AAP

Insurance Australia Group will sell its ailing UK assets, and expects to make a loss of $240 million on the transaction.

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

They posted a loss of $13 million in the 2011/12 year, and IAG wrote down the their value by $297 million in the same period.

The company has agreed to sell its Equity Red Star insurance business, the fifth largest motor insurer in the UK, to a private equity firm, for STG87 million ($A133.95 million), it said on Friday.

IAG's 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 year, it said.

"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.