(Corrects to remove duplicated words 'sending its' in paragraph 1)
SYDNEY, June 24 (Reuters) - Australian insurance and wealth management company AMP Ltd warned first-half underlying profit would slide on high claims levels and as more people dropped their policies, sending its shares plunging 11 percent.
The profit warning reflects a tougher market for the whole insurance industry which has been hurt by a weaker economy, with more people losing their jobs.
AMP, the country's top wealth manager, said it expected first-half underlying profit to fall between A$415 million and A$435 million ($382-$400 million), below A$491 million booked in the first half of 2012.
AMP said that for the five months to 31 May 2013, it had a greater-than-expected A$26 million in losses from insurance claims and a greater-than-expected A$8 million in losses from lapsed policies.
Around half of those insurance claims were related to income protection, which are paid to people out of employment.
"It's a very difficult life insurance market here at the moment," said CIMB Research analyst Richard Coles.
"It's just a combination of life insurance policies that are economically linked like income protection and also people dropping policies...because they can't afford or don't want to pay the premium anymore," he added.
AMP shares plunged 10.3 percent to a 7-1/2 month low of A$4.47 by 0237 GMT.
$1 = 1.0860 Australian dollars Reporting by Lincoln Feast and Maggie Lu Yueyang; Editing by Edwina Gibbs