SYDNEY: Australia's largest auto and home insurer Insurance Australia Group Ltd. agreed to acquire the U.K. motor insurance underwriter Equity Insurance Group for 570 million pounds. This will be the company's third U.K. buyout in recent months.
Equity Insurance is the U.K.'s fifth largest auto insurer. It is owned by two buyout firms, Englefield and Duke Street Capital and it comprises the motor insurance unit Equity Red Star and Equity Insurance Brokers, a personal lines broker.
IAG said it plans to sell some A$600 million worth of shares to institutional investors to raise funds for the acquisition. IAG is eyeing Britain's motor insurance market, which is estimated to be worth around 13 billion pounds. IAG's chief executive Michael Hawker said the company is looking at overseas buys because of competition issues in the home segment.
IAG has already acquired British insurers Hastings Insurance Services Ltd for A$350 million and car insurer Advantage Insurance Co. Hawker has plans to have a stake in China Pacific Property Insurance, which was once an IAG group company.
Hawker hopes to drive growth in the company in line with its competitors and for this the company has to increase in size, which is not possible in a consolidated Australian market, or through organic growth alone. He intends to increase sales of the company outside Australia and New Zealand to reach 40 per cent of the total revenue by 2012 from the 2005 level of 16 per cent.
Equity Insurance, previously called Cox Insurance Holdings Plc. was bought by the private equity firms for 298 million pounds in August 2005.
