澳大利亚保险集团有限公司（IAG）：与西澳RAC结盟-稳步前行

Australia | Insurance Insurance Australia Group Ltd Alliance with RAC WA - Motoring Along The proposed acquisition of RAC (WA) is IAG's fourth such arrangementwith a major motor club. If the ACCC approves, the acquisition is expectedto be completed in the first half of 2026. The outcome of RACQ should beknown by 22 May 2025. The company also advises that perils claims aretracking $250m better than budget for FY25. Should this continue to 30June, the insurance profit guidance range would increase by as much. Wereaffirm our Buy Rating. EPS and Valuation Revisions: We revise our forward EPS +1% to +4% across the fc period,which relates to perils claims in FY25 (+4%). Currently, our forecasts do not include RACQor RAC until the ACCC approves the acquisitions. Earnings revisions and changes in relativemultiples since last publication result in our PT increasing to $9.60. IAG has announcedthe acquisition of 100% of the RAC Insurance (RACI) business for $400mat deal completion and an upfront payment of $950m for an exclusive 20-year distribution andbrand licensing agreement for RAC's home, motor, and niche insurance products. Acquisition Multiples:The total acquisition price of $1.35bn equates to 16.4x FY24 NPAT and9.5x FY25 earnings. Based on trailing earnings, RAC is a slight improvement vs RACQ. IAGexpects the combined RACQ and RAC to increase insurance profit by $300m or +20% basedon the midpoint of FY25 guidance. Benefits to IAG:1) Internally funded from existing surplus capital, debt and organic capitalgeneration. CET1 ratio falls to 1.0x the midpoint of IAG's target. 2) EPS accretive in thefirst full year and mid-single-digit EPS-accretive inclusive of full run-rate synergies. 3) RACIadds ~$1.5bn in GWP & will result in circa $100m pre-tax annual synergies primarily throughreinsurance benefits and operating efficiencies. Reminder, IAG announced a strategic alliancewith RACQ in November, with the ACCC decision likely to be released on May 22. CombinedRACQ and RAC increase GWP by ~$3bn, NEP by ~$2bn & Insurance Profit by ~$300m. Other details:IAG expects to incur one-off transaction costs of ~$20 million and annualintegration costs of between $15 million and $25 million over the next three years. Source: FactSet Strong trading and guidance update:Importantly, IAG has upgraded the ROE target to 15%as a result of the acquisitions and a positive financial outlook on the existing business. Thishas been aided by natural perils to end of April ’25 of circa $900m, which is ~$250m lowerthan YTD expectation. If perils were to remain at subdued levels for the remainder of FY25,IAG will increase insurance profit guidance to $1.65bn - $1.85bn from $1.4bn - $1.6bn (+17.9%to +15.6%). Similarly, the reported insurance margin guidance will increase to the top end ofthe 16-18% range vs original guidance at the top end of 13.5-15.5% range. GWP growth toApr has been around 5% (inc. 8.5% growth in Retail direct). NZ is experiencing softer marketconditions, with GWP being broadly flat in $AUD terms. Simon Fitzgerald * | Equity Analyst61 293642982 | sfitzgerald@jefferies.comWilliam Richardson * | Equity Analyst+61 293642983 | wrichardson@jefferies.com The Long View: Insurance Australia Group Ltd Risk/Reward - 12 Month View Investment Thesis / Where We Differ IAG is the largest insurer in Australia and New Zealand and operates someof the most established, iconic brands in both regions. The company islikely to benefit in the near term from moderating claims inflation and higherreturns on investment assets. Further, the retirement of legacy platformsand a turnaround in IIA will contribute to improve margins. The companyalso has strong relationships with its quote-share partners, which lowersearnings volatility and costs associated with reinsurance expenses. Upside Scenario,AUD13.00, +47% Downside Scenario,AUD4.00, -55% Base Case,AUD9.60, +9% Our PT for IAG is based on our blended NPV ofdistributable earnings (DCF) and P/BV multipleapproach. In terms of underwriting performance,we forecast an improved claims ratio for FY25f.EPS growth in FY25f is mostly attributable topremium growth and lower Perils claims. Assumptionsrelatedtoourupsidescenarioinclude: Assumptions related to our downside scenarioinclude: •Lower Natural Perils leading to a claims ratiobelow our base case.•Sustained high investment earnings.•Improved market share.•Premium rate increases sustained at highsingle digits. •Higherreinsurancecostswithcapacityexiting the market.•A reduction in investment income due todeclining interest rates.•Poor underwriting performance with a spike inclaims.•Lowermarketsharethroughincreasedcompetition. Sustainability Matters Catalysts Top Material Issue(s):1) Sudden asset revaluations due to capital allocation shifts towardssustainable options. 2) Commitment to Net Zero by 2050, 50% emissions reduction by 2030. 3)Advocating change to disaster resilience and emergency responses to protect customers and theirproperty