IAG paves the way for UK asset sale

17 May 2012, 5:05 pm   -   Source: AAP

Insurance Australia Group is reviewing its troubled UK business in a move that could lead to them being sold off.

Insurance Australia Group (IAG) is considering a potential sale of its loss-making businesses in United Kingdom.

IAG has launched a review of its Equity Red Star, the UK's fifth largest motor insurer, and commercial insurance broker Barnett & Barnett, paving the way for a possible sale.

The businesses posted an insurance loss of $5 million in the six months to December 31, an improvement from a $121 million loss in the previous corresponding period.

IAG chief executive Mike Wilkins said it was an appropriate time to assess the options for the UK business, given its improving performance and the country's double-dip recession.

"One of our key strategic priorities is to return the UK to profitability," he said in a statement on Thursday.

"Given the progress towards that goal in the opening half of the current financial year, we believe the time is right to consider our longer term plans for the business, and the best way to maximise shareholder value."

IAG's shareholders welcomed the news, sending the insurer's shares up four cents to $3.38 in an overall weaker market.

"People like the idea of them selling their UK business," one analyst, who did not want to be named, said.

"I would've thought IAG would take a bid any time for it."

The outcomes of the review could include a sale, or a refinement of its business strategy to focus more on motor insurance.

Alternatively, the review could lead IAG to continue its focus on improving the business performance within the current operating model.

An update on the review will be delivered in August.

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