Promina is “favourably disposed” to the $7.7 billion merger bid by Brisbane-based Suncorp. In a statement to the Australian Stock Exchange this morning, Promina said it has agreed to engage with Suncorp “in order to reach a conclusion on whether the proposal would be in the best interests of Promina shareholders”.

The Suncorp move, while not unexpected, would change the shape of general insurance in Australia. Analysts have generally expressed little surprise at the bid, noting that this is probably the first step in the final consolidation at the top end of the general insurance market.

The $7.50 a share offer values Promina at $7.7 billion. The Queensland bancassurance company is not likely to encounter opposition from the competition regulators. Most of its business is based in Queensland and – through its GIO acquisition in 2001 – in NSW.

In a note to staff this morning, Suncorp CEO John Mulcahy said bringing the two companies together “is a logical combination of two complementary businesses”.

Among the potential benefits listed by an “extremely excited” Mr Mulcahy are an expanded national presence and improved geographic diversity; a national general insurance business with enhanced scale advantages; and a significantly increased presence in wealth management, in particular life insurance.

Neither company is expected to make any further statements until the due diligence process is complete.