IRISH Life achieved good profit growth in 1995. Strong equity markets and good performances by its associated companies, Irish Intercontinental Bank, AGF Irish Life and Irish Life Finance, helped to boost profits.

Existing business - policies sold before 1995 - continued to produce good profits for Ireland's largest life assurance group. But in competitive markets where margins are under pressure, it is more difficult to generate profits on new business.

In 1995, the embedded value earnings, or profits, on new business was £6 million compared with £11 million in 1994. New business in Ireland contributed £6 million while Interstate in the US contributed £3 million. But this £9 million was reduced to £6 million by start up costs of £2 million at First Variable and Irish Life International and once off expenses of £1 million in Britain.

Start up costs at new ventures are a necessary part of establishing new distribution and building size in markets, managing director, Mr David Kingston, said. "We regard this cost as a positive investment in future growth."

But some of the fall in the value of new business reflected margin pressure in the competitive Irish market and difficult trading conditions in the US annuity market.

To tackle these problems, Irish Life is trying to reorganise its field sales force to improve the quality of sales and reduce costs. But objections to the company plan may lead to industrial action by the sales force. In the US, Irish Life is moving to diversify its business through First Variable to balance its annuity sales.

This year, Irish Life expects growth in the Irish pension market, particularly in the single premium side. There will be a move towards the US style system, where people make "dump in investments, according to Mr Kingston. They make some payment into their pension plans each year but decide each year how much they can pay for that year instead of committing to an annual payment for a fixed period, he explained. Irish Life plans to launch new products to capture more of this growing market.

In the US, as well as diversifying products to even out cyclical sales patterns, Irish Life intends to expand. The company wants to make acquisitions which will bring new customers in niche markets.

In Britain, sales are expected to fall again this year, but Irish Life International will increase its sales into that market from its International Financial Services Centre base.

In 1995, the discount rate used to calculate the current value of the future stream of income from policies sold was reduced. It fell from 14 per cent to 13 per cent for earnings in Ireland and Britain and from 13 per cent to 12 per cent for US earnings. This reflected reductions in interest rates on government bonds in those markets. This boosted profits.

Overall, changes in the economic assumptions underlying the embedded value calculation contributed £8 million to profits. This offset a £5 million currency translation loss on unhedged US dollar and sterling earnings and boosted 1995 embedded value earnings by £3 million. A positive £10 million from changes in economic assumptions in 1994 was wiped out by a £10 million loss on currency translation.

At the end of 1995, the group had a strong solvency cover - an indication of financial strength - at 3.7 times the required minimum of £105 million.