Chief executive of Australian giant confirms disposal and unveils £121m full-year loss.
The sale of Insurance Australia Group’s UK portfolio is “on track”, the company’s managing director and chief executive Michael Wilkins has announced.
Wilkins made his comments while unveiling full-year results for the group. The Australian giant first revealed plans to sell Hastings, Advantage and Equity Insurance Brokers, as well as to lay off 300 staff, in July.
His announcement came just days after Neil Utley, chief executive of IAG UK, set out a timetable for the disposal of parts of the business in a memo to staff that was leaked to Insurance Times.
IAG reported a net loss after-tax of A$261m (£121m) for the year to 30 June 2008, compared to a net profit of A$552m in the previous year. The result included almost A$400m in restructuring and impairment charges.
However, the group’s gross written premiums rose 5.6% to about A$7.8bn in the year to June 2008.
Its insurance margin fell to 6.1% from 11.4% in 2007, while insurance profit lowered to A$448m from A$767m. The insurer blamed “increased claims costs from natural perils”, which rose 22% to A$502m, and lower reserve releases, which were down 16% to A$406m.
IAG also recorded a non-cash after-tax writedown of about A$350m in its UK assets.
In a statement, IAG said: “In the UK, Equity Red Star remained profitable while Advantage improved its performance in relation to the market and is now operating at close to break-even. The private motor market remained difficult.
“In response, the group implemented further rate increases and reduced exposure to private motor in favour of specialist lines.
“In line with the refined corporate strategy, the group is now scaling back its UK operations to the specialist underwriter, Equity Red Star, and associated specialist distribution.”
Wilkins admitted the results were “poor” and said the company would “need to do better”.
“We’ve recently made some tough decisions to ensure we get the fundamentals right and set a clear course for the future. We are confident these measures will underpin improved future profitability,” he said.
“We’re increasing our discipline and focus. In both Australia and New Zealand, rate increases are being implemented in line with rising claims costs and frequency, while in commercial insurance we have ceded volume to maintain price discipline. In the UK, we are shifting the mix of our portfolio towards the more profitable speciality motor classes.”