By Sherin Sunny

Nov 28 (Reuters) - Shares of Insurance Australia Group IAG.AX rose on Thursday to their highest levels in more than five years after the company said it will enter an exclusive long-term partnership with the Royal Automobile Club of Queensland (RACQ).

The insurer's stock rose by as much as 5.6% to A$8.64, its highest point since July 31, 2019. The stock was among the top gainers in the benchmark ASX 200 index .AXJO, which was up 0.6% at 0157 GMT.

Under the 25-year exclusive partnership, IAG will acquire 90% of the RACQ's existing insurance underwriting business for A$855 mln ($555.41 mln). The insurer will also provide RACQ members and Queensland residents with general insurance products and services.

Analysts at Citi noted that the exclusive partnership between IAG and the RACQ should help the Australian insurer establish a stronger presence in Queensland, which has traditionally been one of its weakest markets.

On completion of the deal, the RACQ portfolio is expected to contribute about A$1.3 billion to IAG's gross written premiums.

Additionally, IAG stated that the acquisition will be earnings per share accretive in the first full year of ownership, signaling a positive impact on the company's financial performance.

"At face value, the deal seems a positive one for IAG shareholders", Citi said.

"The main risk would seem to be the combined concentration of IAG and SUN in the state post the deal but, even so, this would not be as concentrated as some other industries suggesting there should be a good prospect of the deal being approved", Citi said, referring to Suncorp's SUN.AX presence in Queensland.

The deal is expected to be complete in the third quarter of 2025, pending regulatory approvals, including clearance from Australia's competition regulator.

($1 = 1.5394 Australian dollars)

(Reporting by Sherin Sunny in Bengaluru; Editing by Sherry Jacob-Phillips)

((Sherin.Sunny@thomsonreuters.com;))