Australian giant to axe 300 jobs at Hastings following A$350m write-down.
See also: IAG plans UK business sell off
Insurance Australia Group (IAG) has announced plans to sell parts of its UK portfolio and lay off 300 staff, following a strategic review of the business, which includes a writedown of A$350m (£169m).
In a trading update, recently appointed chief executive Mike Wilkins outlined the company’s plans to focus on its specialist underwriting business, Equity Red Star, while potentially selling off its other UK operations including Equity Insurance brokers, private motor group Hastings, and underwriting agency, Advantage.
In a statement the insurer said it had received a number of approaches from parties with a view to acquiring some or all of its UK retail assets. The company said that new investors or owners were in the process of being sought.
In a separate statement, Hastings and Equity Direct announced they would close two of its five contact centres, in Manchester and one in Leicester. 300 staff will lose their jobs.
As revealed by Insurance Times last week, Wilkins has moved to restructure the group after fending off an audacious A$8.7bn (£4.1bn) acquisition bid by rival Australian insurer, QBE.
It will restructure Equity Red Star (ERS), Equity Direct and Barnett & Barnett, which the company acquired earlier this year, in order to create a stand-alone specialist underwriting and wholesale distribution business.
Under the restructuring Wilkins said that the group has announced a UK write down of A$350m (£169m)and would also restructure its Australian operations and corporate office, expected to deliver around A$130m (£63m) in annual pre-tax savings.
As expected, the group also cut its final dividend from 16 to nine cents a share.
Wilkins, who took over the firm from Michael Hawker last month but began the review on the business when he joined the company in the Autumn, said that the group would also exit from its Alba and Diagonal investments.
He said: “It’s clear from our recent financial performance we need to do better. Our aim is to create shareholder value by making IAG a more tightly-managed portfolio of high performing, customer-focused and diverse general insurance businesses.”
He added: “We’ll do this by simplifying our operating structure, creating end-to-end businesses with autonomy to manage their own brands, customer bases and markets.”
IAG blamed the poor performance of its UK assets on the prolonged softness of the private motor market, heightened by the rise of price comparison websites.
Wilkins said the group expected to generate underlying GWP growth of 3-5% for the year ending 30 June 2009.
He said the group’s 2009 insurance margin is expected to be above 10%, up from the current mark of around 6%. The company has revised this margin twice from 9-11% during the past eight months.
Wilkins added that the group would stay focused on the business’ core strengths in Australia and New Zealand.
He said: “The changes announced today will involve a short-term financial impact, however we believe these actions are necessary to give us the platform to improve the performance of the business over the medium to longer term,” Wilkins said.
He said: “The fundamentals of the business remain strong and we are confident that our actions today will improve shareholder value.”
IAG Chairman, James Strong added: “The initiatives announced today by the Chief Executive Officer are the culmination of an extensive business review conducted since Mike Wilkins joined the Group in late November 2007.
“The review both confirms and enhances the Board’s view of the fundamental value of the overall business.”
The new board line up, which see UK chief executive Neil Utley remaining in his post includes, is as follows:
- Chief Financial Officer: Nicholas Hawkins
- Group Executive, Corporate Office: Leona Murphy
- Chief Executive Officer, Asia: Justin Breheny
- Chief Executive Officer, CGU: Duncan West
- Chief Executive Officer, eVentures: Jacki Johnson
- Chief Executive Officer, New Zealand: Ian Foy
In a related move, IAG appointed former Aviva group chief, Philip Twyman, as non-executive director.
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