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(Refiles to correct day in 8th par)
* AMP reports 57 pct fall in underlying profit
* Targets second reinsurance deal for life insurance
* Announces A$500 million share buyback
By Jamie Freed
SYDNEY, Feb 9 (Reuters) - Australia's biggest wealth manager, AMP Ltd, on Thursday said it wanted to strike a second reinsurance deal for its life insurance unit to reduce its financial exposure to the troubled business.
The company announced a A$500 million ($381.95 million) share buyback and kept its dividend steady despite posting a worse-than-expected 57 percent fall in full-year underlying earnings because it had released capital from a reinsurance deal with Munich Re in October.
Australia's life insurers have seen rising claims rates and more policy cancellations since Australian media in March last year revealed the use of discredited methods to refuse legitimate claims for insurance payouts.
AMP Chief Executive Craig Meller said life insurance was an "area where we are looking to reduce our exposure".
“Our focus for the time being is on ensuring it delivers the margins we have guided to and we continue to complete the reinsurance arrangements that allows us to free up capital or return it to our shareholders," he told reporters.
The next reinsurance deal would cover policies under the National Mutual Life Association business it acquired from AXA in 2011, he said.
Morningstar analyst David Ellis said he would not be surprised if the deal released a similar amount of capital to the A$500 million from the Munich Re transaction.
AMP shares were trading 3.4 percent higher on Thursday, while the broader market was up 0.3 percent.
AMP reported underlying earnings of A$486 million for the 12 months ended Dec. 31, down from A$1.12 billion a year earlier, including a A$415 million operating loss in its life insurance business.
The underlying result was below an average estimate of a 41 percent decline in underlying profit to A$633 million from 15 analysts surveyed by Thomson Reuters I/B/E/S.
On a statutory basis, which includes one-off items, the company swung to a A$344 million bottom-line loss - its first loss since 2003 - due to writedowns in its life insurance business announced to the market in October.
While analysts say the wealth management sector's long-term outlook is bright thanks to an ageing population and Australia's compulsory pension savings scheme, the AMP result underscores medium-term risks associated with the life insurance business.
Rival Suncorp on Thursday said it was considering "strategic alternatives" for its life insurance division, including a reinsurance deal, sale or partnership arrangement.
Meller is under pressure from the board to revive the life insurance division and reverse a slide in market share.
He announced a shake-up of senior management in November as part of that effort, and last month AMP closed its fledgling venture capital arm to focus more on its core business. ($1 = 1.3096 Australian dollars) (Reporting by Jamie Freed; Editing by Kevin Liffey and Stephen Coates)