New deal throws a lifeline to the Bank of Ireland pensions dealers

The takeover of New Ireland by Bank of Ireland could lead to further rationalisation in what is still an over-populated Irish life assurance and pensions industry. "This is a huge strategic move for Bank of Ireland and it makes a whole lot of sense," one seasoned observer of the life and pensions industry told The Irish Times.

But the same observer doubted whether Bank of Ireland would keep its two life and pensions operations separate in the long-term and believes that within a number of years the Lifetime business would be subsumed into New Ireland, which would then become Bank of Ireland's sole life and pensions operations.

The acquisition of New Ireland will give Bank of Ireland a major presence in the pensions market, an area where Lifetime - and the other bank assurer, AIB's Ark Life - failed to make any impression.

In contrast, using Bank of Ireland's extensive branch network to sell savings and protection products, allowed Lifetime to build up a substantial share of this section of the market. However, in recent years Lifetime has been passed out by Ark Life which came into the market much later than Lifetime.

But despite the perception that Lifetime has failed to consolidate on its early success, Bank of Ireland's chief executive, Mr Maurice Keane, was adamant that the bank was pleased with its performance. "We have had a good experience with Lifetime and are happy with its market share. But the pensions business in Ireland is becoming increasingly attractive and most pensions are sold through the broker network.

"We needed to widen our distribution network, New Ireland has a good broker network and a good direct sales force, so the takeover will give us the three channels of distribution we need," he said.

Mr Keane also insisted that Bank of Ireland would be keeping Lifetime and New Ireland as two separate stand-alone operations

"New Ireland will focus on its own markets and will retain its distinctive and highly-regarded brand," he said. The acquisition would mean that almost half of the Irish pensions market would be held by Irish Life and Lifetime/New Ireland, with smaller shares held by Standard Life, Friends Provident, Eagle Star and Norwich Union.

The savings and protection part of the market is not so heavily dominated by the big players but Irish Life, Lifetime/New Ireland and Ark Life will still hold a combined 45 per cent of the market.

A progressive winkling-out of the smaller players in both savings and protection and the pensions business is expected to intensify over the next few years, with the 20-odd companies offering life assurance, and pensions probably shrinking to little more than half a dozen in the next five years, one informed source said.

"The smaller companies with a market share of a couple of per cent just can't survive and make money." New Ireland managing director, Mr Jack Casey, who will remain at the helm after the takeover, was emphatic that the buy-out is a good move for New Ireland.

"We see this as a big plus for ourselves, and it's nice to be back in Irish ownership. We didn't have problems with the French owners, but if we stayed under the control of AXA, the New Ireland brand would probably have been changed."

He added that New Ireland's £2 billion fund management operation would be integrated into Bank of Ireland Asset Management, the only part of New Ireland to be absorbed into the new parent company.

"That will result in some job losses but they will be minimal," he said.

Retaining the highly-regarded New Ireland brand name is seen in the industry as an essential move, especially in the pensions area. "New Ireland has evolved as a pensions specialist, we sell far more pension products than savings products. That appeals to Bank of Ireland, and our broker network and direct sales complete a circle with Lifetime's branch sales operations," said Mr Casey.

Industry sources believe Bank of Ireland had no option but to bid for New Ireland. "Lifetime had reached saturation point as a bank-owned insurer, it had picked up lots of easy business through the branches but was going nowhere fast. This makes huge strategic sense for the bank," said one observer.

"Lifetime and Ark have been useless at selling pensions because most people buying pensions do it through an adviser, not over a bank counter. In contrast, New Ireland, a pensions company with a big share of the market and an excellent set of products, has a well-managed direct sales force," he added.