IAG is finally free of its troubled UK operations, which it sold in December – albeit at a loss to the group.

The company sold motor underwriter Equity Red Star to private equity firm Aquiline Capital Partners for £87 million ($132 million), while its UK broking business, Independent Commercial Brokers, went to a consortium led by the existing management team for about £10 million ($15 million).

In the current financial year IAG expects to incur a net loss after tax of about $240 million relating to the sale of the operations it bought for $1.4 billion in 2006 – on top of the hundreds of millions of dollars in writedowns and losses incurred in recent years.

IAG CEO Mike Wilkins said that, following a review of all options for the UK business, a sale “delivers the best available outcome for IAG shareholders”.

Shortly after the sale announcement Equity Red Star revealed it had struck a deal for the renewal rights of Ansvar’s intermediated private car, van and minibus motor portfolios in the UK, following Ansvar parent company Ecclesiastical Insurance’s decision to exit the British motor market.

The future of the market remains uncertain. While consultant Towers Watson was pointing to a fall in premiums and a possible return to profitability for underwriters last year, the introduction of the EU’s gender directive means women no longer receive premium reductions for being safer drivers is changing pricing dynamics.

Reinsurance broker Willis Re has reported that the UK motor sector endured some of the largest reinsurance price rises at the January 1 renewals, meaning premiums are expected to increase this year.

The rises were in response to reinsurers’ concerns about the growing number of periodic payment orders – or ongoing lifetime payments – being awarded to crash victims by British courts.