IAG and RACQ announce 25-year insurance partnership to serve Queensland

In a significant development for Queensland’s insurance sector, Insurance Australia Group (IAG) and the Royal Automobile Club of Queensland (RACQ) have entered a 25-year exclusive strategic alliance to enhance insurance services for Queenslanders and RACQ members. This long-term partnership reflects a shared vision of safety, sustainability, and resilience in the face of evolving challenges.

Under the agreement, IAG will acquire 90% of RACQ’s insurance underwriting business for $855 million, which includes the net tangible asset value and the exclusivity of the alliance. Additionally, IAG has an option to purchase the remaining 10% after two years under consistent terms. The alliance will expand IAG’s reach in Queensland while allowing RACQ to maintain its brand identity and customer relationships.

RACQ CEO David Carter described the deal as a significant step toward achieving RACQ’s mission of supporting Queenslanders through leading insurance services. He noted that this collaboration leverages IAG’s expertise in technology and customer service while preserving the trusted local focus of RACQ.

IAG Managing Director and CEO Nick Hawkins highlighted that the alliance aligns with IAG’s strategy of partnering with organisations that share its values. He emphasised that this partnership will bring best-in-class insurance products and services to RACQ members, further solidifying IAG’s presence in Queensland.

What does the partnership mean for Queenslanders?

The partnership ensures that RACQ members and residents will benefit from IAG’s extensive resources, including advanced claims technology, comprehensive underwriting capabilities, and global reinsurance relationships. The agreement also underlines a mutual commitment to addressing climate action and building community resilience.

For Queensland, the deal promises enhanced access to robust insurance solutions designed to meet the state’s unique needs. IAG CEO of Retail Insurance Australia Julie Batch reiterated the focus on providing Queenslanders with confidence and protection through high-quality insurance services.

Strategic financial details of the alliance

The financial specifics of the transaction reveal a promising outlook for IAG and RACQ. The upfront payment of $855 million includes $522 million for RACQ Insurance’s net tangible assets and $333 million for the exclusivity of the 25-year partnership. The deal will add approximately $1.3 billion to IAG’s Gross Written Premiums, with expected synergy benefits exceeding $50 million annually, primarily driven by the adoption of IAG’s reinsurance strategy for the RACQ portfolio.

While IAG will manage the underwriting and claims, RACQ will continue to focus on building strong customer relationships under its brand. No changes will occur to either organisation’s existing Queensland operations or branding.

What’s next for the partnership?

Subject to regulatory approvals, including clearance from the Australian Competition and Consumer Commission (ACCC), the deal is expected to close by the third quarter of 2025. IAG has assured shareholders that the transaction will be earnings-per-share (EPS) accretive in the first full year, maintaining its investment targets of a 15% insurance margin and a return on equity (ROE) between 14% and 15%.

The agreement marks a significant milestone in the Australian insurance landscape, combining the strengths of two industry leaders to deliver unparalleled services in Queensland. As regulatory hurdles are addressed, this partnership is poised to redefine insurance services for millions of RACQ members and Queensland residents.