The divestment of Suncorp’s RACQ and RAA insurance interests has taken analysts by surprise, with the sale expected to net the insurer up to $380 million.

Suncorp CEO Patrick Snowball’s decision to sell the company’s 50% share in both motoring group insurance operations shocked the market and analysts as the former tank commander steers the group towards core investments.

Suncorp acquired the stakes in Queensland’s RACQ and SA’s RAA under a 2001 deal to purchase AMP’s general insurance assets. It also owns RACT Insurance in Tasmania outright, but has made no announcement on its future.

JP Morgan’s Siddharth Parameswaran says both operations are still earnings-positive, so the divestment was strategic. He says there is a high likelihood of other insurers trying to take up Suncorp’s former stakes.

“I think they would all be sharpening their pencils,” he told insuranceNEWS.com.au.

Credit Suisse analyst Arjan van Veen says Suncorp’s decision to pursue a single pricing and claims desk is the catalyst for the sale.

“It wasn’t one we would have expected or even thought about given it’s been such a long relationship,” he told insuranceNEWS.com.au. “The returns have been pretty good over the years.”

Suncorp and the two motoring groups will now meet to hammer out a fair deal exit, Mr van Veen says. An expert may be called in to mediate if both parties can’t agree on a price.

He expects that based on a sale value of 10 to 12 times earnings after tax, Suncorp could make “roughly” between $320 million and $380 million.