Sharechat Logo

IAG sells unprofitable UK operations to buyout firm, managers

Friday 14th December 2012

Text too small?

Insurance Australia Group, whose ASX-listed shares have surged 63 percent this year, is selling its unprofitable UK operations, taking a loss of about $240 million on them in the 2013 year.

The Sydney-based insurer, which runs the NZI, State and AMI insurance bands in New Zealand, will sell its Equity Red Star motor insurance business in the UK to buyout firm Aquiline Capital Partners for 87 million pounds. The sale will settle in the second half of this financial year, with IAG agreeing to retain existing pension fund liabilities.

IAG is also in talks to sell its Independent Commercial Brokers business in the UK to a group of the existing managers, with details yet to be finalised.

"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," chief executive Mike Wilkins said in a statement.

The shares last traded at A$4.81 on the ASX, valuing the company at A$10.1 billion, which is below its enterprise value of A$11.2 billion, according to Reuters data. The stock is rated 'outperform' based on the consensus of 15 analyst recommendations compiled by Reuters, with a price target of A$4.50.

Wilkins said IAG reviewed all possible options for maintaining the operations in the UK, including a move to focus more on auto insurance. Exiting the UK will allow the company to focus on it key markets of Australia and New Zealand, while targeting growth in Asia so that the region represents 10 percent of gross written premium by 2016, he said.

The UK operations contributed to a 17 percent drop in IAG's profit for the year ended June 30, when their value was written down by $297 million. The UK businesses posted a loss of $13 million.

BusinessDesk.co.nz

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

ANALYSIS: Should penalties for continuous disclosure breaches be relaxed?
Fletcher seeks urgent talks on Ihumatao stalemate
NZ economy grows 0.5% in June quarter, beating expectations
Restaurant Brands lifts 2Q sales; appetite for KFC offsets ditched Starbucks
Auckland jet fuel arrangements a potential barrier to new entrants
NZ dollar weaker after Fed split on outlook for further US cuts
Leading judge says court administration model 'outdated'
MARKET CLOSE: NZ shares fall; Goodman placement sees property stocks sold
NZ dollar eases as market eyes pending GDP data
Evolve shareholders demand answers

IRG See IRG research reports