Aug. 6 (Bloomberg) -- Allianz SE, Europe's biggest insurer, said second-quarter profit fell 29 percent after losses at its Dresdner Bank unit. The company also scrapped its earnings growth forecast.

Net income dropped to 1.52 billion euros ($2.31 billion) from 2.14 billion euros a year earlier, the Munich-based insurer said in a statement today. That beat the 1.26 billion-euro median estimate of analysts surveyed by Bloomberg.

Allianz expects markets to remain difficult through 2009, and as a result, its target of a 10 percent compound annual growth rate for operating earnings ``cannot be maintained.'' Chief Executive Officer Michael Diekmann said in the statement that the current business climate means it's impossible to accurately predict earnings. Allianz is holding talks to sell Dresdner Bank and its Dresdner Kleinwort securities unit.

``It's important for Allianz to get rid of Dresdner Kleinwort as fast as possible as that's where all the bank writedowns originate,'' Lutz Roehmeyer, a fund manager at Landesbank Berlin Investment who helps oversee $20.5 billion including Allianz shares said before the announcement. ``Allianz's management can be blamed for waiting too long to draw a final line under that issue.''

Total revenues decreased 9.5 percent to 22.0 billion euros in the quarter. 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 by 286 million euros, adding to more than 2.5 billion euros in subprime-related markdowns already taken.

Operating Profit

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.

Allianz has lost 24 percent in Frankfurt trading since the beginning of the year, valuing the insurer at about 51 billion euros. The share drop compares with a 23 percent decline in the 31-member Bloomberg Europe 500 Insurance Index.

Frankfurt-based Commerzbank AG, China Development Bank and Spain's Banco Santander SA are interested in buying Dresdner, Germany's third-largest lender by assets, three people familiar with the matter told Bloomberg this week. Commerzbank, Germany's second-biggest bank by assets, is the most likely buyer as it's already studied the company's books and held talks with management, the people said.

Diekmann, 53, plans to separate Dresdner's consumer and investment banking units by the end of the month to give it more options in finding partners, the insurer has said.

Assets and Branches

Dresdner would give a buyer 500 billion euros of assets, more than 1,000 branches and 6.3 million retail clients. The German bank may be worth 8 billion euros to 9 billion euros, according to Konrad Becker, a Munich-based analyst at Merck Finck. In May, Allianz Chief Financial Officer Helmut Perlet estimated Dresdner Bank's book value at about 12 billion euros.

Munich Re, the reinsurer that has its headquarters on the same street in Munich as Allianz, cut its full-year profit outlook on July 25 following ``substantial'' writedowns on stock investments and said earlier today that second-quarter profit declined 47 percent to 599 million euros.

Allianz said in May that its target of boosting operating profit by an average of 10 percent through 2009 had become ``much more challenging'' because of financial-market turbulence.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net

Last Updated: August 6, 2008 17:20 EDT