IAG moving closer to finalising sale of troubled UK arm

Edi Truell

Private equity investor Edmund Truell is focusing his efforts on acquiring another UK motor insurer after his talks to buy Equity Red Star hit a roadblock.

Truell told Insurance Times: “All the way along we’ve been running more than one horse.

“It is much more likely that we will acquire another insurer rather than Equity Red Star. We are hoping to acquire another company, which is where we are spending our time and attention at the moment.”

Truell, through his new private equity vehicle Tungsten Corporation, is keen to buy a UK motor insurer to combine with telematics technology.

He was in the running to buy Equity Red Star, which is being sold by Insurance Australia Group (IAG), and at one point was considered a front-runner. But talks have stalled over a disagreement about provisions for Equity’s historic liabilities.

Truell said: “The issue is that in a number of areas the board of the vendor was unwilling to give us the comfort we were seeking.”

IAG has bought adverse development cover that protect Equity Red Star against the risk of its reserves being insufficient to pay claims. Insurance Times understands this cover would transfer to Equity’s eventual buyer.

Equity Red Star hit trouble in 2010 after rising bodily injury claims forced it to strengthen reserves, resulting in heavy losses. The company was subsequently investigated by both Lloyd’s and the FSA for its reserving practices.

Despite the breakdown of talks with IAG, Truell said he would still be keen to buy Equity Red Star if IAG changed its mind.  

He said: “IAG knows exactly where we are on Equity Red Star. If they want to do a deal with us, they can literally sign the papers and send them back. If they don’t want to do a deal with us, that’s entirely up to them.”

With Truell focusing elsewhere, Equity Red Star is likely to be sold to private equity house Aquiline Capital Partners. The company is run by Jeff Greenberg, son of iconic ex-American International Group chief executive Hank Greenberg.

Equity Red Star forms the bulk of IAG UK, which the Australian parent IAG is looking to sell. An IAG spokesman declined to comment on the specifics of the deal but issued a statement that said: “IAG confirms that, further to its previously announced strategic review, it remains in discussions about the potential sale of its UK business. These discussions are incomplete and no agreement has yet been reached. There is no guarantee a sale will result from the discussions. IAG will update the market as appropriate.”

The language of the statement suggests progress is being made towards finalising the sale of IAG UK.

A previous statement said that the company was “in preliminary discussions with a number of parties”. The change in language suggests that discussions are now advanced and focused on a single suitor.