Battle over GRE may spark period of consolidation

Further consolidation could be on the way in the Irish insurance sector if Royal & Sun Alliance does emerge as the successful bidder for Guardian.

Combining the two groups would result in the creation of a combined group in Ireland which would have more than 30 per cent of the Irish non-life insurance market.

Other insurers remain in the race, however, including AXA of France, which has a small general insurance operation here and the Eureko Group, which includes Friends First in Ireland. The German group Allianz, which has a controlling stake in AGF-Irish Life, may also be in the frame.

Both Guardian and Royal & Sun Alliance are major players in the Irish market, ranking first and third respectively, according to the most recent figures on market share from the Irish Insurance Federation. These figures show that Guardian, whose operations in Ireland include the PMPA motor insurance operation, had premium income in 1997 of more than £238 million (€302 million) and a market share of 18.6 per cent. Royal & Sun Alliance had premium income of over £146 million and a market share of just under 11.5 per cent.

The combination of the two companies would, however, result in an enlarged group more than double the size of AGF-Irish Life, which owns Church & General/Insurance Corporation with its combined market share of 15 per cent and nearly three times that of the next biggest player, Hibernian, which has a market share of 11.9 per cent in 1997. Market sources said that a merger of the Irish operations of Guardian/PMPA and Royal & Sun Alliance, with its attendant cost-savings and synergies, would undoubtedly put pressure on the other non-life insurers to respond, probably through mergers or takeovers of some of the smaller players.

But the German group Allianz, which has been suggested as another possible bidder for Guardian, also has extensive Irish interests through its controlling stake in AGF-Irish Life. A merger of AGF-Irish Life's Church & General and Insurance Corporation with Royal & Sun Alliance would create a merged entity of over 33 per cent.

The Irish non-life insurance market is hugely fragmented with 25 different companies dividing up the £1.3 billion premium income in 1997. Many of these have market shares of less than 2 per cent and are likely to find it difficult to continue in the long-term as the Irish market consolidates.

Guardian and Royal & Sun Alliance also have small life assurance operations.

Royal & Sun Alliance employs 600 people here, while Guardian has more than 1,000 staff.

Reacting to the latest merger speculation, Mr Gerry Shanahan of MSF, which represents most of insurance workers in the Republic, said it was too early to speculate on possible job cuts.

He said some of the other potential bidders for Guardian such as AXA-UAP did not have a major presence in the Republic, so if they purchased Guardian the impact on jobs would be limited.