The transaction includes IAG’s purchase of the RAC Insurance (RACI) business and a 20-year exclusive distribution agreement for RAC branded home, motor and niche insurance products. The consideration comprises $400 million for 100% acquisition of RACI and $950 million for a distribution and brand licensing agreement.
RAC Group CEO Rob Slocombe said: "RAC is pleased to partner with IAG, a leading Australian general insurance company, in a long-term partnership that will strengthen the value we deliver to our 1.3 million members across Western Australia.
“IAG brings national scale, global reinsurance capability and industry-leading technology to support RAC members, along with a deep understanding of member focused organisations.
“The partnership will contribute to our organisation’s purpose, vision and mission of being the driving force for a better Western Australia, providing a safer, sustainable and connected future. The partnership will support RAC to deliver for our members, employees, and all Western Australians through continued access to innovative insurance products and services provided locally under the RAC brand, to safeguard their future for years to come,” Slocombe said.
IAG Managing Director and CEO Nick Hawkins said the new alliance with RAC builds on IAG’s successful track record of partnering with leading member motoring organisations which share its purpose and values.
IAG today announced it will enter a strategic alliance with The Royal Automobile Club of Western Australia (RAC) to provide general insurance products and services for RAC members and Western Australians. The announcement states:
The transaction includes IAG’s purchase of the RAC Insurance (RACI) business and a 20-year exclusive distribution agreement for RAC branded home, motor and niche insurance products. The consideration comprises $400 million for 100% acquisition of RACI and $950 million for a distribution and brand licensing agreement.
RAC Group CEO Rob Slocombe said: "RAC is pleased to partner with IAG, a leading Australian general insurance company, in a long-term partnership that will strengthen the value we deliver to our 1.3 million members across Western Australia.
“IAG brings national scale, global reinsurance capability and industry-leading technology to support RAC members, along with a deep understanding of member focused organisations.
“The partnership will contribute to our organisation’s purpose, vision and mission of being the driving force for a better Western Australia, providing a safer, sustainable and connected future. The partnership will support RAC to deliver for our members, employees, and all Western Australians through continued access to innovative insurance products and services provided locally under the RAC brand, to safeguard their future for years to come,” Slocombe said.
IAG Managing Director and CEO Nick Hawkins said the new alliance with RAC builds on IAG’s successful track record of partnering with leading member motoring organisations which share its purpose and values.
“RAC and its members will benefit from our financial stability, advanced technology platforms, global reinsurance arrangements, and customer-centric claims processes. Together, we will continue to invest in initiatives that support local communities and provide value to RAC, its members, and Western Australia,” Hawkins said.
IAG CEO Retail Insurance Australia Julie Batch said: "We look forward to welcoming all RAC members and RACI employees, as we work together to provide Western Australians with high quality service and innovative insurance solutions for the future.
“Our partnership with RAC will help to increase our geographical diversification and provide the opportunity to offer leading products and services to RAC’s 1.3 million members,” Batch said.
"Our alliance with RAC will draw on our proven track record with successful motoring club partnerships and help us keep more Western Australians safe through competitive, accessible and high-value insurance products and services.
“RAC and its members will benefit from our financial stability, advanced technology platforms, global reinsurance arrangements, and customer-centric claims processes. Together, we will continue to invest in initiatives that support local communities and provide value to RAC, its members, and Western Australia,” Hawkins said.
IAG CEO Retail Insurance Australia Julie Batch said: "We look forward to welcoming all RAC members and RACI employees, as we work together to provide Western Australians with high quality service and innovative insurance solutions for the future.
“Our partnership with RAC will help to increase our geographical diversification and provide the opportunity to offer leading products and services to RAC’s 1.3 million members,” Batch said.
Transaction summary
Key terms of the transaction include:
- IAG to purchase the RACI entity and existing portfolio.
- 20-year exclusive access to RAC’s network for distribution of RAC branded home, motor and niche insurance products.
- Commitment from both parties to continue to invest in RAC member experience and deliver leading insurance products and services.
- Total consideration of $1,350 million comprising: $400 million for IAG’s acquisition of 100% of the RACI shares equivalent to the expected net tangible asset value at time of completion and upfront payment of $950 million for entry into an exclusive 20-year distribution and brand licensing agreement
- On completion, the RACI portfolio is expected to add ~$1.5 billion to IAG’s Gross Written Premium (GWP).
- In Western Australia, there will be no change to IAG’s existing insurance business and brands, or RAC’s brand as a result of the alliance.
- The transaction is expected to result in ~$100 million pre-tax annual synergies comprised of reinsurance, operating efficiencies and other benefits.
- IAG expects to incur customary one-off transaction costs of ~$20 million and annual integration costs of between $15 million and $25 million over the next three years.
- Expected to be EPS accretive to IAG shareholders in the first full year, and mid-single digit EPS accretive on a full synergy run-rate basis.
- Consistent with IAG’s ‘through the cycle’ 15% insurance margin target and contributes to an upgrade in the ROE target to 15%.
- The transaction will be funded from existing surplus capital, debt and strong, stable organic capital generation.
- The transaction is subject to conditions including Australian Competition and Consumer Commission clearance and approval under the Financial Sector (Shareholdings) Act 1998.
- Subject to regulatory approvals and other conditions, the transaction is expected to complete in the first half of calendar year 2026.
In combination with the RACQ strategic alliance announced on 28 November 2024, subject to regulatory approvals, the transactions are expected to add approximately $3 billion in GWP, approximately $2 billion in NEP, increase insurance profit by at least $300 million and deliver double-digit EPS accretion on a full synergy run-rate basis. This, in addition to the positive financial outlook on the existing franchise, results in an improved ROE target of 15% on a ‘through the cycle’ basis.