While IAG is faced with a £200m writedown if it can sell Equity Red Star, its former UK chief’s fortunes are looking considerably brighter

If the recent history of IAG UK was a game of poker, its Australian insurer parent is looking more and more like the loser in a high-stakes game with Neil Utley, who has played his hand skilfully.

To find out why, let’s rewind the clock and look back at some of the deals Utley has been at the centre of with IAG.

A time to sell

Utley bought Equity off the stock market in 2004 and a year later sold it for £540m to IAG. It was the height of the buy-out boom, when markets were awash with money - in hindsight, the perfect time to sell a business.

He stayed on as IAG UK chief executive and, three years later, led the management buy-out of Hastings and Advantage for £23.5m. Nice work, when you consider that today Utley’s talking about a £500m flotation of the revived business. If that goes to plan, he could pocket up to £150m.

Utley finally left IAG UK in July 2010, a time when the bodily injury storm was reaching its peak and the Australian parent had to pump in £229m reserve strengthening. A year later in 2011, IAG had to cough up another £113m.

But that’s only half the story. It has emerged today that IAG may have to take a £200m writedown if - and it’s a big if - the firm manages to sell IAG UK, which contains Equity Red Star and insurance broker Barnett & Barnett, at book value.

Ups and downs

So let’s do a little bit of maths here. In very crude terms, if the sale goes ahead, IAG will probably be down £542m, whereas Utley, if he completes a successful flotation of Hastings, will be up by just over a billion with his negotiations for himself and his partners.

One could argue in mitigation that IAG has been unlucky in that it bought Equity Red Star just as bodily injury was beginning to escalate and the financial crisis was soon to hit, smashing down valuations.

But the balance sheet hits that IAG UK have taken are huge, even in comparison to motor rivals suffering the same woes on bodily injury. And the buck stops with the parent when it comes to responsibility of the subsidiary.

Meanwhile, Utley has had the aggravation of the Lloyd’s inquiry and questions over the performance of Equity Red Star.

Ultimately, though, when the history of IAG UK is written, Utley will be the one who has emerged the clear winner.

IAG will be looking for buyers for its UK subsidary, and maybe this time they’ll play their hand better.