Uplifting the risk capability, using innovative ways, this ASX 100 stock has found way in the list of growing companies to invest in.
Insurance Australia Group Limited (ASX: IAG)
Insurance Australia Group Limited (ASX: IAG) and RACQ have announced a significant 25-year strategic alliance aimed at strengthening IAG’s position in the Queensland insurance market. As part of the deal, IAG will acquire 90% of RACQ's insurance underwriting business for $855 million including shares payment and entry into an exclusive 25-year distribution agreement. Its aim is to offer RACQ members quality insurance products and services that would bring about a seamless local customer experience. IAG will maintain its existing brands in Queensland while benefiting from RACQ's trusted brand and extensive network. This collaboration is expected to drive growth in IAG’s Queensland operations and improve its customer offerings.
The agreement involves IAG acquiring 90% of the RACQ Insurance entity for $522 million, based on net tangible asset value, and paying an additional $333 million for the exclusive distribution agreement. IAG also has an option to acquire the remaining 10% of RACQ Insurance in two years under consistent terms. With this partnership, IAG expects to add around $1.3 billion to its Gross Written Premiums, further strengthening its portfolio. The deal is expected to be accretive to EPS in its first full year of ownership and to deliver synergies of more than $50 million annually, primarily through the adoption of IAG's reinsurance strategy for the RACQ portfolio.
IAG has set out clear goals for the partnership, emphasizing its strong track record in working with motoring clubs and its ability to offer leading insurance products and services to RACQ’s 1.7 million members. Both companies will continue investing in the member experience, ensuring that Queenslanders have access to cutting-edge products and services. The deal also aligns with IAG’s broader Australian Retail Strategy, which seeks to build on its existing operations in the region. The purchase is to be concluded at the third quarter of calendar year 2025 depending on obtaining necessary regulatory consents such as Australian ACCC approvals.
IAG is among the high growth stocks as reflected in recent FY24 results. Its continued strong performance, reported a net profit after tax (NPAT) of $898 million, an increase of 7.9% from FY23.
This growth was driven by an 11% rise in net earned premiums and a significant improvement in insurance profit, which surged by 79.1% to $1.4 billion. The company also benefited from higher investment income, which rose by 35%. Natural perils costs were lower than expected, positively impacting the insurance profit. These results underscore IAG’s resilience and commitment to delivering value to shareholders and customers while navigating the challenges of the insurance sector.
Source: Company’s Report
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