Insurer Suncorp sees sharp profit drop, shares tumble

By Mette Fraende

SYDNEY (Reuters) - Suncorp Ltd (SUN.AX), Australia's No. 2 car and home insurer, warned profits will halve this year due to turbulence in global markets, sending its shares down as much as 18 percent to a five-year low.

The bank is the latest in Australia to feel the effects of volatile global equity and credit markets, which many analysts fear will further undermine slowing economic growth.

"It's another company indicating that they're having a tough time and in many ways, it should be expected. Everyone was expecting bad news from the financial sector," said Angus Gluskie, portfolio manager at White Funds Management.

Suncorp, also Australia's sixth-biggest bank, said it expects net profit after tax in fiscal 2008 to be between A$525 million ($495 million) and A$550 million, down from A$1.06 billion in fiscal 2007, and expects challenging times ahead.

Suncorp shares were down 13.8 percent at A$11.53 at 0219 GMT after falling as much as 19 percent to A$10.90 in early trade, the lowest since June 2003.

In the last week, National Australia Bank (NAB.AX) took an $800 million hit from its exposure to U.S. mortgages, while Australia and New Zealand Banking Corp (ANZ.AX) warned its profits would fall sharply and forecast more than $1 billion in bad debt charges.

Suncorp, like NAB, said its underlying business was strong, but added that its level of non-performing loans was expected to rise and its wealth management business had been significantly impacted by the downturn in investment markets.

"It is a profit warning ... next year's earnings guidance is down 15-20 percent from what the market was expecting," said an analyst who asked not to be identified.