Domestic business fuels Irish Life profit growth

Strong growth in its Irish life and pensions business, countering a fall in profits from the British and US operations, has allowed Irish Life to report a 20 per cent rise in embedded value profits to €173.8 million (£136.9 million). Shareholders in Irish Life - whose merger with Irish Permanent is expected to be completed by the end of April - are to receive a 10 per cent increase in their dividend to 18.41 cents (14.5p) per share.

Operating after-tax profits in the Republic were 27 per cent higher on £70.4 million, with sales of life and pensions products up 28 per cent to £94.1 million.

After the strike-affected 1997, last year was a much better period for Irish Life in Ireland with retail sales up 39 per cent to £42.6 million while the group's corporate business rose 11 per cent to £31.2 million.

But the associated businesses, where Irish Life has a minority stake, showed a fall in profits from £19.9 million to £12.6 million, mainly due to poor underwriting figures at the AGF (now Allianz) Irish Life general insurance business. Managing director Mr David Went said, however, that after the difficulties in 1998, there were signs that rates and premiums were increasing.

"Ireland first" was Irish Life's strategy, said Mr Went. "The Irish market, with its strong economic fundamentals and supporting demographic profile, provides a very positive environment for financial services in general and the long-term savings market in particular. My first priority, therefore, has been to focus on the Irish business to support changes in the area of product distribution and service necessary to protect and build on Irish Life's position as market leader," he said.

After-tax profits in the US fell from £20.1 million to £17.9 million, mainly due to a sharp fall in the sale of annuities as a result of low interest rates at Interstate Assurance in the Mid-West. Sales of fixed annuity products fell more than 50 per cent to $84.9 million (€78.5 million) and Interstate is working to change its mix of products in response to the change in market conditions.

In Britain, profits halved to £5.4 million sterling (€7.99 million), mainly as a result of nonrecurring items. Mr Went said that, historically, the British business had produced a 12 per cent return. "It's a low-cost, low-risk business and by next year we should be back to 12 per cent return.

The 20 per cent increase in embedded value profits is the sixth successive year of profit growth at Irish Life. Earnings from existing "in force" business rose from £64.5 million although earnings from new business fell from £14.2 million to £10.5 million, mainly as a result of the falloff of annuity sales in the US.