Daily briefing: Monday - IAG rumours are just that

A story in the national media over the weekend that Australian insurance giant IAG was set to sell its UK holdings has been heavily played down today. IAG won’t comment publicly, but sources close to the business indicate that it is determined to hold onto its UK assets, namely Lloyd’s motor insurer Equity Red Star and broking arm Barnett & Barnett.

This chimes with recent comments by group boss Mike Wilkins, who told Insurance Times earlier in the summer: “We are concentrating on remediating the business at the moment. Despite the fact that these remediation actions are taking longer than planned to take hold, we still remain confident that profitability will be restored in the UK over the longer term.”

Tangled ties

But there’s little doubt that the UK business is a distraction and arguably an embarrassment to Australia’s biggest insurer. IAG's UK strategy has seemed reactive and muddled in recent years. It sold broker Hastings and underwriter Advantage for a fraction of what it paid for them just two years before, at the end of 2008 to a consortium of staff and private backers led by Neil Utley, who was then chief executive of IAG UK.

Utley chaired the resulting Hastings and Advantage business while still running IAG’s remaining UK interests. This curious arrangement came to an end last summer, when he stepped down. IAG’s New Zealand boss Ian Foy took over, but has been noticeably quiet in the 12 months since.

Not now, but not never

The FSA probe into the huge bodily injury-related write downs at Equity remains ongoing, while a review of 185 jobs was announced earlier this year, resulting in 27 redundancies, as the insurer struggles to reshape itself for profitability. Wilkins has admitted that he expects the business to post another loss at the end of this financial year.

IAG UK may not be on the market, but any business is for sale at the right price, and under the circumstances it seems likely that Wilkins and co would look favourably on the right offer. Whether anyone would ever make such an offer is a different matter altogether.