Aug. 7 (Bloomberg) -- Suncorp-Metway Ltd.’s full-year profit fell as much as 39 percent in the year to June 30 as investment losses cut earnings at its insurance unit.

Profit after tax and Promina Group Ltd. acquisition charges was between A$340 million ($286 million) and A$360 million, the Brisbane-based company said in a statement today based on un- audited figures. That’s down from A$556 million a year earlier. Suncorp, the nation’s fifth-biggest bank and third-largest insurer, fell 1.3 percent to A$7.90 in Sydney, snapping a five- day, 13 percent rally.

“The six-month outlook remains challenging,” said Angus Gluskie, who manages about $300 million at White Funds Management Pty. in Sydney including Suncorp shares. “Apart from that, the general improvement in the economic environment is likely to help, and the potential for Suncorp to be acquired is becoming a dominant consideration in investors’ minds.”

Acting Chief Executive Officer Chris Skilton, who has been standing in since John Mulcahy stood down earlier this year, said the year had been “particularly challenging” with the combined effects of volatile investment and credit markets, subdued domestic economic growth and major insurance claims events across Australia and New Zealand affecting its businesses.

While Australia has so far skirted the global recession, economic growth has slowed, especially in Suncorp’s home state of Queensland, and the local stock market lost 24 percent in the year to June 30. Bushfires in the state of Victoria in February killed 173 people, with about A$1.2 billion worth of losses claimed, according to insurance data from the state government.

‘Volatile Markets’

“While Suncorp expects its banking and general insurance businesses to report results broadly in line with guidance, volatile investment markets have reduced underlying profits in Suncorp Life and resulted in lower returns in the general insurance investment portfolios,” the company said today.

Suncorp said full-year profit before tax and Promina acquisition items was between A$790 million and A$810 million. Suncorp in October 2006 confirmed plans to buy Promina for A$7.9 billion, seeking to double policy sales and become Australia’s second-largest auto and home insurer.

Profit before tax, bad debts and one-off items at its banking unit was A$770 million to A$785 million. Most of that was wiped out by its impairment charge of A$690 million to A$730 million, or between 125 to 135 basis points of gross loans, advances and other receivables.

The general insurance business earned between A$560 million to A$580 million, with growth in all major product classes. Suncorp Life profit was between A$100 million and A$120 million.

The company expects to pay a final dividend of 20 cents per share. It will present its audited full-year result on Aug. 25.

Suncorp shares climbed to the highest since January in yesterday on a report in The Australian newspaper that J.C. Flowers & Co., a New York-based private-equity firm, has run the numbers on the banking and insurance group.

To contact the reporter on this story: Malcolm Scott in Sydney at mscott23@bloomberg.net

Last Updated: August 7, 2009 03:11 EDT