Deal also includes other Equity Insurance Group brands

The management buy out of IAG's UK arm is being led by Edward Fitzmaurice, chief executive of Hastings and Equity Direct, and Keith Charlton, chief executive of Advantage Insurance.

IAG has already agreed a deal to sell its UK insurance branch network to Swinton Group for £50m, while the Hastings and Advantage businesses will be bought for £23.5m in an MBO.

The team leading the MBO has also acquired Equity Insurance Group brands, and as part of the deal.

The deal has been financed by private investors and makes Hastings and Advantage into one of the largest privately owned insurance groups operating in the UK. The new company employs around 830 people.

Fitzmaurice took over as chief executive of Hastings and Equity Direct in April 2008. Hastings Direct will operate as a mass market, personal lines motor, household and travel insurance broker through the Hastings brand with a renewed focus on marketing and brand development with the figurehead of Harry Hastings its iconic mascot.

The broker will also expand its household insurance operations from its Bexhill call centre which is currently being upgraded and expanded.

The direct brands, and will operate separately from Hastings and target their own market sectors.

Advantage, which is based in Gibraltar, will focus on becoming a niche underwriter and move away from being a mass market insurer. Charlton became chief executive of the business in June 2007.

Fitzmaurice and Charlton will remain chief executive of Hastings Direct and Advantage respectively. Neil Utley, chief executive of IAG UK, will be non-executive chairman of the group.

The transaction is subject to FSA & FSC approval. Fitzmaurice, chief executive of Hastings and Equity Direct, said: “We are extremely pleased to announce the management buyout of Hastings Direct and Advantage Insurance Company, securing the future of the businesses for our staff and customers, of which there are over 400 000. Hastings Direct has made huge strides this year and we look forward to building the business in the UK motor and household personal lines market and becoming the insurer of choice for the UK consumer.”

Charlton, chief executive of Advantage, said: “The acquisition of Hastings and Advantage presents a significant opportunity to grow in the UK personal lines market. We intend to turn Advantage into a specialist, niche underwriter.”