Insurance Australia Group to Buy Royal Automobile Club

The Australian Competition and Consumer Commission (ACCC) gave its nod to Insurance Australia Group’s (IAG) plans to acquire Royal Automobile Club of Queensland (RACQ) for $855 million to provide general insurance products and services for RACQ members and Queenslanders through its strategic alliance.

The 25-year strategic alliance remains subject to completion of other requirements, including approval under the Financial Sector (Shareholdings) Act (FSSA). Subject to satisfaction of the outstanding requirements, IAG and RACQ anticipate the transaction will be completed in the third quarter of 2025.

Welcoming the ACCC clearing the merger proposal, IAG Managing Director and CEO Nick Hawkins said that the Commission’s decision not to oppose the strategic alliance is an important milestone towards IAG and RACQ partnering to protect Queenslanders into the future.

“As we outlined when we announced the strategic alliance in November last year, RACQ will maintain brand and customer relationships, while leveraging IAG’s scale, financial strength, best-in-class technology for claims, policies and pricing, customer orientated claims experience and underwriting expertise,” Hawkins said.

RACQ CEO David Carter said that this was a great first step in the regulatory process and recognises the benefits that would come from the two organisations working together as part of a 25-year strategic partnership agreement.

He also said that they were just as confident today as we were when we announced the partnership, in the benefits that will come from the both organisations working together. IAG will continue to provide updates as appropriate during the approval process.

Transaction Details

On completion, the RACQ portfolio is expected to add around $1.3 billion to IAG’s Gross Written Premium. IAG’s consideration for 90% of the shares of RACQ Insurance and the entry into a strategic alliance for $855 million comprises payment for the shares equivalent to the expected net tangible asset value at time of completion of around $522 million and upfront payment of $333 million for entry into an exclusive 25-year distribution agreement.

IAG has an option to acquire the remaining 10% stake from two years after completion of the transaction on consistent terms and RACQ can choose to receive either cash or equity in IAG upon IAG’s exercise of the option.

The consideration for the transaction will be funded from surplus capital and the transaction is expected to be Earnings Per Share accretive in the first full year of ownership.

IAG expects to incur customary one-off transaction and integration costs of $70 million over two years, which includes capitalised software integration costs.

Synergies, predominantly by adopting IAG’s reinsurance strategy for the RACQ portfolio, are expected to exceed $50 million per annum. 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.