Allianz SE (AZ) Wednesday reported sharply lower first-quarter net profit, pressured by write-downs on financial investments, claims costs and a charge related to its sale of Dresdner Bank.

Europe's largest primary insurer by market capitalization gave no concrete earnings target for 2009, saying that the environment for financial services companies will remain "challenging" and couldn't rule out further impairments or credit defaults on corporate bonds.

However, it said the group's "underlying fundamentals" are healthy and that it was "able to withstand a prolonged difficult market environment."

It said a 30% decline in stock markets would bring its solvency ratio down to 143%. The ratio - a measure of its ability to meet long-term obligations - fell to 159% at the end of March from 161% at the end of December, but was still substantially above the 100% regulatory requirement.

Allianz said it had accrued a EUR200 million dividend in the first quarter but said this shouldn't be taken as flagging the amount of its full-year dividend.

First-quarter net profit fell 98% to EUR29 million from EUR1.15 billion a year earlier. Net profit from continuing operations, which excludes the EUR395 million loss associated with the sale of Dresdner Bank, fell 69% to EUR424 million from EUR1.38 billion.

Chief Executive Michael Diekmann had prepared markets for a break-even figure at the company's annual general meeting last month.

Shares fell in intraday trade, mirroring generally lower financial stock markets and concerns regarding the mixed picture of Allianz's results together with worries that problems at U.S. operations could widen. At 1451 GMT, Allianz shares were down EUR5.43, or 7.2% at EUR70.15, underperforming the wider market, which was down 2.5%.

First-quarter data show that latent earnings pressures remain despite the sale of Dresdner, which could be a driver of further negative news, Barclays Capital analysts wrote. They rate the shares at underweight.

Total revenue rose 2.8% to EUR27.7 billion from EUR27 billion a year earlier.

Operating profit was down 36% to EUR1.42 billion from EUR2.21 billion. The figure was pressured mainly by write-downs on investments in the company's life-health insurance portfolio and higher costs for damage claims such as winter storms, forest fires and losses in credit insurance that hurt the underwriting result in property and casualty insurance.

All three business segments contributed positive, though lower, operating profit, with the insurance segments the hardest hit. After the sale of Dresdner, Allianz now has insurance and asset management operations and a small banking business.

In the quarter, Allianz realized net losses and impairments on investments of EUR498 million compared with EUR13 million in gains in the year-earlier quarter. Write-downs on stock investments such as Banco Popular Espanol SA (POP.MC) and Hartford Financial Services Group Inc. (HIG) were EUR708 million, almost double the EUR365 million a year earlier, but there were no write-downs on asset-backed securities.

As a result of higher claims costs, the combined ratio, which compares costs and revenue and strips out the investment result, rose to 98.5% from 94.8%. A figure below 100% means the underwriting business is profitable. In coming quarters, the combined ratio is expected to benefit from efficiency gains.

Allianz sold Dresdner Bank to Commerzbank last year for around EUR5.1 billion, with the closing in mid-January. Allianz has said the total burden related to the sale was EUR6.8 billion, of which EUR6.4 billion was booked in 2008, and the remaining EUR400 million in the first quarter. The bank has had total crisis-related mark-downs of EUR6.7 billion since mid-2007.

Landesbank Baden-Wuerttemberg analyst Robert Mazzuoli said the combined ratio disappointed while life insurance business was a positive surprise, as "the traditional business in mainland Europe proved to be more resilient."

The share has lost 41% over the past 12 months, bringing the company's current market value to around EUR34 billion.

Company Web site: www.allianz.com

-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500; ulrike.dauer@dowjones.com