By Joe Lynam BBC World Service reporter

Allianz has faced the cost of recent floods in Europe

Allianz is Europe's largest insurer, but the German company has been struggling of late.

Many insurance companies have been hit by the financial fallout of recent disasters, such as the 11 September terror attacks in the US and a series of floods across Europe.

"In the wake of the World Trade Center disaster in 2001, capital markets almost collapsed, and Allianz is an important player on capital markets," says Oliver Schmidt, who heads Munich-based Allianz's investor relations team.

"In 2002, we were hit by the huge central European floods, which created extraordinarily high claims volume for Allianz. Last, but not least, we had to increase our reserves to cover asbestos claims."

Bank blues

But while the company lays much of the blame for its poor share performance on insurance disasters, many observers feel the situation has been made worse by its acquisition of Dresdner bank.

"Allianz has gone through a difficult phase because it took the decision to buy Dresdner Bank," says former investment banker Michael Phair, who is currently a director with telecoms company Teleunit.

Dresdner is Germany's third largest bank, and Allianz bought it in 2001 to try and get its hands on the bank's investment arm, Dresdner Kleinwort Wasserstein.

Allianz has gone through a difficult phase because it took the decision to buy Dresdner Bank Michael Phair, businessman and former investment banker Check Allianz's share price

Allianz paid 24 billion euros (�16bn; $31bn) for Dresdner, and continues to pump billions into it.

Earlier in March, Frankfurt-based Dresdner reported a deeper-than-expected fourth-quarter net loss of 218 million euros, denting parent Allianz's group figures.

Allianz has said Dresdner's weak revenue problems have been compounded by Germany's sluggish economy.

Bad loans

So does Allianz regret its purchase, and what should it do with the investment?

Allianz bought Dresdner in 2001, boosting its client base

"What they thought they were getting was an ability to deliver policies to a wider group of clients through Dresdner Bank. What they also got, and they didn't bargain for, was a large number of bad loans as well as a vast and very heavily over staffed investment banking operation," Mr Phair says.

"I personally believe that they are not meant to be - and will not choose to be - in that business. The sooner they go back to the core insurance operations they have, and possibly some asset management business, the better off they will be."

Margaret Heckel, of the German business newspaper FT Deutschland, thinks Allianz is right to concentrate on its core business.

"They are now back to investing in traditional areas, such as real estate," she says. "They still have a lot of power. They should be able to regain their former strength in the near future."

But like all insurance companies, Allianz is at the mercy of the gods.

The Asian Tsunami did not affect the company too badly, mainly because most of the victims were uninsured.