

Allianz said earnings from insurance and asset management are ``stable enough'' to generate annual operating profit of more than 9 billion euros in 2008 and 2009. The estimate excludes the banking unit. Operating profit at the property and casualty insurance unit, Allianz's biggest in terms of premiums and profit, fell 11.1 percent to 1.68 billion euros.

Axa Gains

Axa, Europe's second-biggest insurer, gained 4.8 percent in Paris trading after saying full-year earnings excluding one-time charges and acquisition-related costs may meet last year's record level. Operating profit rose 3 percent to 2.77 billion euros in the first half, beating analysts' estimates of 2.53 billion euros.

``Axa's business model is less geared to equity markets at a time of crisis than many feared,'' said Ralph Hebgen, a London- based analyst with Keefe, Bruyette & Woods Ltd. who has an ``outperform'' rating on Axa.

Net profit at Axa was hurt after the insurer had investment writedowns of 739 million euros on debt securities and a 786 million-euro markdown on equity assets in the first half. Falling stock markets also eroded earnings at the life and savings business, the insurer's biggest division, where profit fell 6 percent to 1.4 billion euros.

Aegon Slumps

Aegon, owner of the U.S. insurer Transamerica Corp., fell the most in six months in Amsterdam trading after reporting a bigger decline in second-quarter profit than analysts estimated.

Net income slid to 276 million euros from 655 million euros a year earlier, the company, based in The Hague, said today. That trailed the 343 million-euro median estimate of 10 analysts surveyed by Bloomberg.

The insurer had investment impairments of 98 million euros, including 57 million euros in the U.S., compared with 4 million euros a year earlier.

``Aegon needs to show it can grow, generate attractive margins and have sufficient free cash flow,'' said Folmer Pietersma, who helps oversee about $400 million as a fund manager at Robeco NV in Rotterdam. ``It's important to show that you're able to weather the storm and that your assets are of good quality.''

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.netFabio Benedetti-Valentini in Paris at fbenedettiva@bloomberg.net.

Last Updated: August 7, 2008 11:49 EDT