Rise and fall of Equity Red Star

Equity Red Star was once the benchmark for service and standards, which rival Lloyd’s motor insurers aspired to emulate. The company was totally unprepared for the bodily injury claims storm, which bought the business to its knees.  As parent IAG contemplates a sale, Insurance Times traces the rise and fall of a Lloyd’s legend.

· 1946 Equity Motor Policies begins life as a Lloyd’s syndicate, specialising in classic cars. It quickly establishes a reputation for quality service.

· 2005 Insurance entrepreneur Neil Utley leads a delisting of the Equity from the stock exchange. A year later, it is sold for £540m to IAG.

· 2010 March First signs of trouble as Equity Red Star posts a profit before tax of A$36m (£22m) for the second half of 2009, a fall from the A$77m recorded for the first half of the year.

· June 2010 The storm is well and truly underway as IAG pumps in £206m to help subsidiary IAG UK, owner of Equity Red Star, cope with claims from bodily injury. IAG UK chief executive Neil Utley blames the reserves injection on the “claims farming” activities of accident lawyers, about half of which relate to 2008 and 2009.

· July 2010 JP Morgan sticks the knife in by saying that reserves adjustment was too slow at IAG UK. Utley leaves the business by “mutual consent”.

· August 2010 The situation turns from bad to worse as revelations emerge that the FSA is conducting a Skilled Persons Report into Equity. The report allows the FSA to appoint an independent body to probe corporate governance.

· September 2010 IAG UK caps off a dreadful financial year by posting a £216m loss for the year to June. Ian Foy takes over a business that is undergoing emergency surgery to save itself. Motor rates are hiked by 20%, underperforming broker relations culled and aggregator business scaled back. IAG boss Ian Wilkins vows not to sell the UK arm.

· Some rare good news for IAG UK as it makes a six month loss in the second half of 2011 of A$7m (£4.7m) - a big improvement on the A$119m loss it posted in the first half of the year. 

· January 2012 Lloyd’s fines Equity £95,000 and gives it a verbal rap on the knuckles for reserves blunders. Equity carried out reserve releases without telling its actuary Deloitte.

· April 2012 It emerges that even more money has been injected into the struggling business - £113m in 2011.

· May 2012 IAG chief executive Mike Wilkins finally admits he’s ready to throw in the towel as he signals that IAG UK is up for sale.