Shares in Insurance Australia Group have fallen after it finalised the sale of its ailing UK assets for a loss of $240 million.

The company, which owns the CGU and NRMA Insurance brands in Australia, had been reviewing its loss-making operations in the UK for months.

IAG wrote down their value by $297 million in the 2011/12 financial year, contributing to a 17 per cent fall in the company’s net profit.

The insurer has agreed to sell its motor insurer Equity Red Star to a private equity firm for STG87 million ($A133.95 million), it said on Friday.

Commercial insurance broker Independent Commercial Brokers will be sold to a consortium led by its existing management team, with the details still to be confirmed.

IAG expects to incur a loss of $240 million on its UK businesses in the 2012/13 financial year, it said.

The company’s shares were down nine cents, or 1.9 per cent, at $4.72 at 1244 AEDT.

“We believe the sale option delivers the best available outcome for IAG shareholders, particularly in light of the continuing challenging economic and industry conditions in the UK market,” managing director Mike Wilkins said in a statement.

A loss of $160 million will be included in the company’s first half result, which is mainly the loss on the transactions.

A further $80 million cost relating to a foreign currency loss included in reserves is expected to be included in IAG’s second half accounts.

Analysts said the losses could reduce IAG’s annual net profit by about 30 per cent.

“Overall, we view the financial impacts on IAG as very manageable in light of IAG’s strong starting capital position,” Credit Suisse insurance analyst Andrew Adams said in a note to clients.

“We believe that investors are likely to look through this one-off and focus on future growth with the ongoing loss issues of UK removed.”

IAG made a net profit of $207 million in the 2011/12 financial year.

The company said there would be a modest positive impact on the group’s regulatory capital position from the transactions.