AMP (ASX: AMP) released an update (link saves as PDF) on its first half 2013 earnings today, and the numbers weren't pretty. The company reported underlying profit of $425 million, or 13.5% below first half 2012's $491 million. Ouch.
Apparently, AMP's Australian Wealth Protection division is the culprit behind the cash squeeze.
"Poor claims and lapse experience" in the second quarter pulled profits down to just $54 million, compared to 2012's $134 million in first half profit. (It should be noted that the $80 million drop was partially offset by an $48 million increase in other operating margins.)
According to AMP, the company is not alone in feeling this squeeze. The overall insurance industry is feeling more pressure on insurance claims and policy lapses.
Although AMP's update provides investors with important information, the company makes clear that its release is unaudited, with finalized numbers expected after the completion of the 30 June half year accounts.
Looking ahead, AMP will be implementing new claims management policies, earlier intervention strategies, and improved support to help customers return to work more quickly. Still, the shares have fallen over 10% today, versus a near 1.5% drop in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO).
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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.
