Insurance Australia Group (IAG) will sell off its mass market distribution businesses in the United Kingdom for about $165 million.
The decision to exit the UK market is in line with the listed insurer's strategy of concentrating on the specialist motor underwriting business in the UK, a company statement to the Australian Securities Exchange said.
As part of the sale, IAG's UK insurance branch network will be sold to Swinton Group for about $112 million. The firm's Hastings and Advantage businesses will be sold through a management buyout for about $53 million.
"Since we stated our intention to sell the mass market distribution businesses of our UK operations, we have considered a number of divestment options," IAG managing director and chief executive Michael Wilkins said.
"We believe the transactions ... represent the best outcome available to IAG shareholders, particularly in light of the deterioration in market conditions which has occurred since July," Wilkins said.
IAG said the transactions and the costs relating to the closure of its specialist Lloyd's syndicate Alba and associated underwriter Diagonal will result in a pre-tax loss of about $90 million in the 2009 financial year.
IAG said the divestment of the businesses means the company's capital position will improve slightly.
It also means IAG can now focus on its specialist motor underwriter, Equity Red Star.
IAG said the divestments mark the completion of the major restructuring initiatives the insurer had put in place since announcing its refined corporate strategy in July.
The transactions remain subject to regulatory approval and are expected to be completed in early 2009.
