State buys Irish Life from IL&P

Irish Life & Permanent (IL&P) has been ordered to sell Irish Life to the State for €1.3 billion.

The Government today secured a court order to acquire the life assurance business for €1.3 billion. The order fulfils a State commitment to acquire the life assurance unit to complete the €4 billion recapitalisation of the group's banking unit, Permanent TSB.

The sale also completes the Government's pledge to separate the group's life and banking businesses by the end of the first quarter.

The move completes the recapitalisation of the Irish banking system.

The court order becomes effective 14 days after the publication of the order, which is expected in the coming days.

The transaction was completed under the Government's emergency banking legislation, the Credit Institutions Stabilisation Act 2010. The Government took over IL&P last year.

In a statement, Irish Life said it will be directly owned in its entirety by the Minister for Finance whose intention "is to dispose of Irish Life as soon as market conditions permit". It said the order will have no impact on the position of bank customers or life policyholders or on their accounts and policies and existing terms and conditions will continue to apply.

IL&P chairman Alan Cook said the deal was necessary to complete plans to refinance the banking division while also safeguarding Irish Life.

“The financial crisis has exacted an enormous toll on our shareholders, our customers, the taxpayer and the wider community and I know that everyone involved with our group deeply regrets how events have unfolded,” he said.

“As chairman, I want to put on record our gratitude to the Irish Government and the Irish taxpayer for the support they have provided to the bank.

“Our focus now must be on minimising any further call on the Irish taxpayer and maximising the potential to build sustainable, customer-focused businesses which in time can repay the taxpayer for the support we have been given.”

Irish Life comprises Irish Life Assurance, Irish Life Investment Managers Limited and related businesses. It also includes Irish Life’s 30 per cent minority interest in the general insurance business of Allianz Ireland.

The value of the gross assets of Irish Life on June 30th, 2011 was €30.3 billion. Its net asset value was €1.3 billion on the same date.

The operating profit for Irish Life for the six months ending June 30th 2011 was approximately €41 million.

It was previously expected that Canada Life would pay more than €1 billion to acquire Irish Life, but that collapsed in the wake of increased bond market volatility after the unexpected failure of an auction of German debt. That made it necessary for the State to step in to fill the void.

The Government’s plan to buy Irish Life from IL&P was noted in a European Commission report circulated in the German parliament. The commission’s winter 2011 review of the economic adjustment programme for Ireland also said the State would provide, if needed, “the remaining balance of the required capital of about €1.3 billion following the purchase of Irish Life”.