AIB on brink of pensions merger with Aviva

AIB will hold 25 per cent of the merged Hibernian and Ark Life pensions business that it and UK giant Aviva are expected to announce shortly.

AIB and Aviva, which owns Hibernian, have been working on a merger of the two businesses for several months, and could confirm that the deal is likely to go ahead as early as today.

The combined Ark and Hibernian Life and Pensions business will be hived off to a new holding company in which AIB will hold 25 per cent and Aviva will take the remaining 75 per cent, sources said yesterday.

A large part of the businesses of both Ark Life and Hibernian will transfer to the new venture.

However, they will both keep their separate identities. AIB's branches will continue to sell Ark Life-branded products, while Hibernian will continue to sell its products through its network of brokers.

The new partnership between AIB, the Republic's biggest bank, and Aviva, a major European player in insurance, will be the the third biggest operator in the Irish life insurance market.

The two larger players will be Irish Life, the market leader, and Bank of Ireland Life, which is a subsidiary of AIB's biggest rival, Bank of Ireland.

Between them, the three will hold about 70 per cent of the total market here.

Speculation about Ark Life's future and a possible AIB-Aviva deal has been growing since early this year. Both parties are understood to have been in talks since the early summer.

Aviva already has insurance alliances with a number of banks throughout Europe, and it is not breaking new ground by entering a similar arrangement in the Republic.

However, some reports have said that the move could force AIB to look at the possibility of leaving the asset management business, although this speculation was dampened last week.

Its division in this sector, AIB Investment Managers (AIBIM) relies on Ark Life for about one third of the €9.9 billion it currently has under management.

A spokesman for AIB would not comment last night, while it was not possible to contact a Hibernian representative.

AIB had profits of €851 million in the first six months of this year, a 20 per cent increase on the €706 million it recorded for the same period in 2004

The group has businesses here, the UK, Poland and the US.

Aviva is based in the UK and is listed on the London Stock Exchange. Last year it wrote close to £30 billion (€44 billion) in insurance premiums and made a profit of close to £1.5 billion.

Aviva's balance sheet for the year showed that it had assets of £232.7 billion and shareholders' funds of £8.3 billion.

The group claims to be the the sixth-biggest insurer in the world and and the biggest in the UK. It has 30 million customers.

Along with Hibernian, its brands include Norwich Union and the Royal Automobile Club (RAC) in the UK. Norwich Union is one of the biggest sellers of household insurance in Britain.