Junction secures five-year RAC deal

Junction has won a five-year deal to continue to broker the underwriting panel for RAC, although it is not clear yet what would happen if the insurance and roadside breakdown firm was taken over by a new owner.

The BGL Group subsidiary would not go into details over whether there were clauses in the contract that guaranteed Junction’s position under a new owner.

RAC is currently at the centre of a bidding war between three private equity firms, following Aviva’s decision to give the green light for a sale, as revealed by Insurance Times earlier this year.

Insurance Times understands that a new owner of RAC will continue with the broker-panel model and it seems unlikely that it would force Junction out, even if this were an option.

RAC’s insurance arm was originally a broker panel. Aviva then took on sole underwriting of the business, before it reverted back to a panel system in 2009.

The business is gradually improving. Sales doubled last year and profitability is at break-even point.

RAC will continue with the aggregators, although the new owner is likely to push for RAC to earn more money from lucrative claims referral fees, something Aviva is believed to have shied away from.

A Junction spokesman said: “Junction is pleased to confirm that a new five-year contract with RAC has been signed to continue providing motor insurance products and services to new and existing customers. Junction is unable to comment on the specific terms of the contract.”

The final closing date for bids for RAC is 17 June, with the list being whittled down to three private equity companies. Clayton, Dubilier & Rice (CD&R), BC Partners and Carlyle are all still in the race, with a deal likely to fetch anywhere between £600m and £900m.

RAC’s former chief executive, Debbie Hewitt, who has been helping Carlyle, is one of a trio of industry leaders advising the private equity firms. Former Prudential chief executive Mark Wood has also been wooed by private equity.

CD&R, which recently brought in ex-Tesco boss Sir Terry Leahy to be an operating partner, is working with Bob Mackenzie, the former chairman of PHS, the cleaning support services group.