Patience pays off as new owners warm to prospects for Irish Life
Allen Loney: "We haven't assumed that will roar forward but have assumed it will achieve a little bit of headway . . . 2 per cent a year, that type of thing. It's not back to the glory days ." PHOTOGRAPH: BRYAN OBRIEN
Great-West Lifeco was always keen to return to the fray once the Irish economy showed signs of improvement, says chief executive Allen Loney
Allen Loney enjoyed the mild February weather in Ireland this week. The Great-West Lifeco’s president and chief executive lives in Toronto, Canada where temperatures can drop to minus 15 degrees at this time of year.
It’s even colder in Winnipeg, where Great-West Lifeco has a major operational base.
“When I go there I generally only ever spend about 60 seconds at a time outside,” he jokes at our meeting in the Four Seasons hotel in Ballsbridge.
“Just going from the car into the office and that type of thing. You don’t hang around outside for too long in those temperatures.”
Loney has also been basking this week in the warm glow from his company’s €1.3 billion acquisition of Irish Life, which was announced on Tuesday.
The Government is delighted to have a large, credible overseas financial group investing in Ireland.
At the press conference to announce the deal, the Minister for Finance Michael Noonan said it was a signal that Ireland is once again open for business – a message he reinforced to various investors and analysts at a series of meetings in London this week.
The top brass in Irish Life is also enthusiastic about the deal. It removes them from state ownership and provides them with the backing of a company with a stock market value of about €19 billion, and a AA credit rating.
The deal was a long time in the making.
In September 2011, Great-West Lifeco joined the auction process for Irish Life. It was one of 51 interested parties.
The company made an offer to the Government of €1.1 billion but pulled out of the deal in November 2011 when Loney and his colleagues got the jitters about the euro financial crisis.
“It was pretty straightforward really. During November , the temperature in the EU and the euro zone, and particularly in Ireland, too, rose to the point where everyone was wondering what’s going to happen,” he says.
“That’s a concern to any financial institution that’s entrusted with its policyholders’ money.
“I felt I couldn’t continue to recommend to the board that we went forward [with the deal] so we withdrew. But we withdrew on good terms.”
According to Loney, Government officials were getting “similar messages” from other parties involved in the auction process.
“So that was that but we were always keen to return to the fray just as soon as conditions became calmer and that frankly happened quicker than we could ever have expected.”
Great-West Lifeco approached the Government at the end of November last year to recommence talks on an acquisition. It carried out extensive due diligence before Christmas, with negotiations on a price beginning in January.
Not that Loney is totally convinced that the worst of the financial crisis is completely behind us.
“We don’t believe that it’s absolutely impossible for things to regress but most people believe that Europe will not now fall apart, that the euro zone will be sustained.”
Some commentators believe the Canadians have got Irish Life for a steal. The Government is getting back exactly what it paid for Irish Life in June last year to what was the then Irish Life Permanent plc plus a €40 million dividend.
Irish Life has remained profitable through the credit crunch, has a 30 per cent market share and, in Loney’s own words, is the “dominant brand” in the sector here. It is well placed to benefit when the economic recovery gathers momentum.