Swinton buys branches and management buy Hastings

See also: Swinton secures bank funding for IAG buy & MBO team details Hastings and Advantage deal

Insurance Australia has sold its branch network to Swinton for £50m and Hastings and Advantage to a management buy out for £23.5m.

The branch network of Equity Insurance Brokers consists of 91 high street branches across England and Northern Ireland that are branded Equity Insurance and Open+Direct.

IAG said its profitable motor insurer Equity Red Star would continue to benefit from its existing relationship with Swinton Group, with the branch network remaining a distribution channel for its specialist insurance products.

Hastings Direct and its associated underwriter Advantage, together with the internet-based operations that trade under the Insure brands, will be bought by a small team of management and private investors. During 2008, these businesses generated 29% of IAG’s UK operations’ gross written premium.

The management buy out will be led by Edward Fitzmaurice, chief executive of Hastings, and Keith Charlton, chief executive of Advantage.

IAG’s UK chief executive Neil Utley will be a minority shareholder in the management buy out vehicle and will become non-executive chairman of the separated business, while continuing in his executive role as CEO of IAG UK.

The company said these transactions, combined with the costs of the recent closure of IAG’s specialist Lloyd’s syndicate Alba and associated underwriter Diagonal, will result in IAG recognising a pre-tax loss of approximately £40m.

IAG managing director and chief executive Michael Wilkins “Since we stated our intention to sell the mass market distribution businesses of our UK operations, we have considered a number of divestment options. We believe the transactions announced today represent the best outcome available to IAG shareholders, particularly in light of the deterioration in market conditions which has occurred since July.”

“The divestment of these businesses means we can now focus on our profitable specialist motor underwriter, Equity Red Star. In 2008, Equity Red Star reported an insurance margin of 10.6% and contributed around 71% of the UK operations’ gross written premium.

“Under the ongoing leadership of our UK CEO, Neil Utley, we will continue to focus on Equity Red Star’s underwriting and cost discipline to build on its impressive 37 year track record of profitability,” Wilkins said.