Shares in Suncorp-Metway Ltd slumped after the banking and insurance group said its outgoing chief executive was leaving sooner than expected and an internal candidate for the top job signalled his departure.

Suncorp said John Mulcahy, who announced on February 5 he would step down as soon as a new chief was appointed, would leave on March 2 and that his vacancy would be temporarily filed by chief financial officer Chris Skilton.

But Mr Skilton, who was thought to be a candidate for the chief executive job, said he planned to also leave when the new head had arrived and settled in a new chief financial officer.

Suncorp shares fell 24 cents to 4.81 per cent to $4.75, after marking an intraday low of $4.66, its worst level since June 1997.

Suncorp said on Tuesday that March 2 was an “appropriate time” for Mr Mulcahy, who has been chief executive for six years, to step aside, following the success of a recent equity raising to support its balance sheet.

“As a result, we are comfortable that John can step aside without disruption to the group’s operations or short term objectives,” chairman John Story said.

Mr Skilton, who has been with Suncorp for eight years, said he planned to leave once Mr Mulcahy’s replacement was in place so the person could “refresh the senior team.”

“These changes pave the way for a significant refreshment of the executive ranks,” Mr Story said.

“It’s time for a change and infusion of new ideas.”

Mr Mulcahy will receive a $2 million payment, equivalent to 12 months remuneration, when he leaves.

The news comes as Suncorp deals with rising bad debts due to the economic downturn and increased claims because of flooding and fires.

Suncorp on Tuesday reported a 33 per cent slump in first half net profit, cut its interim dividend by more than half and said its forecast for a full-year underlying profit of $136 million was at risk from the slowdown.

“Suncorp’s businesses were affected by the external challenges, economic as well as the weather,” Mr Mulcahy told journalists in a briefing.

Suncorp’s interim leadership will have to deal with the company’s bad debt expense, which is likely to be between 100 and 130 basis points of gross loans for the full 2008/09 year.

Suncorp also estimates its insurance business will be hit by $180 million of costs before reinsurance recoveries for the Victorian bushfires and flooding in North Queensland.

“In the immediate term, the bad debt issue is key,” JPMorgan analyst Siddarth Parameswaran said.

“The downbeat commentary on the general insurance and banking didn’t help,” he said of the share price performance.

Suncorp’s net profit for the six months ended December 31 was $258 million, down from $384 million in the previous corresponding period.

The group had flagged the figure to the market earlier this month, when it also launched a capital raising that raised $855 million from institutions.

Suncorp said conditions would remain challenging and economic activity subdued over the short to medium term.

Revenue for the first half grew 8.1 per cent to $7.48 billion.

The banking unit’s first half profit pre-tax and bad debts rose 39 per cent to $448 million.

The division is on track to achieve a forecast high-teens growth in full year profit before tax profit and impairment charges.

Gross written premiums for half year grew 5.9 per cent, as profit before tax for the insurance unit increased 47 per cent to $253 million.

The general insurance division’s full year gross written premium growth is forecast to be in a range of four per cent to six per cent, as flagged earlier.

Pre-tax profit at the wealth management unit declined eight per cent to $115 million.

Suncorp said the integration with Promina was on track and the company would achieve the target cost savings ahead of schedule.

Suncorp more than halved its first-half dividend to 20 cents per share from 52 cents the year before.

AAP