UPDATE 1-Australia's Suncorp year profit falls 48 pct

(Adds CEO comments, details)

SYDNEY, Aug 26 (Reuters) - Suncorp Ltd (SUN.AX), Australia's second-biggest car and home insurer, reported a 47.7 percent fall in full-year net profit on Tuesday due to turbulence in global financial markets and higher-than-usual claims from bad weather.

The result continued a weak run of earnings from Australia's insurance sector, with rivals QBE Insurance Ltd (QBE.AX) and Insurance Australia Group (IAG.AX) also battling tough market conditions.

Suncorp, which warned earlier this month that profit would halve, said profit for the year ended June 30 fell to A$556 million ($479 million) from A$1.064 billion a year earlier.

Describing the year as one of the most challenging in recent history for financial services companies, Suncorp said its underlying business remained strong.

"We are well placed to ride out any further deterioration in the market, as well as take advantage of any improvement in the industry cycle," CEO John Mulcahy said.

The level of bad debts would rise, though Mulcahy said Suncorp would not see significant losses.

"Our impairment losses are actually quite low," Mulcahy said at a briefing after the results, referring to a level of impairments of 1.12 percent this year.

TOUGH TIMES

Australian insurance companies took a double hit in fiscal 2008 from a jump in weather-related claims in the first half of the year, as storms battered the country's east coast, and as the global credit crunch saw their funding costs rise sharply.

Suncorp's rival QBE last week said its first-half profit for the six months ended June fell 7 percent and analysts said they were sceptical about its ability to grow premiums due to intense competition.

Insurance Australia Group Ltd last Friday reported a loss of A$261 million for the year ended June 30, also hit by weather-related claims, widening credit spreads and weakness in key markets.

Suncorp, also Australia's sixth-biggest bank, said it would merge its retail and business banking operations to help reduce costs.

Suncorp has seen its shares fall 23.1 percent so far in 2008, while the benchmark S&P/ASX 200 index .AXJO is down 20.7 percent. ($1=A$1.16) (Reporting by Mette Fraende; Editing by James Thornhill)