Suncorp Metway’s new MD John Malcahy says the group’s banking and insurance businesses won’t be split despite analysts’ predictions that they would. He remains adamant that the financial services industry is “moving inexorably” towards the conglomerate model, and says the group’s banking and insurance services will one day be inseparable.

The group has unveiled a five-year strategy to squeeze extra value out of its banking and insurance businesses by improved cross-selling between business units. It also plans to deliver more earnings certainty by reducing exposure to equities in its general insurance business.

“At the moment, financial markets are valuing us at a discount to the sum of the parts,” Mr Mulcahy said. “They don’t see any value in us being a conglomerate.”  He also reaffirmed that Australia’s second biggest house and car insurer and sixth biggest bank will achieve a 20% higher profit this financial year. Last year it recorded $469 million.

The relevance of the conglomerate model in the local market is a moot point. There’s no doubt the group’s stock has under-performed compared with its banking-only competitors in recent years, but Mr Mulachy says the British-based HSBC and the Royal Bank of Scotland are successful examples.

He hopes the new five-year plan will help improve the group’s share price and prepare it for possible further merger and acquisition opportunities.

Suncorp will attempt to reduce some of the volatility in its earnings by slashing its exposure to the share market and cutting the $800 million of general insurance funds invested in equities from 85% to 40%.

The strategy also includes a new marketing campaign for the GIO insurance brand to improve its market penetration outside Queensland. And Suncorp CEO Chris Skilton says the company has now generated $240 million in annual cost savings from its 2001 acquisition of GIO from AMP, compared with its forecast of $210 million.