Allianz hurt by financial turmoil

Allianz could be hit by bad loans at its banking subsidiary Dresdner

Europe's largest insurer, Allianz, has warned it will struggle to meet this year's profit targets because of the turmoil in the financial markets.

Allianz had aimed to increase operating profit by 10% in 2008 and 2009, but its boss Michael Diekmann said that goal had become "much more challenging".

Allianz said it was now unable to give a reliable profit forecast for its banking arm, Dresdner.

The lending crisis has knocked faith in the balance sheets of banks worldwide.

Allianz warned that the value of bond investments linked to the US housing market - held by its banking unit Dresdner - could be cut further if the US housing slump persists and investor sentiment remains negative.

"In view of the current uncertainties and potential further mark-downs it is not possible to give a reliable forecast of the banking segment's contributions to the overall results," said Mr Diekmann.

In addition to the problems at Dresdner, the company said intense competition in its main business of property and casualty insurance would limit earnings.

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