Frankfurt - Shares in Europe's biggest insurer Allianz SE dropped by more than 3 per cent Thursday after the company was forced to abandon its earnings forecast in the face of tough financial markets.

"We expect a continuation of these difficult market conditions in 2009," Allianz chief Michael Diekmann said in a statement announcing that the company's target of a 10-per-cent annual growth in operating earnings through to next year could not be maintained.

In abandoning its earning forecast, Allianz joins a growing list of German companies that have dropped their profit targets as a result of the on-going economic uncertainty and share market volatility unleashed by the US subprime mortgage meltdown and the global credit crunch.

Helping to drag down Allianz's results was a loss run up at the Munich-based insurer's banking offshoot, Dresdner.

Allianz shares were down by 3.8 per cent at 109 euros (168.5 dollars) in early trading Thursday.

After posting an operating profit of 427 million euros in the second quarter last year, Frankfurt-based Dresdner slumped into a bigger-than-forecast loss of 566 million euros in the latest three months on the back of subprime writedowns.

The giant insurer bought Dresdner in 2001 to boost its customer network for retirement plans following government moves to expand private pensions in Germany.

However, earlier this year Allianz flagged plans to hive off Dresdner, possibly to cross-town rival Commerzbank in a deal which would create a new financial powerhouse in Germany.

Allianz said its group second-quarter net profit dropped 28 per cent to 1.5 billion euros with revenue falling by 9.5 per cent to 22 billion euros.

In particular, the insurer said that revenue had been hit by the impact of the capital market crisis on its life insurance business. (dpa)