ALLIED IRISH Banks is ending its joint venture with insurer Aviva to distribute life and pensions products through its network of branches and is instead teaming up with Irish Life.
The deal between AIB and Irish Life, which are both effectively State owned, has been agreed in principle but has not yet been signed off, although this is likely to take place in the coming weeks.
AIB staff were told by the bank that its new joint venture partner would be announced shortly.
Aviva expressed disappointment at AIB’s decision after it failed to agree commercial terms with the bank at the end of their five-year joint venture agreement.
“It is disappointing that after months of negotiations we were unable to reach commercial terms which we could both agree upon,” said Aviva Ireland chief executive Seán Egan.
The company said it would focus on sales of life and pensions products through brokers.
Neither AIB nor Irish Life and Permanent would comment yesterday.
The termination of the joint venture distribution agreement is a further blow to Aviva which is undergoing major restructuring after it abandoned plans to set up a European base for the British business out of Ireland, the departure of long-standing senior executives and October’s announcement that it will lay off 950 of its 1,800 staff.
The AIB joint venture – via Ark Life, which is a subsidiary of Aviva Life Holdings Ireland – was worth between €500 million-€600 million in business and amounts to about half of Aviva’s life and pensions business.
The ending of the joint venture agreement will lead to 300 Aviva staff in Dublin becoming employees of AIB.
No decision has yet been made on whether those staff or Irish Life will manage the “back book” of policies, currently managed by Aviva, that were sold to 200,000 customers through Ark Life.
These roles, which had been earmarked for outsourcing by Aviva under the restructuring, are additional to the 950 staff being laid off.
The trade union Unite, which represents workers at Aviva, will hold talks with the insurer and AIB to clarify the situation in relation to the 300 staff, said union official Brian Gallagher.
AIB will have to buy out Aviva’s interest in the joint venture, which stands at just over 75 per cent – just under 25 per cent owned by the bank – at a price of about €100 million.
The termination of the joint venture stems from AIB’s takeover of EBS and its review of the sales performance of Irish Life products through the former building society compared with the performance of sales at Ark Life through the bank’s network of branches.
The deal between AIB and Irish Life means the company will consolidate its position as the State’s top life and pensions business, giving the company a one-third share of the market.
Ark Life, the fourth largest player in the market, has 6 per cent of the market, behind the 27 per cent share held by Irish Life, the sale of which was postponed by the Government late last year due to turbulent market conditions.
It is understood that Zurich had also been in discussions with AIB about taking over the Ark Life business from Aviva.
AIB’s move to Irish Life means Bank of Ireland is the only major bank that is not selling the products of the State-owned life and pensions company, the biggest in the country, through branches.
Irish Life products are sold through its own banking division Permanent TSB, former building society EBS and Ulster Bank.
The proposed deal with AIB will increase the attractiveness of Irish Life to a potential suitor when the Government reopens the sale process for the company.
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