Image source: Shutterstock

Highlights

  • IAG to acquire RAC's insurance arm and secure a 20-year exclusive distribution deal for AU$1.35 billion.

  • Transaction expected to be earnings-per-share accretive in the first full year post-completion.

  • RAC’s insurance portfolio will add approximately AU$1.5 billion to IAG’s gross written premium.

Insurance Australia Group (ASX:IAG) announced on Thursday a landmark AU$1.35 billion ($867.5 million) agreement to acquire the insurance business of The Royal Automobile Club of Western Australia (RAC), significantly bolstering its presence in the Western Australian market.

The deal includes the purchase of RAC's existing insurance portfolio for AU$400 million and a 20-year exclusive distribution agreement for RAC-branded home, motor, and niche insurance products, for which IAG will pay AU$950 million upfront. The transaction is set to be funded through a combination of IAG's existing surplus capital, debt facilities, and organic capital generation.

In a statement, IAG said the acquisition would allow it to deliver a comprehensive suite of general insurance products and services tailored for RAC members and the broader Western Australian community. The insurer also highlighted that the deal is expected to be earnings-per-share (EPS) accretive in the first full year following completion.

Founded in 1905 and based in Perth, The Royal Automobile Club of Western Australia is a prominent motoring and lifestyle organisation, offering services ranging from roadside assistance and insurance to travel, driver training, finance, and exclusive member benefits. 

Once finalised, the transaction will result in RAC’s insurance portfolio adding approximately AU$1.5 billion to IAG’s gross written premium. The deal is expected to be completed in the first half of 2026, subject to regulatory approvals and other customary conditions.