UPDATE 2-SNS Reaal misses expectations on writedowns

* Warns of future net profit strain

* H1 profit 29 mln euros (Reuters poll 96.8 mln euros)

* Property finance impairments drag down results * Shares fall 5.3 pct, underperforming

(Adds analyst comment, shares)

By Ben Berkowitz

UTRECHT, Netherlands, Aug 25 (Reuters) - Dutch bancassurer SNS Reaal (SR.AS) posted a profit far below expectations as fresh writedowns in its struggling property finance business more than offset improvements in retail banking and insurance.

The company also warned on Wednesday that it expected markets to remain volatile and said net profit could suffer further because of the way hedges and derivatives were valued.

SNS shares were down 5.3 percent at 0754 GMT, underperforming a 0.3 percent decline in Amsterdam midcaps .AMX, as analysts said they were disappointed by the scale of continuing losses in the property business.

"Earnings fell short of our expectations even when stripping out the 68 million euro goodwill charge," KBC Securities analyst Dirk Peeters said in a note.

In total the property finance unit lost 189 million euros in the first half of the year, twice what it lost a year earlier and 50 percent more than it lost in the second half of 2009.

SNS has pledged to wind down the international portion of the property finance book over the next three to four years, and total commitments in the portfolio fell more than 10 percent in the first half of this year.

BELOW FORECASTS

SNS posted a net profit of 29 million euros, compared with a loss of 30 million euros a year earlier. Analysts polled by Reuters on average expected a profit of 96.8 million euros for the quarter.

Excluding one-off items -- mostly the property finance goodwill writedown -- the company posted a profit of 87 million euros, still at the low end of analyst forecasts.

SNS said in a statement it took the writedown "in anticipation of further regulatory capital requirements and as a result of a continued cautious outlook for real estate market developments."

Outside of the property finance book, SNS posted strong profit gains in both retail banking and insurance, as expenses fell and both interest income and financial markets improved.

SNS cautioned, however, that it expected markets to remain volatile and said the way hedges and derivatives were valued could "influence net profit sharply".

The company also said that while its ambitions to repay outstanding state aid were unchanged, there were no ongoing discussions with the government about how or when to repay the 565 million euros it owes.

SNS received a 750 million euro bailout in Oct. 2008 and repaid 185 million last year. It has previously said it would not repay the balance this year and was unlikely to do so next year either. (Editing by David Cowell)