Insurance Australia Group Ltd has entered into a strategic alliance with The Royal Automobile Club of Western Australia (RAC), acquiring RAC Insurance (RACI) for A$400 million and securing a 20-year exclusive distribution agreement valued at A$950 million. The partnership is designed to enhance insurance offerings for RAC’s 1.3 million members and broaden IAG’s geographic footprint in Western Australia.
The alliance is expected to contribute approximately A$1.5 billion in Gross Written Premium (GWP), generate around A$100 million in pre-tax annual synergies, and be mid-single digit earnings per share (EPS) accretive on a full run-rate basis. Subject to regulatory approvals, the transaction is anticipated to complete in the first half of calendar year 2026.
IAG Managing Director and CEO Nick Hawkins said the deal reinforces IAG’s track record of partnering with member-based motoring clubs. RAC Group CEO Rob Slocombe added that the partnership supports RAC’s mission for a safer, more sustainable Western Australia, retaining the RAC brand and local service delivery.
“We’re excited to partner with RAC to help protect and serve more Western Australians. RAC is a highly trusted institution with a quality insurance business and strong member relationships. This partnership lays a solid foundation for continued commitment to Western Australia, the nation’s top performing economy,” Hawkins said.
“Our alliance with RAC will draw on our proven track record with successful motoring club partnerships and help us keep more Western Australians safe through competitive, accessible and high-value insurance products and services.
"RAC and its members will benefit from our financial stability, advanced technology platforms, global reinsurance arrangements, and customer-centric claims processes. Together, we will continue to invest in initiatives that support local communities and provide value to RAC, its members, and Western Australia,”
The alliance positions IAG to offer RAC-branded home, motor and niche insurance products through RAC’s extensive Western Australian network. RAC, a century-old institution with deep member engagement, brings a complementary insurance portfolio, while IAG contributes national scale, global reinsurance access, and advanced technology.
Portfolio integration and operational planning
RACI’s insurance portfolio, focused primarily on home and motor lines, has demonstrated strong customer retention and engagement, with 92% policyholder retention and an average of 2.9 products per member. The portfolio underwrites 1.45 million policies across WA, with FY25 GWP projected at A$1.5 billion.
To ensure a smooth transition, a Transitional Services Agreement will underpin customer integration. IAG will deploy its Retail Enterprise Platform to support technology integration, with the migration expected to complete within 24 months post-transaction.
Financial impacts and synergy expectations
The A$1.35 billion total consideration includes A$400 million for the RACI acquisition and A$950 million for the exclusive distribution and licensing agreement. The latter will be recognised as an intangible asset amortised over 20 years.
Annual pre-tax synergies of approximately A$100 million are expected, derived from reinsurance optimisation, operating efficiencies, and back-office consolidation. IAG anticipates EPS accretion in the first full year and confirms the alliance aligns with its 15% ‘through-the-cycle’ insurance margin and upgraded return on equity (ROE) target.
Capital management and regulatory pathway
The transaction will be funded through IAG’s surplus capital, debt facilities, and organic capital generation. IAG expects one-off transaction costs of A$20 million, with additional annual integration costs of A$15–25 million over the next three years.
Regulatory clearance from the Australian Competition and Consumer Commission and approval under the Financial Sector (Shareholdings) Act 1998 remain conditions for completion.
Outlook boosted by combined RACQ and RAC contributions
Including the previously announced RACQ strategic alliance, IAG expects an aggregate increase of A$3 billion in GWP, A$2 billion in net earned premium, and A$300 million in insurance profit. These developments support a revised group ROE target of 15% and signal strong momentum in IAG’s Australian retail strategy.
“The partnership will contribute to our organisation’s purpose, vision and mission of being the driving force for a better Western Australia, providing a safer, sustainable and connected future," Slocombe said.
"The partnership will support RAC to deliver for our members, employees, and all Western Australians through continued access to innovative insurance products and services provided locally under the RAC brand, to safeguard their future for years to come.”