IAG to buy Equity Insurance, requests trading halt

Australia's largest auto and home insurer, Insurance Australia Group Ltd. said Monday it has agreed to acquire the United Kingdom’s Equity Insurance Group for 570 million pounds ($1.1 billion).

As the transaction is in process IAG has requested the Australian Stock Exchange to place its securities in a trading halt for two trading days.

"The trading halt is necessary as IAG has signed an agreement to acquire a leading UK motor underwriter and broker, Equity Insurance Group and will be undertaking an institutional placement," IAG said.

This deal is being seen as part of IAG’s plans to boost overseas income to 40 percent of sales. To fund the purchase the company plans to sell shares worth of A$600 million ($474 million) to institutional investors, it said in a statement.

According to the website of Equity Insurance the company has the assets of Red Star, a Lloyd's of London underwriter which is the U.K.'s fifth-largest auto insurer, and Equity Insurance Brokers, the seventh-biggest U.K. broker of insurance sales to individuals.

Citing potential acquisitions, Chief Executive Officer Michael Hawker last month raised his sales growth forecast. Hawker is trying to acquire insurers in Asia and Europe to regain premium growth.

Hawker had initially predicted a premium growth of 5-10 per cent which he reforecast last month, telling the shareholders in a meeting in Sydney that the growth may exceed 10 percent in the fiscal year ending June 30, 2007.

What follows for IAG is the purchase of Hastings Insurance Services Ltd. and Advantage Insurance Co. in the U.K.