Insurance Australia Group (IAG) reached an agreement with the Royal Automobile Club of Western Australia (RAC) to acquire RAC’s insurance business in a deal valued at A$1.35 bn ($870 mn).
The agreement includes a 20-year exclusive distribution deal for RAC-branded home, motor, and specialty insurance products across Western Australia. IAG will deliver general insurance services for RAC’s 1.3 mn members.
Of the A$1.35 bn, A$400 mn covers the full acquisition of RACI shares, reflecting the estimated net tangible asset value at closing. The remaining A$950 mn is an upfront payment for the exclusive distribution and brand licensing deal.
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.
RAC Group CEO Rob Slocombe
“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,” Mr 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.
We’re excited to partner with RAC to help protect and serve more Western Australians. RAC is a highly trusted institution with a quality insurance business and strong member relationships. This partnership lays a solid foundation for continued commitment to Western Australia, the nation’s top performing economy.
IAG Managing Director and CEO Nick Hawkins
“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,” Mr Hawkins said.
IAG will fund the transaction using its current capital reserves, debt, and internal capital generation. The acquisition is expected to increase earnings per share in the first full year and deliver mid-single digit EPS growth once full synergy benefits are realized.
The RACI portfolio is projected to contribute around A$1.5 bn in gross written premiums to IAG. Annual synergies of about A$100 mn are anticipated from reinsurance savings, operational efficiencies, and other cost reductions.
IAG reported A$900 mn in natural perils costs through April, about A$250 mn less than forecast.
The company received over 10,000 claims following ex-Tropical Cyclone Alfred, with estimated net costs at A$50 mn. IAG maintains its fiscal 2025 perils outlook at A$1.28 bn.
