IAG, one of Australia's leading general insurers, and RACQ have announced that IAG will acquire 90% of RACQ's existing insurance underwriting business, with an option to acquire the remaining 10% in two years on consistent terms. The consideration amounts to A$855m ($555m).
Both sides will also enter a 25-year exclusive strategic alliance to provide RACQ general insurance products and services for RACQ members and Queenslanders. RACQ will maintain the role of marketing, sales and distribution through its stores, digital channels, and its locally based call centre.
IAG will be responsible for underwriting, claims management, product and pricing.
Transaction details
Key terms of the agreement:
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IAG’s consideration for 90% of the shares of RACQ Insurance and the entry into a strategic alliance for A$855m comprises:
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IAG has an option to acquire the remaining 10% from two years after completion on consistent terms. RACQ can choose to receive cash or equity in IAG as consideration upon exercise of the option.
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On completion, the RACQ portfolio (excluding the run-off CTP portfolio) is expected to add ~A$1.3bn to IAG’s Gross Written Premiums.
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In Queensland, there will be no change to IAG’s existing insurance business and brands, or RACQ’s brand, as a result of the alliance.
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The consideration will be funded from surplus capital.
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The transaction is expected to be EPS accretive in the first full year of ownership.
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IAG expects to incur customary one-off transaction and integration costs of ~A$70m over two years, which includes capitalised software integration costs.
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Synergies, predominantly by adopting IAG's reinsurance strategy for the RACQ portfolio, are expected to exceed A$50m per annum.
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The transaction is subject to conditions including Australian Competition and Consumer Commission clearance and approval under the Financial Sector (Shareholdings) Act
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Subject to regulatory approvals and other conditions, the transaction is expected to complete in the third quarter of 2025.
RACQ managing director and Group CEO David Carter says the partnership builds on RACQ’s successful 50-year insurance history and leverages the benefits that come from IAG’s scale, innovation, and diversification, as well as their experience working with other motoring clubs over many years.
IAG managing director and CEO Nick Hawkins said the new alliance with RACQ builds on IAG’s ability to provide leading insurance products to Queenslanders.