One of the good things about running for
a board is that information starts to flow your way, often from the
most unexpected quarters. Without breaching any confidences, Crikey can
reveal that the RACV absolutely made the right decision to pool its
general insurance operations with the NRMA five years ago.

RACV
Insurance was a slowly poisoned duck quacking loudly prior to its sale.
It was sub-scale and capital constrained – thanks to being a mutual.
The RACV models showed that 25% of the Insurance Manufacturers of
Australia (IMA) joint venture with the NRMA would have been fair value.
However, they ended up getting 30%, partly thanks to Nick Whitlam’s
blunt arrogance.

Prior to demutualisation, the NRMA had spent
$100 million trying to crack the Victorian market and all they ended up
with was a 9% share at the dodgy risk end of the motor market and even
less in home insurance. Buying RACV with equity in the IMA joint
venture allowed Whitlam and the NRMA to crow that they had won but many
regarded it as a phyrric victory.

The next move is for the RACV
to take the big step and demutualise, getting out of insurance and
crystallising a huge profit in the process. The board has looked at
this on occasions in operations called Project Molly and Project Molly
II.

The Project Molly scenario sees RACV exercise its
pre-emptive right to sell its shares in IMA. This would almost
certainly be to IAG in exchange for a minimum 10% stake in IAG which
would be worth $1 billion. Not bad for an asset that had an
optimistic value some seven years ago of $200 million. It’s still in
the RACV books at just $158.34 million

Assuming that the entire
RACV is actually worth about $1.7 billion, that would be a very tidy
average windfall of $10,000 each for the 17,000-odd RACV Club members
if they were able to share in this booty exclusively and the poor
second cousins known as the 1.3 million regular roadside service
members were given no entitlement.