By Myles Neligan
LONDON (Reuters) - Europe's two biggest insurers, Allianz
Allianz, Europe's No.1 insurer, made an operating profit of 2.37 billion euros ($2.88 billion) in the second quarter, up 2.8 percent on a year ago, and ahead of the 2.2 billion penciled in by analysts, it said on Friday.
Second-ranked Axa also beat expectations with net income of 2.6 billion euros in the first six months of the year, surpassing analysts' average forecast of 2.11 billion euros.
Both companies benefited from resilient sales of traditional life insurance contracts which carry little or no investment risk, in contrast to products such as unit-linked policies where customer returns depend entirely on market performance.
Germany's Allianz said life sales had been particularly strong in critically-indebted Spain and Italy, in a sign that consumers there were attracted by the insurer's financial strength and good credit rating.
"The customer assumes correctly that Allianz is more stable than his own government," Allianz finance chief Oliver Baete told reporters on a conference call.
Shares in Allianz and Axa were up 6 percent and 5 percent respectively by 10:10 a.m. EDT (1410 GMT), outperforming a 4 percent increase in the Stoxx 600 European insurance share index <.SXIP>
Revenues from traditional life products at Allianz rose 3.5 percent to 5.8 billion euros in the second quarter, while sales of riskier investment policies fell 4.2 percent to 7.1 billion euros.
"All the big companies have been trying to push the plain vanilla products," said a London-based analyst who asked not to be named.
"When people are nervous about the economy, health insurance is probably an easier sell than, say, pensions."
European equity markets have fallen steeply in volatile trade since the onset of the credit crunch in 2007, with the subsequent eurozone sovereign debt crisis adding to the turmoil.
France's Axa said its life insurance arm benefited from a 5 percent jump in sales of traditional health and protection policies, while savings products were down 6 percent and unit-linked premiums fell 3 percent.
Axa's overall life insurance profit rose 3 percent, lagging a 4 percent increase at its property and casualty (P&C) arm, which benefited from rising prices in several European markets.
"We have a strong trend in our protection and P&C markets, but it's tougher in savings because of the economic situation, " Axa finance chief Gerald Harlin told reporters.
Allianz, in contrast, reported a 16 percent drop in P&C insurance profits due to mounting claims from last year's Thai floods, as well as losses from Italian earthquakes and U.S. tornadoes, although this was outweighed by a 20 percent jump in earnings from life insurance.
The Munich-based insurer said it expected operating profit of between 7.7 billion euros and 8.7 billion euros for the year as a whole.
Allianz is still likely to pay a flat dividend this year as it manages capital cautiously due to its 31 billion euro holding of distressed Italian sovereign debt, analysts at JP Morgan wrote in a note, describing the insurer's results as "not yet great, but getting there."
(Additional reporting by Jonathan Gould in Frankfurt and Christian Plumb in Paris; Editing by David Cowell and Mark Potter)