-- Improvements in life/health insurance, asset management, investments

-- Confirms operating profit guidance, CEO declines to raise expectations for upper end

-- Reduces peripheral government debt investments in Spain, Greece, Ireland, Portugal

 
  By Ulrike Dauer

FRANKFURT--Allianz SE (ALV.XE) said Friday that second-quarter net profit rose 23%, helped by lower sovereign debt losses, plus gains in life & health insurance, asset management and investments.

These improvements more than offset the 16% decline in operating profit in property & casualty insurance, a result of claims for midsize weather events such as earthquakes in Italy, tornadoes in the U.S. and thunderstorms in Germany, a EUR120 million upward revision for claims related to the 2011 flooding in Thailand and lower releases of reserves made in previous years that are no longer needed.

Allianz, Europe's biggest insurer by market capitalization and premium income, also reassured investors that it is on track for 2012 operating profit in the targeted range of 7.7 billion euros ($9.5 billion) and EUR8.7 billion, though it stopped short of raising hopes that it now expects to reach the upper end of that guidance, which some investors expect.

"Our consistently good results show that we weather the difficult market conditions very well. Our operative business is stable and remains on course," said Chief Executive Michael Diekmann.

Mr. Diekmann reiterated that the group is on course to reach the guided operating profit range, but added that he didn't want to "raise further expectations," considering current volatility in capital markets, and with U.S. hurricane season still several months to go.

Net profit rose to EUR1.23 billion from EUR1 billion a year earlier, beating the average estimate of EUR1.21 billion in a Dow Jones Newswires poll.

Operating profit, which many companies consider a better reflection of performance, rose 2.8% to EUR2.36 billion, above analyst forecasts of EUR2.21 billion.

Last year around this time, Allianz wrote down the value of its entire Greek sovereign debt portfolio to market value, which cut EUR326 million from quarterly net profit and EUR76 million from operating profit. This year, there were no major debt impairments.

Investment in Spanish, Greek, Irish and Portuguese government debt was about EUR3.78 billion, down from about EUR6.2 billion at the end of 2011, mainly through sales. Including sovereign debt from Italy, unrealized losses on the peripheral sovereign debt portfolio amounted to EUR2.5 billion gross, or EUR486 million net.

Total revenue was EU25.2 billion, a 2.5% increase and above the forecast EUR25.04 billion.

Allianz competes with French AXA SA (CS.FR) and Italy's Assicurazioni Generali SpA (G.MI) for clients seeking insurance and retirement products, motor policies and investment funds.

Silvia Quandt Research analyst Christian Muschick called the earnings figures "solid" and said the confirmation of the full-year operating profit guidance was expected, though he expects an outcome at the upper end of that range.

At 1000 GMT, Allianz shares were up EUR2.73, or 3.5%, at EUR81.34, outperforming the Stoxx 600 Insurance index amid overall recovering financial shares.

-Write to Ulrike Dauer at ulrike.dauer@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires