Insurance Australia Group (IAG) is busily acquiring more businesses – with a huge UK transaction announced yesterday and a smaller Malaysian investment also on the cards. The acquisitions are in line with CEO Michael Hawker’s previously announced strategy of global growth.

The Australian insurer has taken full ownership of the Equity Insurance Group, the UK’s fifth-largest motor insurer. It will spend £570 million ($1.4 billion) on the acquisition, which will be funded in part by a $600 million equity placement. The UK deal and the equity placement were both announced yesterday.

The purchase also makes Mr Hawker a significant employer of UK brokers. In September IAG bought the country’s fifth-largest car insurance broker, Hastings Insurance Services, and car insurer Advantage Insurance.

Equity has two divisions – Red Star, which is the sixth-largest motor insurer, and Equity Insurance Brokers, the No 7 personal lines broker.

Mr Hawker says the acquisition will provide IAG with a unique opportunity to take charge of the full range of motor underwriting skills for the UK market. “On any measure, the acquisition of Equity makes strategic and financial sense,” he said. “The company has a proven ability to produce profits across the cycle, with an unbroken 37-year record of profitability.”

Equity also offers a strong combined operating ratio (one of the best in the UK motor insurance market) and plenty of opportunities for further growth.

Mr Hawker expects the acquisition to be earnings per share accretive immediately and hopes to add 10% to that figure by the end of the 2008 financial year.

The wider investment markets have had little time to respond to the announcement, but at least one analysis provider is backing the purchase. Standard & Poor’s says IAG has covered its bases with an appropriate amount of due diligence and a sensible funding plan.

“S&P expects that in funding the acquisition, IAG will maintain its financial structure at a level consistent with its AA insurer financial strength rating,” the ratings agency said in a statement late yesterday. It says IAG’s share price and market capitalisation will remain very strong with the benefits of additional geographical diversity.

IAG is also involved in an acquisition of Malaysia’s fifth-largest general insurer, Commerce Assurance. Its main rival in the motor insurance market, AM Assurance, has received regulatory approval to begin takeover talks. IAG owns 30% of AM Assurance and is expected to put up at least part of the money needed to buy out Commerce Assurance.