IAG's specialist motor underwriter Equity Red Star is anticipated to post a loss of 240 million Australian dollars (US$253 million) within the 2013 financial year
Insurance Australia Group Ltd. said hello would sell its loss-making U.K business to Ny private equity firm Aquiline Capital Partners for GBP87 million (US$140 million).
IAG’s specialist motor underwriter Equity Red Star is anticipated to post a loss of 240 million Australian dollars (US$253 million) within the 2013 financial year, which runs to June 30, the Australian insurer said inside a statement to the stock exchange Friday.
The sale, which follows IAG’s overview of the business earlier this year, is anticipated to be completed in the 2nd half of the year, susceptible to regulatory approval. IAG has additionally signed an agreement to market its specialist commercial U.K. broking business, Independent Commercial Brokers, the insurer said, without giving details.
Credit Suisse analyst Andrew Adams estimated the Equity Red Star sale-for under 10% of the price IAG purchased it for in 2006–was equal to a A$100 million loss around the sale of the business, that could drag the company’s annual net gain down by 30%.
IAG shares fell 1.7% to A$4.73 at the begining of Sydney trading against a broadly positive market. Overall this season, the stock has risen by over fifty percent from just over A$3 a share.
Within the long-run, however, Mr. Adams asserted the sale was positive for IAG, which “investors are likely to look through this one-off and concentrate on future growth using the ongoing loss problems with U.K. removed.”
Last financial year, the insurer wrote down A$297 million in goodwill and intangible assets around the U.K. business, which posted a general loss of A$13 million. Last year it posted a A$181 million loss.
“We believe the sale option offers the best available outcome for IAG shareholders, specifically in light of the continuing challenging economic and industry conditions within the U.K. market,” Leader Mike Wilkins said in Friday’s statement.