Will Suncorp hive off its bank assets and buy the AAMI and Royal & SunAlliance’s commercial arms? It’s a very interesting rumour floated by the Australian Financial Review on Friday, and reflects interest in the big Queenslander’s plans following the imminent departure of founding CEO Steve Jones.

While it’s only speculation – and therefore there’s no chance of getting any comment at all from the executives who might know more – it is nevertheless worth considering. R&SA’s British parent is in dire financial straits and fighting for its survival, while its Australian assets are outstanding. The life and wealth creation arms of the local and NZ R&SA operations are already on the market, and the local general insurance assets would be very attractive.

The speculation also reflects general predictions that the market’s top tier will lose at least two players over the next 12-18 months.

The Financial Review said the “logical plan” before the resignation of Mr Jones would be for Suncorp to sell the banking arm and use those funds to buy Royal & SunAlliance’s AAMI general and commercial insurance lines. With bank assets estimated to be around $3.2 billion (based on a multiple of 14 times the forecast 2003 after-tax profit) Suncorp could afford the R&SA deal.

The only impediment: Suncorp has already successfully absorbed the GIO operation, which was larger than it. Analysts said yesterday that it’s a big ask for Suncorp to take on board the R&SA and AAMI operations. Then again, AAMI at least operates very independently from the mainstream R&SA company.

No matter what eventuates, one thing seems certain: the local market is likely to undergo another wave of consolidations over the next couple of years.