Insurance Australia Group (IAG) and RACQ have entered into a 25-year exclusive partnership aimed at delivering general insurance products to RACQ members and residents of Queensland.
The agreement involves IAG acquiring a 90% stake in RACQ’s insurance underwriting business for $855 million, with an option to purchase the remaining 10% within two years under the same terms.
The deal includes the net tangible assets of RACQ’s insurance business and a long-term distribution agreement.
Nick Hawkins (pictured left), managing director and CEO of IAG, highlighted the benefits of combining IAG’s resources with RACQ’s member-focused approach.
“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,” he said.
RACQ CEO David Carter (pictured right) said the collaboration would enhance services for its 1.7 million members and focus on supporting Queensland communities.
“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 all Queenslanders continue to have access to leading insurance products serviced locally, to keep them safe in the long term,” he said.
The $855 million consideration comprises $522 million for RACQ Insurance’s net tangible assets and $333 million for the exclusive distribution rights.
IAG will initially acquire a 90% stake, with the option to purchase the remaining 10% two years post-completion. RACQ can choose to receive cash or IAG shares for the final 10%.
The transaction is expected to add $1.3 billion in gross written premiums (GWP) to IAG’s portfolio and is projected to increase earnings per share (EPS) in the first full year.
Annual cost savings exceeding $50 million are anticipated through reinsurance synergies.
Completion is contingent upon approvals from the Australian Competition and Consumer Commission (ACCC) and the Financial Sector (Shareholdings) Act 1998, with the transaction expected to close by the third quarter of 2025.
Proceeds from the transaction will enable RACQ to reinvest in its services and develop new products, including initiatives focused on mobility and home energy.
Carter confirmed that the funds would also help address cost-of-living pressures, including reducing the cost of roadside assistance products for members.
“We recognise the ongoing cost-of-living pressures facing our members, and completion of this transaction will see us use some of the funds to reduce the price of our roadside assistance products for members,” he said.
RACQ chair Leona Murphy noted that the partnership would allow the organisation to expand its insurance offerings.
“This transaction enables us to grow and expand our market-leading insurance solutions to more Queenslanders and invest in our members by reducing the price of Roadside Assistance,” she said.
She added that the deal would also deepen RACQ’s community investments.
“It will see us increase our investment further in the work we do in our communities by focusing on solving some of Queensland’s biggest challenges in the areas of road safety, community resilience, and making mobility more accessible for all Queenslanders,” Murphy said.
Existing insurance policies for RACQ members will remain unchanged, with no service interruptions expected.
The partnership builds on IAG’s established presence in Queensland, where it operates through several insurance brands.
Julie Batch, CEO of retail insurance Australia at IAG, said the collaboration aligns with IAG’s commitment to resilience and sustainability.
“IAG will provide Queenslanders with the confidence to feel safe and well protected through our commitment to community resilience and climate action, nation-wide supply chain, and global long-term reinsurance relationships,” she said.
RACQ’s other business divisions, including roadside assistance and banking, are not affected by the transaction.
DLA Piper served as legal counsel for RACQ during the negotiations.
Lyndon Masters, M&A partner at DLA Piper, described the deal as a transformative step for RACQ and its members.
“This is a transformational transaction for RACQ and its members, under which members will continue to receive market-leading insurance products and services, while providing RACQ with greater capacity to invest in and accelerate its 2032 Strategy,” he said.
Samantha O’Brien, head of insurance sector at DLA Piper, added: “Having been a trusted adviser to RACQ on a number of significant agreements and investments over the years, we are proud to advise them on their most significant partnership to date.”
