Michael Hawker is fighting for his IAG career following an earnings downgrade and the appointment of insurance heavyweight Mike Wilkins as COO.

IAG has lowered its forecast growth in gross written premium to 7-9% from 10-12%, with Mr Hawker yesterday citing a "couple of factors outside my control".

He was referring to the softening market in Australian commercial and UK motor lines, and under-performance by the Advantage UK motor underwriter acquisition. IAG predicts its insurance margin will be between 11 and 13%.

In addition to the continuing soft market in UK motor, Mr Hawker concedes there have been operational issues at Advantage and the broker Hastings that weren't uncovered by due diligence at the time of the acquisition.

"Some issues are deep in computer systems," he said. "We are finding them and fixing them."

He says under-performance in the UK is largely a result of the market cycle. IAG acquired Advantage and Hastings in September last year for a total of $350 million in the belief that the market had bottomed out.

But the soft cycle in the UK motor market shows no sign of easing.

"The issue is how to manage the economic cycle," Mr Hawker said. "When the cycle turns, there will be strong earnings from UK business... I can't do anything about the cycle."

Trowbridge Deloitte General Insurance Practice Leader Elaine Collins told Sunrise Exchange News that acquiring businesses in the middle of a soft cycle can be inherently risky in terms of controlling premiums.

"It's very difficult to predict the end of a soft cycle," she said. "Generally people are over-optimistic.

"The UK motor market is highly competitive. If one ends up in a position where the pricing is not quite right, it's very difficult to re-rate."

But she says QBE has proved that foreign acquisitions can be highly successful, regardless of the market's position.

"QBE's acquisitions have added value to the company over many years... QBE is proof that it can work in a soft cycle."

Mr Hawker declined to comment yesterday on continuing speculation that IAG is a potential takeover target for QBE. But Ms Collins says rumours will inevitably circulate if IAG's results don't improve.

"There has been talk of QBE acquiring IAG for a good six months. As soon as you have a downgrade in earnings, the speculation becomes more intense. If there's a downgrade it's more of a target."

Mr Hawker says IAG's acquisition strategy is on hold while it sorts out its problems - with the exception of the NTI buyout and building its UK broker portfolio.

"We have made it very clear to shareholders there will be no large acquisitions this financial year," he told a media briefing yesterday.

He is bullish about the medium-term prospects for IAG's British acquisitions, which he believes provide IAG with a capital benefit by diversifying risk. But he won't predict a growth margin for 2009, as it's "too early to tell".

Ms Collins says IAG is unlikely to consider offloading its UK acquisitions, except as a last resort.

Meanwhile, the arrival of Mr Wilkins to take charge of operations has led to feverish speculation that he is in line for the top job should Mr Hawker fail to turn the company's fortunes around.

IAG's share price topped $6.60 as recently as January this year but had fallen to $4.60 after the earnings downgrade last Friday. Following the company's analyst briefing yesterday, it climbed over the $5 mark, closing at $5.03.