That raised investor concerns about the insurer's ability to pay dividends and sent its shares down more than 8 percent.

Gjensidige said a harsher and longer than usual winter in Norway had led to more insurance claims and that its motor insurance activities were still not performing well.

It reported a pre-tax profit of 1.3 billion crowns (121.12 million pounds), undershooting expectations for 1.6 billion crowns in a Reuters poll and down from 1.5 billion crowns a year ago.

The insurer warned it now expected its combined ratio - a measure of profitability adding incurred losses and expenses and dividing the sum by the total earned premium - would be at the lower end of its target range this year.

It guides for a combined ratio range of 90-93 percent for 2018. The ratio came in at 88.2 percent in the second quarter.

"We are fully committed to stabilise and in time improve the profitability," CEO Helge Leiro Baastad told a presentation.

Investors, however, fretted about the company's ability to pay dividends and its shares were down 8.4 percent at 0850 GMT, near a three-year low. It was the third-worst performing stock on the pan-European stock index <.STOXX>.

"We had two weak quarters so far, which poses downside risk on ordinary dividends' capacity due to significantly reduced figures year-on-year, while special dividends are also in question, if we exclude proceeds from the sale of bank," said Norne Securities Zilvinas Jusaitis, which has a "Hold" on the stock.

Gjensidige agreed to sell its online banking arm to Nordic bank Nordea on July 2 in a 5.5-billion crown deal.

"Current underlying profitability levels and the loss of Gjensidige Bank's earnings mean the company will have to substantially stretch payout ratios to meet consensus ordinary dividend expectations," said Barclays in a note to clients.

($1 = 8.1566 Norwegian crowns)

(Reporting by Gwladys Fouche; Editing by Susan Fenton)