Forrester chopping a bigger share of life sector

Bank of Ireland Life released a strong set of figures this week, writes Barry O'Halloran

Bank of Ireland Life kicked off a round of consolidation in the life and pensions market with the purchase of New Ireland at the end of 1997.

Fresh from releasing a strong set of figures for 2004 this week which show that the combined business remains one of the dominant players, its managing director, Mr Brian Forrester, is not ruling out another trip along the acquisition trail.

He's keen to stress that the business has the scale it needs, but at the same time says that if the opportunity comes up then Bank of Ireland Life will take it. "Strategically we don't need to buy another player, but from an acquisition point of view we'll look at any opportunity that arises," he says.

"There's been a lot of consolidation in this market already, even the bank buying New Ireland was part of that. But I think that the acceleration of that is becoming inevitable.

"You really do need scale, the increased regulation is becoming a bigger burden on companies and margins have continued to squeeze over the years, so it's a tough business to operate in, and I think that's going to lead to more consolidation in the future.

"Our position is we'll watch that carefully. We may not need to buy anybody, but we'll keep all our options open." He adds that any acquisition is likely to be "opportunistic", which obviously means that ultimately any purchase will depend on something becoming available.

A year ago, most industry watchers believed that AIB's equivalent, Ark Life, was going to buy Eagle Star. It didn't, but AIB never killed the story by denying that that was its intention.

Whatever happened, AIB needed something like Eagle Star to give it a substantial presence in the life and pensions market. In contrast, Bank of Ireland Life is so far ahead of its parent's biggest competitor in this field that it regards Eagle Star as a more serious rival.

The figures it published this week show that it expects its market share to have grown by 3 percentage points in 2004 to 25 per cent. Next on the list is Irish Life, against which Mr Forrester says his business regularly goes head to head, which could have grown to take a similar share. After that comes the likes of Eagle Star and Standard Life.

Bank of Ireland Life is essentially made up of its own life and pensions business (which previously traded under the Lifetimes brand) and New Ireland. It sells its products through three channels: Bank of Ireland branches, New Ireland's direct sales staff and a network of brokers.

It operates as part of Bank of Ireland Retail, and in the year to the end of March 31st 2004 contributed €147 million to overall group operating profits, well over 10 per cent of the total. Mr Forrester is not yet in a position to say how it will compare for the year ended March 31st 2005.

However, it looks like it will make a similarly substantial contribution. Yesterday it announced that total annual premium equivalent (APE), Bank of Ireland Life's equivalent of turnover, grew 21 per cent in 2004 to €284 million from €234 million the previous year. Within that, annual premiums were up 20 per cent to €192 million. Pensions accounted for €137 million of that, a 22 per cent increase, with life making up the rest.

Life assurance was the clear leader at the single premium side of the business, clocking up 82 per cent growth to come in at €55 million out of a total of €83 million. Pension sales grew 18 per cent to make up the €28 million balance.

The only aspect of the business that showed a decline was non-life single premium products, which includes tracker bonds and other similar investments. This only came up €9 million in 2004, compared with €20.5 million the previous year.

Mr Forrester says this was the result of a shift in trends. "Trackers were popular when the equity markets ran into trouble between 2001 and 2003, but there's been a move away from them," he explains.

This does not mean that investors are taking money out of these products. This is "new money" or it is coming from tracker bonds that matured during the year.

The figures show that money is flowing back into equity-based investments, or at least those with a stock market bias. The sale of unit linked lump sum investments was up 82 per cent to €550 million, which Mr Forrester says is clear evidence of a revival.

Not surprisingly, he attributes the growth partly to the strength of the Bank of Ireland and New Ireland brands, and the fact that between them they are using the three best ways of getting to customers. It has also spent €15 million in systems over the last three years, which allows it to manage the business, and develop good customer relations management.

He is also complimentary of Bank of Ireland Asset Management (BIAM), which is its fund manager. "If you look back at their past performance, three-year, five-year, 10-year, all of which is very relevant to pensions, they've consistently been top of the pile," he says.

BIAM has been having its problems in other spheres. Pension trustees throughout the US have been dropping it, and this week it emerged that the National Treasury Management Agency has put it under review. It also lost key personnel in 2004.

Mr Forrester says that these are issues for the fund manager itself, which is a different division within the group. However, his colleague, Mr David Swanton, Bank of Ireland Life's marketing director, says that BIAM's troubles relate to just one product, which covers European equities, and has no relevance to the bank's own life business.

From the point of view of the Government, the most interesting figure to emerge from Bank of Ireland Life this week was also the smallest. The increase in contributions to Special Savings Incentive Accounts (SSIAs) almost doubled to €9.4 million.

The Government launched the accounts in 2001, and gave investors a year to get on board. That was a turbulent period, and while many people opened the accounts, they initially kept the amounts small. However, better economic conditions mean they are increasing their investment, and organisations like Bank of Ireland Life are encouraging them to go for the maximum contributions if they can. This is working, as few people turn down free money.

"A lot of them are moving up to the maximum contribution at this stage," he says. This is giving the bank cash flows of about €100 million a year. The accounts will begin maturing next year, at which point the Government will have to match its pledge to give people a 25 per cent return on their investment.

Along with all other individuals in his position, Mr Forrester hopes the Government will create incentives to encourage people to re-invest the cash. But he also points out that it has given many consumers the saving habit, which itself might spur them to continue to salt it away.

If they do, one way or the other, SSIAs could turn out to be very good news for his industry.

Factfile
Name: Brian Forrester

Position: Managing director, Bank of Ireland Life (the bank's pensions and life division)

Background: He joined the bank in 1971 after getting a B Comm from University College Dublin (UCD). In 1994, he became regional manager for Dublin south, then south-east, before taking over as managing director of its mortgage business in 2000. Last year, the group made him managing director of Bank of Ireland Life and he is also a director of the bank's wealth management division, which includes Bank of Ireland Life.

Family: Married to Marie with two daughters, Elaine and Laura, both in their 20s.

Hobbies and interests: All sports, especially golf.

Why is he in the news? Bank of Ireland Life produced figures showing annual premium equivalent growth up 21 per cent at €284 million. Its market share has grown 3 per cent to an estimated 25 per cent.