IAG's move to exit the UK retail market has been a long time coming.
See also: IAG to scale back UK acquisitions
You can almost hear the slow clapping of 900,000 pairs of shareholder hands from the across the globe, following IAG's unveiling of its long-awaited plan to off-load a vast chunk of its troublesome UK portfolio.
Chief executive Michael Wilkins might have only been handed the job two months ago, but he has been running the rule over the business since he joined the company in the Autumn.
What he will have seen is chalk and cheese. And that's putting it mildly.
The decision to scale back IAG UK to become a specialist motor underwriter and wholesale distribution business under the umbrella of Equity Red Star, Equity Direct and recently acquired SME broker, Barnett & Barnett comes as little surprise, given the variance between those elements and IAG UK's retail business.
As a matter of fact, the move was hinted at on a number of occasions.
“[Wilkins] has been running the rule over the business since he joined the company in the Autumn. What he will have seen is chalk and cheese.
In April, the company sneaked a couple of lines into its latest profit warning explaining that it had initiated a strategic shift in the UK away from both the private motor market and the call-centre based model.
The same month, the moving of 150 of Equity’s 800 Brentwood staff, comprising its claims liability, classic car and motor breakdown teams, into a new office across town was another clue.
The anaemic performance of Hastings and Advantage, as highlighted to investors in October last year, was the most obvious third.
Given that only a fifth of Equity’s total book is standard motor, specialism is not only a sensible option, but very much core to the insurer’s existing and already profitable offering - 13% at the last reading, to be exact.
But what will become of the rest, namely Lloyd's managing agency, Alba; Equity's broking arm; Open & Direct, and Hastings and Advantage?
IAG has received approaches for both parts and the whole, which are being pursued. The word's 'MBO' and 'Neil Utley' feature on most tipster's lists, especially as the IAG UK chief has done it all before. He has all the backing he needs for such a move.
“Given that only a fifth of Equitys total book is standard motor, specialism is not only a sensible option, but very much core to the insurers existing and already profitable offering
However, as you would expect given market conditions (both within and beyond the sector) there is no timeline for the sale, with Wilkins commenting rather obliquely: “We will take whatever time it takes.”
In an investor presentation, IAG added that it would look for “natural owners who can derive greater value from the personal lines distribution assets Hastings/Advantage, and our mass market branch distribution.”
It's a tough ask, and no one is yet to even suggest a price tag. But one thing is for sure: Hastings will not fetch anything like the £140m IAG paid for it less than two years ago. The move to close down two of the group's five UK call centres, leading to 300 redundancies, will suggest to potential buyers that the business is at least attempting to become fit for profitable purpose.
At the same time, there is more than slightly ironic that Equity insurance brokers has steadily continued to acquire in recent months, including yesterday, with the company announcing its 18th buy in the past year. No prizes for guessing who might be a front-runner to acquire that part of the business, which has almost 100 branches and 900 employees across the UK, including Northern Ireland.
While IAG blames the prolonged depression of the UK motor market for the performance of its portfolio, the citing of aggregators as a primary cause is further evidence of the transformational – and unexpected – impact these portals are having in reshaping the way that personal lines business is transacted.
IAG adds that the private motor market can be expected to be tough for another two years; an observation that the likes of Zurich, Allstate, Travelers and Allianz will be only too well aware as their pursuit of RBSI edges towards its conclusion.
To read this analysis in full, see next week's Insurance Times.