UPDATE 2-Emerging Europe helps Vienna Insurance earnings

(Adds analyst comments, details on one-off gains)

By Boris Groendahl

VIENNA, Aug 21 (Reuters) - Vienna Insurance Group (VIGR.VI) posted a 43 percent rise in second-quarter pretax profit, topping analysts' expectations, as premium income grew in emerging Europe and investment income was helped by one-offs.

Pretax profit rose to 163.5 million euros ($241.4 million) in the quarter to June, compared with an average estimate of 134 million euros in a Reuters poll. Gross written premiums grew by 29 percent to 1.9 billion euros, also much more than expected.

"We believe the results are strong and demonstrate that Vienna Insurance is able to source strong growth, driven by its operations in central and eastern Europe, at a difficult time in the financial markets," Keefe, Bruyette & Woods analyst Ralph Hebgen said in a note to clients.

Chief Executive Guenter Geyer said the company would likely exceed its 2008 guidance of 540 million euros in pretax profit, and raised the guidance for 2010 and 2011. He said he planned to keep the dividend at least stable at 1.10 euros per share.

Earnings were skewed by 325 million euros of one-off gains from the sale of two Austrian insurers, which cancelled out losses from equity investments due to the weak market in the second quarter and other negative one-offs.

Vienna Insurance, which is focusing on emerging Europe to find growth elusive on mature markets, has steered largely clear of investments in credit derivatives that have cost rivals like AIG (AIG.N) and Swiss Re (RUKN.VX) dearly.

"You've got to say that even if the investment income is just flat once the one-off items are stripped off, this is a positive result these days," said Paul Wessely, analyst at UniCredit.

Shares in the group were among the few gainers in the weaker DJ Stoxx European insurers index .SXIP, trading up 0.6 percent at 41.24 euros by 0858 GMT. They have lost 25 percent this year, in line with the index decline.

EMERGING EUROPE GROWTH

Vienna Insurance is the second biggest insurer in emerging Europe after Germany's Allianz (ALVG.DE). The market in the former Communist bloc is growing fast as few people there bought insurance before the free market economy was introduced.

Gross written premiums in emerging Europe rose by 41 percent in the first half, while pretax earnings in the region grew 78 percent. It now contributes almost half of the group's total premium income and profits.

In developed markets Austria and Germany, premiums rose by 7 percent and pretax profit rose 12.5 percent.

Vienna Insurance bought the insurance business of Erste Group Bank (ERST.VI) for 1.4 billion euros in March, and issued 1.1 billion euros of new shares as well as a hybrid bond to fund the deal in the first half of the year.

Investors are paying about 10 times next year's estimated earnings for the stock, or around 1.2 times its embedded value, a significant premium on the index average, reflecting its strong growth prospects in eastern Europe. (Reporting by Boris Groendahl and Eva Komarek; Editing by Louise Ireland, Paul Bolding)