Déjà vu as Irish Life returns to pole position

Since the credit crunch, not too many Irish-owned financial institutions have reported such healthy figures as this life and pensions company, writes Kyran Fitzgerald

If an Irish Life policyholder went to bed, in 1990 and only woke up, last week, he would notice that little appeared to have changed at the company in the intervening period.

Of course, he would be wrong. In 1991, the company floated on the stock market before joining forces with Irish Permanent, some years later, to become a major force in the bank assurance world.

This year, Irish Life found itself back as a standalone, State-owned entity, with the break-up of Irish Life & Permanent and of course, the Government is looking to offload the company. So, it would seem that Ireland’s leading life and pensions company has been going round in circles.

As if to add to the sense of déjà vu, we have the return of the company to its pre-’90s position of dominance in the life and pensions market.

In fact, Irish Life has changed fundamentally and by doing so, has emerged as a stand-out domestic financial services organisation.

This week, the company reported pre-tax profits of €96m for the first six months of the year — a six-fold increase on the corresponding period, last year.

Not too many Irish-owned financial institutions have reported such healthy figures since the onset of the credit crunch.

The Government has paid €1.3bn for the company — it now has a fighting chance of making a decent return on this investment, assuming the eurozone sovereign crisis abates.

Irish Life has a number of things going for it, but it the company is also facing into strong headwinds. The brand name remains strong. The company has strong and growing share in its core markets.

The view within the company is that Irish Life is now a stable, solid business, turning out a bit of cash.

The company’s embedded value has been revised up from €1.7bn at the end of Dec to €1.8bn at the end of Jun.

CEO Kevin Murphy has estimated that the company would expect to fetch about 70% of its embedded value in a trade sale, at present — that is slightly below the State investment, but the general view is it will be 18 months to two years before a sale could be concluded, giving plenty of time for embedded value to rise.

Irish Life’s distribution channels are formidable. It supplies six of the 10 bank branch networks. It has relationships with around 1,500 brokers, along with a direct sales force as part of its multi-channel distribution model. Sales are up 6% in a year when the life and pensions market has been marking time.

However, Frank O’Dwyer, director of the Irish Association of Investment Managers, has noticed a high level of resilience, specific to Irish Life and in the sector generally.

Despite the financial pressures, consumers are not as yet cancelling policies in large numbers.

“There is no decline in persistency. The industry, as a whole, is holding up.”

He warns that another tough budget, however, could challenge people.

CEO Kevin Murphy, a Corkman, has been one of the quiet success stories of Irish finance, but he is close to retirement age and his replacement could be announced by the year end.

Gerry Hassett, head of retail, is a leading internal candidate along with CFO, David McCarthy.

Both Murphy and McCarthy held the top two positions at Irish Life & Permanent before they moved back to ready Irish Life for a sale, due last Oct, but then delayed by the eurozone crisis.

Chairman Alan Cook, could well also be accompanying Murphy out the door. He must cede either his chairmanship at State-owned Permanent TSB, or that at Irish Life. Either way, Irish Life faces another period of transition, culminating in a trade sale and a new overseas owner, given that another stock market flotation is hardly on the cards in current conditions.

Whatever happens, Irish Life looks set to remain the leading name in the life and pensions market, but with the real prospect that it could be used as a launch pad for further expansion into Europe.

Lifetime of insurer

1939: Irish Life created by amalgamation of nine British and Irish insurers. The Irish State has an 18% stake.

1947: State stake raised to over 90%.

1965: Irish Life enters UK market.

1979: Acquires control of Church & General, non-life company. Following later disposal, Irish Life acquires 30% stake in Allianz Ireland.

1991: Irish Life floated on London and Dublin stock exchanges in privatisation.

1996: UK subsidiary closed to new business.

1999: Merger with Irish Permanent to form Irish Life & Permanent.

2011: Collapse in IL&P share price precipitates State takeover.

2012: Irish Life spun off as separate, State-owned firm as sale planned.

Employment: c 2,000.

Customers: c 1m.

Sales: €2.5bn (Jan-Jun 2012).