Irish Life & Permanent shares dip

IRISH Life & Permanent Plc, Ireland’s largest life insurer, said sales of savings, pensions and insurance products were weaker than it expected in the first-quarter as stock market declines deterred consumers. The company’s shares fell as much as 5.4%.

Sales of such products in the Irish market are estimated to have fallen more than 40% in the first quarter from a year ago, the company said. Irish Life, which gets two-thirds of total earnings from its life assurance unit, said it “performed slightly better” than the overall market. As well as falling consumer confidence, Irish Life cited a government savings plan that boosted sales last year and has now closed, and said some consumers are delaying purchases as they wait for a new government pension plan to start.

“It’s the severity that’s the shock of it,’ said Roman Cizdyn, an analyst at Commerzbank, who has a hold rating on the stock. “It was widely known there was a special offer a year ago and there’s a new pension coming in, but I don’t think many people will be looking for minus 40%.” Irish Life’s shares fell 54 cent, or 5.3%, to 9.61 at 12:01pm in Dublin, and traded as low as 9.60, the biggest one-day decline in percentage terms in more than six months.

The shares have dropped 6.7% this year, compared with a 2.4% decline by the 129-member Bloomberg European Financial index.

Irish Life is more vulnerable than Irish rivals to a slower demand for life products because they account for more of its profits. Bank of Ireland Plc, the nation’s biggest bank by assets, garners 8% to 10% of profit from life sales, while they account for 5% of profit at Allied Irish Banks Plc, the number two bank, according to analysts at NCB Stockbrokers. Earnings at the company’s banking business “will go a considerable way to compensate” for falling margins in life assurance.

Demand for mortgages at its banking division has been “exceptionally strong” so far this year and will probably remain “strong” for the full year, Irish Life said.

Irish mortgage borrowing rose at the fastest pace in more than two years in February as rising house prices spurred home buyers to borrow more.

House prices climbed 15% in the 12 months to February, according to Irish Life & Permanent. The company fund management and corporate life businesses had a “good start” to 2003 with sales “broadly in line with expectations,” Irish Life said.

Irish Life, which raised the 2002 dividend 10%, won’t cut its 2003 dividend even if earnings this year are stagnant or fall, finance director Peter Fitzpatrick said in March.

The company last week had the outlook on its credit ratings cut to negative from stable at Standard & Poor’s on concern declining stock markets will hurt earnings.

Irish Life said it will give further guidance when it publishes a trading statement in June.

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