IAG secures RAC Insurance and 20-year distribution rights

The transaction is expected to complete in the first half of calendar year 2026.

Insurance Australia Group (IAG) has partnered with the Royal Automobile Club of Western Australia (RAC), including the acquisition of RAC Insurance (RACI) and a 20-year exclusive distribution agreement for RAC-branded general insurance products.

The agreement involves a total consideration of $0.864b (A$1.35b), comprising $0.256b (A$400m) for the 100% acquisition of RACI and a $0.608b (A$950m) upfront payment for the long-term distribution and brand licensing rights.

The transaction is expected to complete in the first half of calendar year 2026.

Under the agreement, IAG will distribute RAC-branded home, motor, and niche insurance products exclusively through RAC’s network.

The RACI portfolio is expected to add approximately $0.96b (A$1.5b) in Gross Written Premium (GWP) to IAG’s business.

IAG expects the deal to deliver around $0.064b (A$100m) in pre-tax annual synergies through reinsurance and operational efficiencies.

The transaction will be funded through surplus capital, debt, and organic capital generation.

Integration costs are projected to be between $0.0096b (A$15m) and $0.016b (A$25m) annually over the next three years, with one-off transaction costs of around $0.0128b (A$20m).

The deal is forecast to be earnings per share (EPS) accretive in the first full year and to achieve mid-single digit EPS accretion once full synergies are realised.

There will be no change to IAG’s existing operations or brands in Western Australia, and the RAC brand will remain in use.

In combination with the previously announced strategic alliance with RACQ in November 2024, IAG expects both transactions to contribute approximately $1.92b (A$3b) in GWP, $1.28b (A$2b) in net earned premium (NEP), and an increase in insurance profit by at least $0.192b (A$300m), delivering double-digit EPS accretion at full synergy run-rate.

($1.00 = A$1.56)