Vero's offer for New Zealand insurance company Tower has not changed the value of Vero's parent, Suncorp, Morningstar analyst David Ellis says.
The group remained well capitalised and provided good upside from major restructuring and simplification, although it was still heavily exposed to volatile insurance earnings.
Morningstar had a share fair value of $A12 ($NZ12.80) on Suncorp.
Suncorp's wholly owned subsidiary Vero New Zealand had surprisingly had its proposed acquisition of Tower blocked by the New Zealand Commerce Commission, Mr Ellis said.
''We were expecting the proposal to receive regulatory approval, but the regulators considered the proposed deal would substantially lessen competition in New Zealand's insurance market.''
Despite the setback, Suncorp would review the decision and assess its options for expansion in the New Zealand market.
An upside from the decision was Vero would not be increasing its exposure to potential future large and expensive natural disaster costs from the geophysically unstable region of New Zealand.
Vero owned 19.9% of the shares in Tower and was offering to buy all the ordinary shares it did not already own for $1.40 a share.
Morningstar thought the two insurers provided strategic benefits, boosting Vero's estimated market share to about 30%, still below market leader Insurance Australia Group's about 45% market share, Mr Ellis said.
However, the commission noted the merger would remove Tower as the only independent competitor to Vero and IAG with the scale, brand and strength and experience to compete effectively.
Morningstar had previous noted the Tower deal was a ''relatively small'' acquisition and did not impact on the $A12 fair value estimate.
The decision to decline Vero's application did not change Morningstar's view on Suncorp or valuation, he said.
At current prices, Suncorp stock was trading at 20% above valuation. It would report its 2017 financial results next Thursday.
