UPDATE 2-Allianz prepares for sale of Dresdner Kleinwort

(Adds company confirmation, analyst comment, background)

By John O'Donnell and Jonathan Gould

FRANKFURT, March 14 (Reuters) - Allianz (ALVG.DE: Quote, Profile, Research) is planning to break up Dresdner Bank in a move that paves the way for a sale of investment banking laggard Dresdner Kleinwort and an end to a marriage many investors wished never happened.

The bank said on Friday that it will split itself in two -- a retail bank and investment bank, Dresdner Kleinwort -- to play a more active role in industry consolidation.

Europe's biggest insurer bought Dresdner in 2001 in a 24 billion euro ($37 billion) deal a shareholder once described as the biggest disaster in German industrial history.

The architects of the takeover had hoped to sell bank accounts to Allianz customers as well as car insurance, for example, over the counter at branches. Instead, Dresdner racked up losses of almost 3 billion euros as cross-selling floundered.

It then appeared to turn the corner with modest profits before financial market ructions pulled it back into the red again in recent months.

Allianz Chief Executive Michael Diekmann has come under continued pressure from shareholders to consider a sale of Dresdner or at least the investment bank.

But Dresdner has had some support in Allianz's management board. Its position in the group was staunchly defended by Paul Achleitner, the former Goldman Sachs banker who was one of the architects of the takeover.