International Herald Tribune

The global credit crisis tore a hole in the profits of some of the top European insurers on Thursday, with AXA and Aegon both posting lower earnings.

AXA, the second-biggest insurer after Allianz, said net profit fell 32 percent to ˆ2.16 billion , or $3.35 billion, partly because of write-downs on fixed income assets due to the financial market turbulence.

Aegon said impairments on U.S. credit and subprime mortgage investments had hurt its second-quarter earnings, while the reinsurer Hannover Re also published lower profits.

Bucking the trend was the British commercial insurer, RSA Insurance Group, which eked out a first-half profit rise.

The credit crunch, sparked by losses on U.S. subprime mortgages, has hit insurers around the world. Falling stock markets have affected insurers since many of them hold their assets in equities.

Allianz, Europe's biggest insurer, posted lower second-quarter net profits this week and abandoned its 2009 profit goal.

'It's a rather difficult sector at the moment,' said Bank Vontobel insurance analyst Uwe Otten. 'From a pricing side, the cycle is expected to go down.'

Allianz said late on Wednesday that new guidance was impossible given the financial market turmoil that kept its Dresdner Bank unit in a loss-making position in the second quarter.

'We expect this difficult market environment to continue to 2009, therefore our 2006 long-term operating profit growth target of 10 percent compound annual growth rate until 2009 cannot be maintained,' Allianz said in a statement.

AXA said it expected flat 2008 earnings. The French group said its 2008 underlying earnings would be 'in line' with those of 2007, provided market conditions did not deteriorate materially.

However, AXA reassured investors by saying that it needed no capital increase. It proposed a stable 2008 dividend of ˆ1.20 per share.

'AXA's business strategy is built to withstand severe economic conditions and we remain well positioned to benefit from any upturn in the market environment,' the chief executive Henri de Castries said.

The DJ Stoxx European insurance sector has fallen around 21 percent so far this year, broadly in line with a similar decline in the FTSE Eurofirst 300 index.