Insurance Australia Group (IAG) CEO Mike Wilkins says the group’s turnaround strategy for the UK is on target, despite persistent rumours it is looking to offload the underperforming business.

In an interview published by UK publication Insurance Times, Mr Wilkins says “all the actions that are necessary” have been taken to see the UK business return to profit in 2012.

The UK business, which includes Lloyd’s motor insurer Equity Red Star, posted an insurance loss of $181 million in the year to 30 June 2011, as a result of bodily injury claims inflation and the need to buy additional reinsurance.

But this was a vastly improved result from the division’s 2010 loss of $355 million.

“We dropped a lot of business, we re-priced our portfolio and we strengthened a number of our internal disciplines,” Mr Wilkins says. “I am pleased with what we have been able to achieve as we have sought to reposition the business.

“Yes, we have had some disappointments along the way. But generally speaking, I think we have achieved most of what we set out to achieve.”

In June 2010, IAG announced plans to revamp Equity Red Star by axing 175 of its broker partners and withdrawing almost entirely from its aggregated motor business.

He says much of the turnaround strategy has been left to the local UK management. “I believe you need to have decision-making as close to the end user as possible. I try to give as much authority and autonomy as I can to the leaders of the individual businesses within an agreed set of parameters.”

But Mr Wilkins has expressed his frustration with the short-term outlook of the equity markets.

“While I respect analysts, they don’t always appreciate how long it takes for price increases and other remedial actions to work their way through a portfolio,” he says.

On the subject of future growth at IAG, Mr Wilkins says bolt-on acquisitions, such as that of health insurer HBF in June which added around $100 million in premium income to the Australian business, are on his agenda.

“It will be that type of thing that we are looking at. We are very open to those opportunities.”