Irish Life beats forecasts with 20% interim profit rise

STRONG investment markets and good contributions from subsidiaries helped boost Irish Life profits by 20 per cent to £48 million for the six months to the end of June 1996.

Profits rose despite a drop in sales, which included an 11 per cent fall in annual premium sales in the domestic market.

With results ahead of market expectations, the group has increased the interim dividend for shareholders by 9.2 per cent to 3.55p per share.

Managing director Mr David Kingston said the results covered a period "when we are implementing important changes to our business in Ireland".

Proposed changes in sales structures have led to an industrial dispute with 420 sales staff. Expressing confidence that agreement could be reached in the current talks with sales staff, he admitted that the dispute affected sales figures in May and June.

Irish Life's next major acquisition was likely to be in the US, he said. Despite abandoning two recent opportunities at the due diligence stage, Irish Life "remains committed to rapid growth in the US".

Mr Kingston was positive about the current half, forecasting improvements in the US and in the domestic annual, or recurring premium, market. Profits in the first half rose despite an 11 per cent fall in group sales to £204.5 million. This indicates that the company is now generating better margins on policies sold.

The rise in first half embedded value profits from £40 million to £48 million reflected a £5 million increase in earnings on investments and a £3 million increase in earnings from insurance products.

Embedded value is a profits measure used by life assurance companies. It is based on calculating a current value for the future income stream from new policies sold in the period, earnings from policies sold in previous periods and increases in the value of shareholders' investments.

The £5 million rise in investment earnings included an exceptional gain of £3 million "from specific property transactions" which is unlikely to recur in the current half.

Products earnings - the profits generated from the sale of life assurance - rose by 9 per cent, or £3 million, to £36 million. The contribution from new policies sold during the six month period increased to £5 million from £3 million while existing policies contributed £31 million, up from £30 million.

Describing product earnings as "very satisfactory", Mr Kingston said they reflected attention to margins through "expense control, prudent underwriting and satisfying customers".

Lower safes reflected a sharp tall in the US where sales fell from £107 million to £61.3 million and a fall in annual premiums in the domestic market.

Mr Kingston said the annuity market in the US had started to improve. This would benefit Irish Life's Interstate subsidiary. The performance of its First Variable subsidiary was "slower" than expected, he said, but new management appointments and a new distribution system should result in a better performance in the current half, he forecast.

In the Irish market, total sale rose by 7 per cent to £107.8 million. While single premium sales once off lump sum payments rose by 14 per cent to £83.9 million, regular annual premiums fell by 11.5 per cent to £23.9 million. Mr Kingston said the fall reflected a weak savings market and the company's difficulties in the pension market "which we are addressing".

In Britain, premium income fell from £16.3 million to £2.9 million in line with the winding down of its tied agent distribution network. This business was now profitable, Mr Kingston said. Xaar, in France, recorded a 25 per cent rise in sales to £5 million and was still seeking a strategic partner to achieve critical mass in the market.

Irish Life International, the IFSC subsidiary which sells tax based products, reported a jump in premium income from £2 million to £27 million, with sales mainly in Europe and South Africa. This company is now targeting the British market.

Mortgage lending at Irish Life Homeloans rise by 48 per cent to £62.5 million with advances of £100 million in the year to date. Contributions from subsidiaries

AGF Irish Life and Irish Intercontinental Bank were "ahead of expectations", Mr Kingston said.