(Bloomberg) -- Allianz SE saidsecond-quarter profit almost halved, missing estimates, as Europe’sbiggest insurer faced higher claims from natural disasters andcharges for the expected sale of its South Korea unit.

Net income declined to 1.1 billion euros ($1.2 billion) from2.02 billion euros a year earlier, the Munich-based company said ina statement on Friday. That compares with the 1.55 billion-euroaverage of 12 estimates compiled by Bloomberg. Allianz confirmedits target for full-year operating profit of 10 billion euros to 11billion euros compared with 10.7 billion euros in 2015.

Insurers in Europe are under pressure as low interest ratescrimp investment returns, which typically provide a buffer forearnings when claims rise or prices for coverage decline. Theindustry is also grappling with stricter regulatory capitalrequirements and subdued prices in some markets. ChiefExecutive Officer Oliver Baete seeks to achieve annual growth pershare growth of 5 percent on average over the next three years andan adjusted return on equity of 13 percent by 2018.

“Management needs to deploy capital to accretive M&A orbuybacks in order to achieve their 2018 financial targets”following declines in earnings per share and return on equity inthe first half, Sanford C. Bernstein analyst Thomas Seidlwrote in a note to clients. Considering the company’s “rather dryM&A pipeline” there’s more than a 70 percent chance that itwill announce a buyback of 1 billion euros to 2 billion euros inthe second half, he said.

Shares fall

Allianz declined as much as 4.3 percent in Frankfurt trading andwas down 4.1 percent at 123 euros as of 11:05 a.m. The stock hasfallen 25 percent this year, valuing the company at about 56billion euros. The Bloomberg Europe 500 Insurance Index declined 22percent over the same time.

The expected sale of the South Korean business resulted in acharge of 352 million euros in the quarter, Allianz said. Theinsurer agreed to sell its unprofitable operations in the countryto Chinese insurer Anbang Insurance Group Co. in April.

“Operating profit was burdened by European floods and storms,wildfires in Canada, hailstorms in the United States, as well aslower investment income,” Chief Financial Officer Dieter Wemmersaid in the statement.

Pimco pressure

The insurer’s asset management unit, which comprises PacificInvestment Management Co. and Allianz Global Investors, is alsounder pressure to bolster earnings after Bill Gross left Pimco inSeptember 2014. Since then, Pimco lost about a quarter of itsassets and now manages about $1.5 trillion. The flagship PimcoTotal Return Fund — once the world’s largest mutual fund— has shrunk 70 percent to $86 billion in the past threeyears.

Operating profit for the asset-management business fell 1.4percent to 498 million euros in the second quarter. Pimco’sthird-party net outflows declined to 18 billion euros in thequarter, down from 29 billion euros a year ago but an increase fromthe 10 billion euros of outflows in the first three months of theyear, Allianz said.

“Expected strategic asset re-allocation of a few largeinstitutional customers crystallized in larger negative flows inApril,” Allianz said. Outflows in May and June were in line with alonger term trend of declines, it said.

Pimco last month hired Emmanuel “Manny” Roman as CEO fromMan Group Plc, the world’s largest publicly-traded hedge fundmanager. At Pimco, with almost 20 times the assets of ManGroup, Roman is expected to contain costs and broaden the productoffering to revive profit. He will start on Nov. 1 and report toJacqueline Hunt, Allianz’s head of asset management.

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