Motoring mutual giant RAC is looking to become a company, asking members to vote on the historic move as it basks in a bumper profit and separately sweats on the $1.35 billion insurance arm sale.
Motoring organisation RAC is looking to incorporate as a company, asking members to vote on the historic shift next month as the group separately sweats on the sale of its insurance arm.
The 120-year Royal Automobile Club of WA says its governance structure as an incorporated association is not longer fit for purpose and it wants to incorporate as a company limited by guarantee.
RAC sits at fourth in the Not-for-profit Businesses lists compiled for Data & Insights on the Business News website, based on its 2024 financial revenue of $1.58 billion, making it one of the biggest private entities in the state and major financial services player, largely on the basis of its insurance division.
However it has again reported a bumper profit, more than doubling its result to $254 million for the year ending June 30 from $110 million in the previous corresponding period, which is likely to shift it up the rankings, possibly to second above health insurer HBF and hospital operator St John of God Health Care, depending on their 2025 results.
The change, to be put to a vote of members at its November 24 annual meeting and requiring 75 per cent support, comes as the Australian Competition and Consumer Commission weighs up the $1.35 billion sale of RAC’s insurance business to Sydney-based Insurance Australia Group.
In a letter to the group’s 1.3 million members, RAC president Allan Blagaich said the move to be governed by the federally-overseen Corporations Act, rather than state-based rules for associations, was part of a modernisation process started in 2017.
“These changes are necessary because RAC has outgrown the Associations Incorporation Act – legislation intended to regulate much smaller, local clubs and community organisations in Western Australia,” Mr Blagaich wrote.
He stressed that RAC would continue to exist for members and be owned by them.
However, the constitutional changes do allow for a form of share ownership, called mutual capital instruments (MCIs), though which RAC would be able to raise capital.
Notably, MCI holders would also be able to receive dividends, something that would not be possible under the current structure.
“MCIs were created to allow mutual entities to raise capital from outside their members while retaining their status as mutuals,” RAC said in its notice of meeting.
“While the RAC has no current intention to raise capital in this way, RAC considers it prudent to ensure that the company has the ability to take advantage of all possible fundraising mechanisms.
“This provides flexibility for the future.
“As a result, the new constitution contains provisions to give the company flexibility to issue MCIs in the future and pay dividends in respect of the MCIs.
“This is consistent with constitutions of other large mutual companies limited by guarantee and consistent with the other motoring clubs that have changed their status to become a company.”
A spokesman for the RAC made it clear that the incorporation of the entity was unrelated to the sale of the insurance arm or any consideration regarding the use of those funds should the ACCC agree to the deal.
