Suncorp Group has announced that it has entered into a binding agreement to sell its 50 per cent interest in RACT Insurance to its joint venture partner, the Royal Automobile Club of Tasmania (RACT). The group said the sale is consistent with the continued simplification of its portfolio.
According to Suncorp, the sale consideration of $83.75 million for RACT Insurance will be in the form of upfront cash proceeds and reflects a price-to-earnings ratio of 18.1 times based on expected fiscal year 2021 earnings. The pre-tax profit on sale is expected to be in the range of $65 to $70 million. The total capital release, including the profit on sale, is expected to be approximately $50 million.
Suncorp CEO Steve Johnston said the transaction is in the best interests of customers, shareholders and the business.
“Suncorp and RACT have enjoyed a successful relationship in Tasmania since 2007. We have mutually agreed that now is the right time for RACT to take full control of the insurance entity. This is consistent with our focus on simplifying the group and driving improvement in our core insurance and banking businesses.
“Tasmania remains an important market for Suncorp Group. We are now focused on driving growth in the region through our wholly owned brands. This includes our leading national mass market brand AAMI, as well as our more specialised brands Shannons and APIA.” Johnston said.
Suncorp said completion of the transaction is subject to regulatory approval and expected to occur late in the 2021 calendar year.