Nearly $1.9 billion has been wiped off the market value of wealth manager AMP after it warned of a fall in its first half profit.

Higher than expected income protection claims are a key reason for an expected fall in AMP’s underlying profit for the six months to June 30, it said on Monday.

The company’s underlying first half profit is expected to be between $415 million and $435 million, a drop of up to 15 per cent from its $491 million underlying profit in the first half of 2012.

AMP’s interim dividend could be also affected, due to its previously stated target of paying between 70 and 80 per cent of underlying profit to shareholders.

The company’s shares dropped 64 cents, or 12.9 per cent, to $4.34, their lowest point since the beginning of October 2012.

The fall took $1.88 billion off AMP’s market value, to $12.78 billion.

The company’s wealth protection business has had a poor claims and lapse experience during the second quarter of the calendar 2013, particularly in May, AMP said on Monday.

Experience losses were $32 million for the five months to May 31, comprising $26 million in insurance claims and $8 million in insurance policy lapses, partly offset by $2 million in positive experience.

Around 50 per cent of insurance claim losses were related to income protection, which are generally taken out to cover sickness and injury.

AMP said its wealth protection claims reflect the volatile nature of its experience across the company’s insurance portfolio.

“The industry is experiencing increased pressure on insurance claims and policy lapses,” it said in a statement.

The company is working to improve its claims experience, implementing new claims management policies, earlier intervention strategies and enhanced support to help customers return to work quicker, AMP said.

It said its overall business was performing in line with market expectations.