Sale to aid EIG acquisition strategy - details to follow in next few weeks

Equity Insurance Group (EIG) is ready to acquire a number of brokers after successfully selling its business to Australian insurer IAG for £570m.

EIG chief executive Neil Utley, who has signed a three year contract to stay at the helm, said the security of a new owner would allow EIG to pursue its acquisition strategy.

"Now we have a long-term, stable owner, we can get down to business and pursue the growth and acquisition strategy we have in place.

"I expect to announce one or two deals in the next few weeks," he added.

Speculation has surrounded EIG's interest in the specialist motor broker Carole Nash. But sources said that French insurer Groupama is now the front runner having pushed the price above £70m.

Utley declined to comment on market speculation.

The deal with IAG means Utley will pocket over £13m personally, based on his 9% stake. Seventy seven individual shareholders, involved in the original Cox buy-out last year, will share £40m. In the staff share scheme EIG set up for remaining staff, each will receive between £500 and £2,000.

The deal generates an estimated capital gain of £190m of an initial investment of £155m from Duke Street Capital and Englefield Capital, Utley's financial backers. Though both Duke Street and Englefield told Insurance Times last year that the investment was based on a three to five year exit plan, a Duke Street spokesman said the firm "was not looking to withdraw from the deal so soon".

EIG will become a key part of IAG's growing UK presence, which currently comprises Hastings, Lloyd's managing agent Alba Group and Advantage, all of which were acquired this year. It is listed on the Australian Stock Exchange with a market capitalisation of around A$9bn (£3.57bn) and receives annual gross written premium of more than A$6.4 bn (£2.54bn).

IAG chief executive Michael Hawker said: "Equity is an ideal fit with our acquisition criteria in mature markets like the UK...The company has a proven ability to produce profits across the cycle, with an unbroken 37-year record of profitability, and a combined operating ratio that has outperformed the UK motor market by an average of 15% over the past 25 years."