IAG-ASX: Strategic Alliance With RAC WA Strengthens ASX 200 Presence

Highlights

• IAG (ASX:IAG) partners with RAC WA to broaden insurance offerings and local presence

• Agreement includes acquisition of RAC Insurance and long-term distribution exclusivity

• Integration to be supported by IAG’s technology platforms and operational planning

Insurance Australia Group Ltd (ASX:IAG), a key component of the ASX 200 index, has entered into a strategic agreement with The Royal Automobile Club of Western Australia (RAC). This alliance marks a significant step in expanding insurance reach across Western Australia through the acquisition of RAC Insurance and the establishment of a long-term exclusive distribution arrangement. The deal is expected to strengthen the group's overall presence and reinforce its influence within the insurance segment of the ASX 200.

Acquisition and Exclusive Distribution Agreement

The partnership includes the full acquisition of RAC Insurance, aligning with IAG’s strategy to collaborate with member-based motoring clubs across the country. The agreement also introduces a multi-decade exclusive distribution and licensing arrangement, allowing IAG to deliver RAC-branded home, motor, and niche insurance solutions via RAC's established Western Australian network.

This initiative supports RAC’s continued commitment to localized service delivery while drawing on IAG’s financial infrastructure, advanced reinsurance capabilities, and digital technology platforms. The collaboration aims to elevate member experiences through tailored, community-focused insurance offerings.

Operational Integration and Technology Deployment

Post-acquisition, the transition will be guided by a structured integration roadmap, supported by a Transitional Services Agreement. IAG’s Retail Enterprise Platform will be deployed to ensure a seamless migration process across systems and operations.

The insurance portfolio being integrated includes a strong concentration in home and motor insurance, with demonstrated policyholder loyalty and diversified member engagement. The operational alignment will be executed in phases over an extended transition period, ensuring stability in service continuity.

Financial Structure and Strategic Objectives

The financial arrangement consists of two main components: the acquisition of RAC Insurance and the long-term distribution licensing agreement. The latter will be treated as an intangible asset and amortized accordingly. The transaction is set to be funded through a combination of internal reserves, existing credit facilities, and ongoing capital generation.

IAG has highlighted expected synergy benefits from the deal, including reinsurance optimization, streamlined operations, and administrative consolidation. These efficiencies are projected to enhance earnings accretion within the initial full-year cycle following integration. The strategy aligns with IAG’s reaffirmed focus on consistent insurance margins and a reinforced return on equity target.

Regulatory Milestones and Transitional Costs

Completion of the agreement is subject to regulatory clearance, including approvals under competition and financial sector ownership legislation. IAG has factored in one-time transaction and recurring integration costs into its capital management framework, ensuring a structured financial pathway during the onboarding phase.

These regulatory processes are anticipated to reach conclusion within the first half of the upcoming calendar year, post which the operational synergy realization will commence in earnest.

Broader Impact and National Strategy Reinforcement

In combination with a prior agreement involving the Royal Automobile Club of Queensland, this partnership contributes to IAG’s larger strategy of expanding through motoring club collaborations. The consolidated impact from both alliances enhances national reach and supports IAG’s evolving retail roadmap across Australia.

By leveraging RAC WA’s established regional trust and IAG’s scalable operational capabilities, the alliance aims to deliver comprehensive insurance services while supporting local community initiatives and broader sustainability goals.