Nov. 9 (Bloomberg) -- Allianz SE, Europe’s biggest insurer, said third-quarter profit from continuing operations more than doubled as investment income recovered from year-ago writedowns.

Net income rose to 1.32 billion euros ($1.98 billion), from 545 million euros a year earlier, excluding the January sale of Dresdner Bank to Commerzbank AG, the insurer said today. That beat the 1.25 billion-euro median analyst estimate. Allianz didn’t set a profit target.

The Munich-based insurer, led by Chief Executive Officer Michael Diekmann, returned to profit in the first half after investment writedowns and the sale of unprofitable Dresdner Bank contributed to a 2.4 billion-euro loss for 2008. European insurers are struggling to return to their 2007 record profit as the recession weighs on premium income and low interest rates and smaller equity holdings weaken investment returns.

“Reliable” earnings forecasts aren’t possible, Allianz said, citing risks to the economic recovery and capital market volatility. Munich Re last week scrapped a medium-term profit target for its Ergo Versicherungsgruppe unit, Germany’s second- biggest primary insurer after Allianz.

Allianz gained 3.39 euros, or 4.3 percent, to 82.70 euros in Frankfurt electronic trading today, the biggest gain in six months, giving the company a market value of 37.5 billion euros.

Net income at Allianz’s property and casualty unit, typically the biggest in terms of profit, fell 3.4 percent to 764 million euros, matching analysts’ estimates. Operating profit dropped 18 percent from a year earlier.

‘Not Yet Satisfactory’

“We achieved a reasonable result in the property and casualty business, given the still challenging market environment, but the operating result isn’t yet satisfactory,” said Chief Financial Officer Oliver Baete. “We remain focused on our efforts to improve productivity in this segment.”

The division’s spending on claims and other costs worsened to 96.9 cents for each euro of premium income in the quarter from 96.5 cents a year earlier. The so-called combined ratio will probably reach the top end of a range of 97 percent to 98 percent this year, Baete said in a media conference call today.

The insurer’s life- and health-unit swung to a profit of 601 million euros, beating estimates, after a year-earlier loss of 5 million euros. “Improved conditions in the capital markets” helped boost its investment gain to 578 million euros from 69 million euros a year ago, Allianz said.

‘Profit Driver’

“Life and health was again the quarter’s profit driver,” said Robert Mazzuoli, an analyst at Landesbank Baden- Wuerttemberg who has a “hold” rating on the shares. “While property and casualty has improved compared to the first half, it’s still not as well recovered as at other major European insurers.”

Allianz’s operating profit rose 23 percent to 1.93 billion euros in the third quarter. That exceeded the 1.8 billion-euro median analyst estimate. The figure stood at 5.13 billion euros after the first nine months of this year. Giving a full-year operating profit target isn’t possible as capital markets remain volatile and winter storms may still hit Europe, Baete said. He reiterated that Allianz could generate about 8 billion euros in annual operating profit in “normal years.”

Impairments on investments such as equities, debt securities and real estate were 46 million euros, after 921 million euros a year earlier, the company said on its Web site.

Allianz is “well capitalized” with a so-called solvency ratio, a measure of its ability to absorb losses, of 164 percent, after setting aside money for dividend payments. That compares with 161 percent at the end of 2008.

Not Raising Capital

“We aren’t planning a capital increase, neither a real one nor a camouflaged one,” Baete said in a conference call with analysts. Paris-based rival Axa SA, Europe’s second-biggest insurer, said earlier today it will raise 2 billion euros in a rights offer to finance acquisitions.

Allianz gained 120 million euros, Baete said, when it cut its stake in Commerzbank to “slightly above” 10 percent from 13.8 percent. Allianz doesn’t plan to cut its holdings in the Frankfurt-based lender more.

In the second quarter, Allianz booked a gain of 658 million euros after it sold half its stake in Beijing-based Industrial & Commercial Bank of China Ltd. in April. It decided to keep the remaining 0.97 percent in ICBC when the lockup for the stake ended on Oct. 20.

Allianz currently isn’t examining any “concrete mergers and acquisitions,” Baete said.

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

Last Updated: November 9, 2009 11:49 EST