TOKYO (Nikkei)--Allianz, Europe's largest insurer, will from Jan. 1, 2012, stop taking on new life insurance contracts in Japan and focus on managing only existing ones, the Nikkei reported in its Friday evening edition.

The de facto withdrawal plan comes at a time when the German insurance giant is struggling with a major sales slump in Japan due to the stock market downturn and low interest rates. The move is also part of ongoing efforts to streamline unprofitable operations to buffer itself against fallout from the European sovereign debt crisis.

Allianz Life Insurance Japan Ltd. has handled mainly single-premium variable annuity products. In fiscal 2010, the local unit added about 17,000 new contracts and generated Y127.5 billion in premium revenues. However, sales have been plunging since the start of the current fiscal year. As of the end of August, it had a total of 35,000 contracts.

Allianz Life Insurance Japan, which had 233 employees as of the end of last month, is expected to reduce its workforce through an early retirement program.

Allianz Fire & Marine Insurance Japan Ltd. and four other group firms will continue operating in Japan.