IAG will retain its UK operations while pursuing new opportunities in China as part of a multi-year plan to place the business on a sounder footing.

IAG CEO Mike Wilkins used the company’s annual general meeting in Sydney last week to support IAG’s UK operations and reaffirm the group’s full-year guidance of an insurance margin between 10.5% and 12.5%.

Last financial year IAG’s UK business, which includes motor underwriter Equity Red Star and its broking business Equity, cost the group $367 million in writedowns and contributed to a 50% fall in net profit for the full year to $91 million.

However, Mr Wilkins said with the UK business under the leadership of former NZ division CEO Ian Foy, he was confident it could be turned around.

The former head of IAG’s UK operations, Neil Utley, was removed by Mr Wilkins in July this year – less than two months after he backed Mr Utley as the best man for the job.

“In the UK, under the new leadership of CEO Ian Foy, we have made great progress with the program of remedial actions to help restore profitability to our business there, and we are pleased with the progress made in our Asia division,” Mr Wilkins said.

IAG sold some of its underperforming UK assets last year for £73.5 million ($151 million), but kept the profitable Equity Red Star, which contributed 71% of the group’s UK gross written premium in the 2008 financial year.

Meanwhile, IAG will also continue its push into Asia, focusing on Thailand, Malaysia, India and China.

The insurer says in its 2010 annual report published last week that the new joint venture with SBI General in India has been a priority for the year and that it is now seeking a new general insurance joint venture in China.

“The long-term potential of our new joint venture in India is impressive,” IAG Asia CEO Justin Breheny says.

IAG paid $126 million for a 26% stake in the Indian company, which started selling policies in March. India’s general insurance market grew by 9% in 2009 and is tipped to reach 20% growth a year over the next decade.

IAG Chairman Brian Schwartz says the group is also scouring China for a suitable partner.

“We won’t rush into big acquisitions for the sake of growing,” Mr Schwartz said. “We’re focusing less on the very big play in China now and looking more at a regional play.”

IAG currently owns the China Automotive Association, a roadside assistance company based in Beijing.

In 2007 IAG wanted to buy 24.9% of China Pacific Property Insurance in a deal worth $350 million, but the deal collapsed over uncertainty about a forthcoming initial public offering of parent company China Pacific Insurance Group and restraints imposed by US private equity shareholders.

In Thailand, reported gross written premium was up 8.1% to THB5.4 billion ($184.5 million) while the Malaysian operation also reported strong premium growth, up 11.7% for the year. Although the amount of premium was not specified, the business contributed $3 million to IAG’s overall profit.

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