IAG's UK motor arm posted a £216m loss, but Utley predicts return to profit
Insurance Australia Group (IAG)’s UK chief executive Neil Utley has admitted the company did not anticipate the boom in bodily injury claims now gripping the UK.
Utley said he was “disappointed” with the UK arm, motor insurer Equity Red Star, posting a loss of A$355m (£216m) in the year to 30 June 2010, but predicted the firm would soon return to profit.
The FSA is looking into the insurer’s reporting systems in consequence.
Utley, speaking in IAG’s annual report Staying the Course, said: “Conditions have been challenging across the UK motor industry for some time. However, the scope of this issue was much greater than originally anticipated and I am extremely disappointed with its effect on our financial result. Our actions have now addressed the issue, and we believe our remediation plan will begin to restore Equity Red Star’s profitability.”
Utley said Equity was pushing up rates by around 20%, exiting unprofitable broker relationships, investing in claims and underwriting, and scaling back aggregator business. Other parts of the group, such as Equity Direct and Bike Team, were performing well.
The report also shows that IAG paid A$789,000 (£480,000) to Utley as an incentive to stay on with the business after 2008. He was paid the short-term employment benefit after IAG announced in July 2008 its intention to sell some UK operations. Five months later, the Australian firm sold intermediary Hastings and its sister insurer Advantage to a management buy-out, led by Utley, and its high street broker Equity Direct to Swinton.
Utley remained as IAG UK chief executive, mainly focused on looking after Equity Red Star. He leaves on 30 September.