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* AMP FY profit falls 10.6 pct to A$849 mln vs A$938 mln fcast
* CEO says to stem wealth protection declines in 2015
* Shares surge 7.8 pct on positive outlook (Updates with more detail on results, CEO comment, share price rise)
SYDNEY, Feb 20 (Reuters) - Australia's AMP Ltd missed forecasts with a 10.6 percent fall in full-year profit but its shares surged higher as the company said it was stemming losses in its wealth protection unit.
Australia's third-biggest retail funds manager reported underlying profit of A$849 million ($766.90 million) for the year to December 31, compared to A$950 million the previous year.
Analysts surveyed by Reuters had on average forecast AMP's annual profit to be A$938 million.
The market seized on comments by Chief Executive Craig Mellor that the group would halt an earnings decline at its wealth management protection unit in 2015.
The unit, whose products pay part of a person's salary if they are unable to work, was hit by more claims and a pull-out from policies as people cut costs amid a weaker economy.
"There are some early signs of traction for the actions we're taking, with positive developments in the second half (of calendar 2013)," Mellor told journalists.
AMP shares were up 7.8 percent at A$4.86 in early trade, having touched a high of A$4.94. The stock had dropped about a quarter in eight months after AMP gave two warnings about the wealth protection unit's shrinking profit.
In other positive news, AMP Bank delivered a record profit of A$83 million, up 34 percent on the previous year, while cashflows into the Australian wealth management business almost tripled to A$2.2 billion.
Excluding wealth protection, AMP recorded an average 15 percent earnings growth across the company.
The group declared a final dividend of A$0.115 per share, the same as last year.
$1 = 1.1071 Australian dollars Reporting by Byron Kaye; Additional reporting by Reshma Apte; Editing by Stephen Coates