UPDATE 3-Australia's IAG to sell some UK operations, post loss

(Adds fresh CEO comments, details, updates shares)

By Denny Thomas

SYDNEY, July 9 (Reuters) - Insurance Australia Group Ltd (IAG.AX) (IAG), Australia's top home and car insurer, said it will sell some of its struggling businesses in the UK and take a A$350 million ($333 million) charge, forcing the company to report its first loss in six years.

IAG, which earlier this year rebuffed a takeover proposal from bigger rival QBE Insurance Group Ltd (QBE.AX), also said it would cut about 5 percent of its workforce in Australia and lowered its dividend payout ratio.

But it forecast insurance margins would recover to 10 percent plus in fiscal 2009, from 6-8 percent in the previous year, betting that the number of claims will return to more normal levels after being hit by unfavourable weather last year.

The insurer made the comments in a trading update and business review, the first review under new Chief Executive Michael Wilkins.

"As a counter to QBE's advances, we believe IAG's defence falls short on hard facts and figures that can be reflected in longer term earnings," Deutsche Bank said in a note to clients.

The A$350 million charge will result in IAG reporting a loss of between 13-15 Australian cents per share for the last fiscal year ended June 30. IAG reported a net loss of A$25 million in 2002.

IAG also forecast annual savings of A$130 million from restructuring its non-UK operations, which exceeded market expectations, but the initiative failed to excite investors.