👉 Background: Suncorp Group is an Aussie insurance and banking company based in Queensland. The Suncorp Group we know today has been around since 1996, but it actually started its life as a bank way back in 1902.

👉 What happened: Suncorp’s bank division makes around $400 million a year in cash profit. Its insurance division? That's now Oz's second biggest provider of many insurance products. Now, it's reportedly considering breaking off its bank division (for a cheeky $5 billion) to focus solely on insurance.

👉 What else: This move would disband Suncorp's long-held two arm model, but it means Suncorp could then take on an insurance multiple for its company valuation.

What's the key learning?

💡Generally, companies are valued based on industry benchmarks. But the more strings to a company's bow, the harder it becomes to value.

💡Industry benchmarks help you compare different companies within the same industry. Sometimes EBITDA is the benchmark, other times its multiples of revenue, or even price-to-earnings ratio. In Australia, banks are generally valued on a P/E ratio of around 10. Insurers have P/E ratio of around 19.

💡But it's tricky to value a company when it's involved in both banking andinsurance - like Suncorp. So, Suncorp is looking to cut the (banking) fat and focus on its higher value business. Buuuut it's arguably the toughest time to sell a bank since the GFC - so good luck!

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