RACQ to sell 90% of insurance business to IAG

If completed, the transaction alter the strategic positioning of the broader group.

The Royal Automobile Club of Queensland (RACQ) has announced the proposed sale of 90% of RACQ Insurance to Insurance Australia Group Ltd., according to S&P Global Ratings. 

If completed, the transaction is expected to alter the strategic positioning, as well as the revenue, earnings, and capital composition, of the broader RACQ group.

RACQ Insurance plays a critical role in the group’s credit profile, contributing 78% of its total revenues and 72% of its earnings in 2024. 

Under the current structure, S&P views RACQ Bank as a strategic member of the group. The group is expected to provide liquidity and capital support to the bank in nearly all circumstances, backed by substantial capital resources and minimal debt.

However, S&P noted that RACQ Bank faces competitive pressures within Australia’s retail banking market. Despite this, the mutual bank is projected to maintain low credit losses whilst sustaining its capitalisation, with a risk-adjusted capital ratio forecasted to remain between 18% and 18.5% over the next two years.