Allianz SE (ALV.XE), Europe's largest insurer by gross premiums and market capitalization, Friday reported a 46% slump in net profit for the second quarter on lower income from own investments and higher costs related to earthquakes and other natural disasters.

It also said it is on track for an operating profit of about EUR7.2 billion for 2010, give or take EUR500 million.

It reported improvements in property/casualty insurance and asset management.

"Based on this very good result, we are confident that we can achieve our outlook for operating profit for the entire year of around EUR7.2 billion, with a fluctuation range of plus or minus EUR500 million," Chief Executive Officer Michael Diekmann said.

Second-quarter net profit attributable to shareholders was EUR1.02 billion, down from EUR1.87 billion in the same period a year ago. The figure was below a forecast EUR1.15 billion in a Dow Jones Newswires poll of 15 analysts.

Operating profit, which many investors consider to better reflect a company's true performance from normal operations, rose 23% to EUR2.19 billion from EUR1.79 billion, substantially outpacing the forecast EUR1.84 billion.

Analysts in general expected lower realized gains on stock investments than in previous quarters, visible in a weaker contribution from items known as non-operating items.

Indeed, non-operating items swung to a loss of EUR597 million from a profit of EUR548 million in the year-earlier quarter. These items include realized gains or losses and impairments on investments, interest expense from external debt, fully consolidated private equity investments, restructuring charges, acquisition-related expenses, and reclassification of tax benefits, among others.

Allianz said it paid EUR255 million for claims caused by natural disasters in the quarter, such as a tornado in Saxony, flooding in Central and Eastern Europe and a hailstorm and flash floods in France.

The higher disaster claims weighed somewhat on the combined ratio in property/casualty insurance. However, Allianz said it was able to release reserves made for potential claims that were no longer needed, which improved the combined ratio. Improvements in credit insurance and industrial insurance business also contributed to lower the ratio.

The combined ratio was 96.3%, a beat of the forecast 97.4% and below the year-ago figure of 98.9%. It was also better than the 100.4% in the first quarter and better than many peers.

The combined ratio is a widely watched measure of an insurer's profitability in its core underwriting business, when stripping off the investment result. The ratio compares how many cents an insurer has to pay per euro premiums earned for claims and other costs; a figure below 100% means the insurer made a profit in its underwriting business, a figure above 100% means it made a loss.

Total revenue rose 15% to EUR25.4 billion from EUR22.2 billion, above the forecast EUR22.17 billion.

In pre-market trade, Allianz shares were down EUR0.16, or 0.2%, in a EUR90.13-90.31 range.

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