Insurance Australia Group (IAG) M&A Announcement summary

Deal rationale and strategic fit

• Strategic alliance with RAC expands presence in Western Australia, leveraging RAC's trusted brand and access to 1.3 million members, and complements existing retail insurance portfolios.

• Builds on a successful track record of partnering with motoring clubs, supporting a multi-brand strategy and enhancing geographic diversification across Australia and New Zealand.

• RACI's high-quality personal lines portfolio and strong member engagement (92% retention, 2.9 products/member) complement offerings and support member-focused innovation.

• IAG will maintain existing brands in WA and invest in RAC's member experience and local presence.

Financial terms and conditions

• Acquisition of 100% of RAC Insurance for $400 million, plus $950 million upfront for a 20-year exclusive distribution and brand licensing agreement, totaling $1.35 billion.

• Funded from existing surplus capital, debt, and organic capital generation, with no change to dividend policy.

• IAG expects to recognize a $950 million intangible asset, amortized over 20 years.

• Transaction costs are ~$20 million, with annual integration costs of $15–25 million over the next three years.

• Acquisition multiple is 12.8x trailing and 9.5x forward earnings, lower than a recent comparable deal.

Synergies and expected cost savings

• Expected pre-tax annual synergies of ~$100 million from claims, technology efficiencies, reinsurance, and operating improvements.

• Full synergy run rate to deliver at least $300 million in additional insurance profits across recent deals.

• EPS accretive from day one, rising to mid-single digit accretion as synergies are realized.