IAG managing director and chief executive officer, Mike Wilkins, said all options for the UK business had been investigated, including continuing to focus on improving the business’ performance within the current operating model and refining the business’ strategy to a more focused specialist motor offering.
"We believe the sale option delivers the best available outcome for IAG shareholders, particularly in light of the continuing challenging economic and industry conditions in the UK market,” said Wilkins.
"It also allows us to concentrate on our strategic priorities of accelerating profitable growth in our home territories of Australia and New Zealand, which in the 2012 financial year represented over 90% of the Group’s gross written premium (GWP), and on increasing our Asian footprint. It remains our target for Asia to represent 10% of the Group’s GWP, on a proportional basis, by 2016," he added.
The sale is expected to be effected through two separate transactions:
- The Equity Red Star (ERS) business will be sold to Aquiline Capital Partners, a private equity investment firm specialising in financial services, for £87 million (approximately $130 million). The sale is subject to regulatory approval and is expected to complete in the second half of IAG’s financial year ending 30 June 2013. As part of the sale agreement the existing pension fund liabilities will remain with IAG.
- An exclusive arrangement has been established with a consortium led by the existing management team to buy the significantly smaller specialist commercial broking business Independent Commercial Brokers (ICB), which includes Barnett & Barnett and NBJ. A further announcement will be made in relation to ICB in due course.
IAG expects to incur a net loss after tax of approximately $240 million in respect of the UK business in FY13.