Sale of Irish Life unlikely until end of euro crisis

STATE-OWNED insurer Irish Life is unlikely to be put up for sale until there is sustained improvement in the euro zone, the insurer’s chief executive said yesterday.

Kevin Murphy was speaking as Irish Life announced pre-tax profits of €96 million for the first half of 2012, up from €16 million a year earlier.

Plans to sell Irish Life were abandoned last year due to the euro zone crisis. Canadian insurer Canada Life is thought to have been the main contender to buy the insurance group.

In June court approved the State’s purchase of Irish Life for €1.3 billion as part of its recapitalisation of its former sister bank Permanent TSB.

Irish Life’s chief financial officer David McCarthy said yesterday the sale of RBS’s Direct Line insurance business in the UK in the coming months would give a strong indication of investor appetite for insurance companies.

Mr Murphy said a €1.3 billion price tag would be “quite achievable as a target today” given that it was more than 70 per cent of the group’s €1.8 billion embedded value.

Irish Life yesterday posted a profit of €96 million for the first half of 2012, and €112 million on an embedded basis. Embedded values are used in the insurance industry to reflect the long-term value of insurance companies.

The Irish Life Group comprises a retail and corporate pensions business, fund management company Irish Life Investment Managers, as well as brokerage and third-party administration companies Cornmarket and Irish Progressive Service International. It also has stakes in Allianz and, more recently, Glo Healthcare.

Irish Life is the largest life assurance company in Ireland with 29 per cent market share.

It recently signed an agreement with Quinn Life Direct to acquire its life and pension back-book, comprising around 4,000 policies. In January it replaced Aviva as joint partner with AIB to distribute life and pension products through its branches.

During the first half of 2012 the company’s life and investment sales increased by 6 per cent, while Irish Life Investment Managers increased the funds under management by €2 billion to €34.6 billion. Its profits, on an embedded value basis, gained from short-term investment fluctuations as markets recovered in the first half of the year. High persistence rates also contributed to the bottom line.

Cornmarket and Irish Progressive contributed €9 million or 10 per cent of the company’s overall operating profit on an embedded value basis, while associate business Allianz, in which it has a 30 per cent stake, accounted for €12 million.

Mr Murphy said Irish Life was a strongly cash-generative company, generating around €100 million per annum. The group had a cash flow of €54 million in the first half, compared to €21 million in the first half of 2011.