Allianz SE (AZ), Europe's largest primary insurer by market capitalization, Friday reported a 16% decline in second-quarter net profit, on lower contributions from its property/casualty insurance business and start-up costs for its remaining small banking business.

The company gave no concrete earnings target for 2009, saying the market environment companies will remain challenging.

It said, however, that it remains strongly capitalized, that its low-risk profile and good diversification allow it to withstand potential market shocks and benefit from market upturns. It also said it accrued a dividend equivalent of EUR900 million for the first half, compared with EUR200 million in the first quarter.

"Allianz is prepared for what we perceive as the 'new normal,' an ongoing challenging market environment with structurally lower returns," Chief Executive Michael Diekmann said.

Second-quarter net profit fell to EUR1.87 billion from EUR2.23 billion in the year-earlier quarter, above the EUR1.48 billion average forecast in a Dow Jones Newswires poll of 18 analysts, helped by a better-than-forecast investment result.

The year-earlier figure has been restated to reflect continuing operations only, after Allianz sold Dresdner Bank.

Total revenue, which includes sales generated by the insurance and asset management operations and a small banking business, rose 3% to EUR22.2 billion from EUR21.5 billion a year earlier, above the forecast EUR21.86 billion.

Allianz shares closed up EUR0.51, or 0.7%, at EUR75.50 Thursday, slightly outperforming the wider market, which ended up 0.3%. The share has lost 33% 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