Australian insurer IAG has struck a deal to purchase 90% of RACQ’s existing insurance underwriting business for $855m (A$1.32bn), under a 25-year exclusive partnership between the two parties.
IAG also has the option to acquire the remaining 10% in two years on similar terms.
The transaction, funded from IAG’s surplus capital, is expected to be earnings per share accretive in the first full year post-acquisition.
It aligns with IAG’s investment targets, including a 15% insurance margin and a return on equity of 14–15%.
IAG’s payment for the 90% stake and the distribution agreement includes approximately $522m for the shares and an upfront payment of around $333m for the distribution rights.
RACQ has the option to receive cash or equity in IAG upon the exercise of the remaining 10% acquisition option.
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The acquisition is expected to add approximately $1.3bn to IAG’s gross written premiums and will not result in changes to IAG’s existing insurance business and brands or RACQ’s brand in Queensland.
IAG expects incurring one-off transaction and integration costs of around $70m over two years, including capitalised software integration expenses.
The completion of the transaction is contingent upon regulatory approvals including clearance from the Australian Competition and Consumer Commission and approval under the Financial Sector (Shareholdings) Act.
The deal is expected to be finalised in Q3 2025, subject to fulfilment of these conditions.
Under the agreement, RACQ will continue to manage marketing, sales and distribution including stores, digital platforms and a locally based call centre. Meanwhile, IAG will assume responsibility for underwriting, claims management and the formulation of product and pricing strategies.
RACQ CEO David Carter said, “RACQ is pleased to partner with IAG, a leading general insurance company in Australia, to help our 1.7 million members live and move safely, securely and sustainably into the future.
“The partnership with IAG contributes to our goal of building a truly resilient state, leaving no Queenslander behind. And we will invest together to ensure RACQ members, employees and all Queenslanders continue to have access to leading insurance products serviced locally, to keep them safe in the long term.”
IAG managing director and CEO Nick Hawkins said: “The transaction is a true partnership between IAG and RACQ. It builds on our proven track record of working collaboratively with leading member motoring organisations that share our values.
“RACQ will maintain brand and customer relationships, while leveraging IAG’s scale and financial strength, best-in-class technology for claims, policies and pricing, customer orientated claims experience and underwriting expertise.”
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