Australian insurer IAG is to acquire 90% of RACQ’s existing insurance underwriting business for $855m, under a 25-year exclusive partnership between the two companies.
According to the announcement, IAG also has the option to acquire the remaining 10% in two years on similar terms.
RACQ Chief Executive Officer David Carter said: RACQ is pleased to partner with IAG, a leading general insurance company in Australia, to help our 1.7 million members leave and move safely, securely and sustainably into the future. IAG has made a major commitment to Queensland and RACQ and brings a deep understanding of member focused organizations.
“I am delighted to announce the beginning of our long-term strategic partnership today. 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 Queenslanders continue to have access to leading insurance products locally, to keep them safe in the long term.”
The deal comprises payment for the shares equivalent to the expected net tangible asset value at time of completion of ~$522m, and upfront payment of ~$333m for entry into an exclusive 25-year distribution agreement. All of which will be funded from surplus capital.
Regarding IAC’s option to acquire the remaining 10%, RACQ can choose to receive cash or equity in IAG as consideration.
On completion, it is expected that RACQ’s portfolio will add ~$1.3 billion to IAG’s Gross Written Premiums.
Additionally, the acquisition is anticipated to increase earnings per share (EPS) within the first year of ownership, and consistent with IAG’s investment targets of a 15% insurance margin and ROE of between 14% and 15% on a ‘through the cycle’ basis.
While IAG expects to incur customary one-off transaction and integration costs of approximately $70 million over two years (including capitalised software integration costs), it also projects annual synergies exceeding $50 million, primarily achieved by applying IAG’s reinsurance strategy to the RACQ portfolio.
As a result of the alliance, in Queensland, there will be no change to IAG’s existing insurance business and brands, or RACQ’s brand.
IAG Managing Director and CEO Nick Hawkins commented: “IAG has a well-established presence in Queensland through our trusted insurance brands, and we are excited to now help protect and serve RACQ’s members. 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.”
The transaction is expected to complete in the third quarter of 2025, subject to regulatory approvals and other conditions – which includes clearance and approval fromAustralian Competition and Consumer Commission and under the Financial Sector (Shareholdings) Act 1998.
This post was originally published on here
