Queensland bancassurance group Suncorp is struggling for growth opportunities and represents a “medium risk” investment, according to Citigroup Investment Research.

The researcher’s latest report into Suncorp warns that the business is suffering in a mature Australian market that is likely to see further consolidation in the near term.

“The business is struggling for operational momentum, and with a few head winds still ahead this doesn’t look as though it is likely to turn in a hurry,” the July 12 report said.

Suncorp’s insurance operations have been lacklustre this year, with flat premium growth and an expensive few years of weather-related claims. “Slightly concerning is the fact that storm costs have now been above what the company views as ‘average’ in each of the last four halves.”

And things don’t look like improving soon. Citigroup says competition in commercial lines has intensified this year and Suncorp has had to discount many premiums. The company claims to be reducing its claim costs but Citigroup says many of the savings will be lost through premium cuts.

One positive factor for Suncorp investors may be its suitability for acquisition. Citigroup says the company may offer strong synergies for local or overseas rivals, with St George and Westpac mentioned as possible suitors.

Suncorp could also go on its own buying spree. “The preference is likely to be banking, though we would not rule out the company expanding in general insurance.”