Suncorp boss Patrick Snowball has ruled out getting rid of the financial services group's troubled life insurance business despite it facing a $500 million writedown.
Shares in Suncorp sank more than two per cent after flagging the writedown on Tuesday.
The writedown will hit Suncorp's full year financial result when it reports in August.
The Suncorp Life division is expected to contribute only five per cent of the group's net profit this year, but was still a core part of its strategy, Mr Snowball said.
"Our integrated model delivers better value than any alternative and we get clear value benefits out of that including our group A+ (credit) rating, earnings and capital risk diversification, cost savings through economies of scale," Mr Snowball told an investor briefing.
"Suncorp Life remains core and strategic to the group."
Australia's life insurance industry is struggling amid higher claims and customers switching insurers more often.
Australia's biggest life insurer AMP issued two profit warnings in 2013 as bigger and more frequent claims hit the bottom line.
The Australian Prudential Regulation Authority also previously revealed that industry profits fell by more than a quarter in the year to last September.
Suncorp was forced into Tuesday's writedowns because it has slashed its profit expectations for the Life business for the next three to four years.
Slow changes to regulation also meant the carrying value had to be also cut.
However Suncorp hinted it would again pay a special dividend this year as it had for the last two years.
And the writedowns will not hit its cash earnings, with only a minimal impact of $27 million on Suncorp's $1.1 billion-plus capital surplus.
Suncorp's shares closed 27 cents, or two per cent, lower at $13.42.
Morningstar analyst David Ellis blamed Suncorp's woes on industry-wide structural and cyclical issues, particularly upfront commissions that give financial advisers incentives to change clients' policies.
There was also a jump in income protection claims by workers with mental health issues as Australia's economy weakened.
"The industry was not smart enough to see the changes in what would happen with claims, particularly the rise in mental health claims ... the policy wording was too loose," he said.
Suncorp also revised down its overall business growth for the 2015 fiscal year to between four per cent to six per cent, from seven per cent to nine per cent.
That was due to a more cautious approach to credit and a fall in reinsurance costs.
Mr Snowball said Suncorp was still in great shape with a strong balance sheet.
Morningstar is forecasting a total cash profit this year of $1.2 billion.Author : Greg RobertsSource : News 7 yahoo