Insurance Australia Group is mulling to sell its UK underwriting operations, which include motor insurer Equity Red Star and commercial insurance broker Barnett & Barnett.

As part of a strategic review of its UK business, IAG Managing Director and Chief Executive Officer Mike Wilkins, said the Group believed this was an appropriate time to assess the options for the UK business, given the improvement in its performance and the current UK economic conditions.

The UK businesses has sustained an insurance loss of A$5m for the half year ended 31 December 2011 compared to a loss of $121m in 2010.

The company is also considering an option to continue focus on improving the business’ performance within the current operating model, refining the business’ strategy to a more focused specialist motor offering.

"One of our key strategic priorities is to return the U.K. to profitability," Wilkins added.

According to an estimate made by Commonwealth Bank of Australia analyst Ross Curran, IAG’s UK operation has cost the insurer more than A$500m over the past two years.

The company is also into an acquisition spree mode in Malaysia, Vietnam and New Zealand in a bid to boost its footprint, and to add to its existing operations in India, Thailand and China.