How Will IAG’s RACQ Acquisition and FY26 Upgrade Shape Its Future?

Strong FY25 Financial Performance

Insurance Australia Group (IAG) opened its 2025 Annual General Meeting by highlighting a robust financial year. The company reported a 4.3% increase in gross written premium to $17.1 billion, alongside an insurance profit of $1.7 billion and a net profit after tax approaching $1.4 billion. These results underscore IAG's ability to deliver solid returns amid a competitive insurance market in Australia and New Zealand.

Customer service remains a core focus, with IAG paying out $10.2 billion in claims and maintaining a 98% settlement rate for Australian retail customers. The company has enhanced its catastrophe management capabilities, including a 24/7 Major Event Command Centre, reflecting lessons learned from recent natural disasters and regulatory inquiries.

Strategic Alliances and Growth Momentum

Significant strategic moves were a highlight of the AGM. IAG completed an $855 million acquisition of the Royal Automobile Club of Queensland’s (RACQ) insurance underwriting business, bringing 1.7 million members under its umbrella. This acquisition, effective from 1 September 2025, is expected to contribute approximately 10% premium growth in FY26.

Additionally, IAG announced a $1.3 billion strategic alliance with the Royal Automobile Club of Western Australia (RAC), pending regulatory approval. Together, these partnerships position IAG to serve over 10 million customers and write more than $21 billion in annual premiums, reinforcing its leadership in the general insurance sector.

Upgraded FY26 Guidance and Capital Strength

Reflecting the RACQ acquisition and ongoing positive business momentum, IAG upgraded its FY26 guidance. The company now expects premium growth of approximately 10%, up from a previous low-to-mid-single-digit forecast. Insurance profit guidance increased by $100 million to a range of $1.55 billion to $1.75 billion, maintaining a reported insurance margin between 14% and 16%.

IAG emphasized its strong capital position, with a Common Equity Tier 1 capital base of nearly $4 billion and total regulatory capital exceeding $6.5 billion. This financial strength supports both shareholder returns and the funding of growth initiatives, including organic capital generation and innovative risk management solutions such as multi-year reinsurance protection.

Sustainability, Diversity, and Community Engagement

The company reaffirmed its commitment to sustainability and social responsibility. Initiatives include the NRMA Insurance Help Fund supporting climate resilience, partnerships with Indigenous communities through a $10 million supplier spend commitment, and programs to reduce environmental impact in vehicle repairs and fleet emissions.

Diversity targets remain a priority, with gender representation goals set between 40% and 60% at senior management levels and a Board composition target of 40% women. IAG also reported progress on its Reconciliation Action Plan, completing 95% of FY25 deliverables and preparing a new plan for FY26–FY28.

Governance and Board Changes

The AGM included the election of JoAnne Stephenson as an Independent Non-Executive Director, bringing expertise in insurance, risk management, and transformational change. The Board also paid tribute to the late David Armstrong, a former Director and Chair of the Audit Committee, whose contributions were deeply valued.

Shareholders approved an increase in the Independent Non-Executive Director Fee Pool to $4.7 million annually, enabling the company to meet regulatory requirements and attract high-calibre directors.