RACQ insurance sell-off hopes dead in the water

RACQ’s $500m sale of its insurance business to IAG is dead after the Sydney-based group last week resumed a huge share buyback.

RACQ chief executive David Carter.

RACQ’s deal to sell its troubled insurance business to IAG in a deal worth an expected $500m is dead in the water after the Sydney-based group last week resumed a huge share buyback.

Analysts say the buyback announcement means any plans for a war chest to acquire the Queensland insurance operations have been canned.

RACQ has shopped the business around to other potential buyers, including to South African insurers Auto & General and Hollard, but Sydney-based IAG emerged as the favoured buyer last year.

IAG already has a major stake in the RACV insurance business, giving it experience working with major motoring bodies.

Both IAG and RACQ have declined to comment on any “market speculation”, but RACQ earlier this year said that “in line with the increased climate risk facing all insurers, we have and continue to take active steps to strengthen our balance sheet, including long-term partnerships in reinsurance”.

RACQ posted an after-tax loss of $236m last year after flooding events and the discovery of several material regulatory breaches.

RACQ chief executive David Carter last year announced the insurer would refund half a million of its members a total of up to $220m after they did not get promised discounts on their insurance premiums.

Hunter Green Institutional Broking analyst Mark Tomlins said competition concerns presumably would prevent Suncorp, the state’s largest insurer, from acquiring the operations.

“There is too much concentration in certain Queensland classes of insurance,” Mr Tomlins said. “Maybe Hollard, which bought Commonwealth Bank’s insurance operations in 2021, will end up acquiring it, boosting their market share even further, and hence narrowing the gap between themselves and Allianz.”

He said QBE may be an interested party, playing up its Queensland heritage, and increasing its exposure to personal insurance.

Another option would be for the Queensland government to engineer a solution similar to what it did for the Metway Bank and Suncorp merger, he said.

RACQ also could potentially float the division off, and raise the needed capital in the process, akin to what NRMA did with its insurance division in the late 1990s.

RACQ chair Elizabeth Jameson stepped down from her position last November as the club moved to recover from the costly insurance premium snafu.