Allianz in the frame for RACQ insurance unit

Allianz has recent experience with acquiring Australian insurance companies.

German financial giant Allianz is believed to be closing in on the insurance business of the Royal Automobile Club of Queensland, with Bank of America once again tasked with finding a buyer.

It is understood the business generates about $50m in annual profit and some expect this means an interested acquirer would be prepared to pay about $500m, although expectations are believed to be closer to $1bn.

Allianz has a sizeable business in Australia, buying Westpac’s general insurance operations for $700m in 2020 and having looked at the CBA general insurance unit.

It purchased Manufacturers Mutual Insurance in 2000 and provides a variety of products, ranging from industrial risk to professional indemnity.

Last year there were suggestions Insurance Australia Group was in talks with RACQ.

IAG already has experience running the insurance operations for motoring clubs, including NRMA and RACV.

Founded in 1905 to patrol roads in search of broken-down vehicles, the RACQ, which is owned by its members, later expanded into travel services, insurance and banking, and has an annual turnover of more than $2bn.

It faces increasing competition in the auto insurance business from companies such as Sunshine Coast-based Youi.

Last year, it announced it would no longer cover more than a million motorists for compulsory third party insurance, after taking on too many riskier drivers in the scheme as well as absorbing losses from natural disasters and regulatory slip-ups.

RACQ was forced to repay $220m to customers after they did not get promised discounts on their insurance premiums.

RACQ also last year worked to separate its bank from its insurance unit for the sale. The insurance operations were purchased for about $500m.

Previously, insurers such as South Africa’s Auto & General and Hollard weighed up the merits of buying the business.

RACQ Insurance posted an after-tax loss of $236m in 2022.