Irish Life & Permanent Plc

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Irish Life & Permanent Plc

Irish Life Centre
Lower Abbey Street
Dublin, 1
Ireland
Telephone: +353 1 704-2000
Fax: +353 1 704-1900
Web site: http://www.irishlifepermanent.ie

Public Company
Incorporated: 1998
Employees: 5,294
Total Assets: $36.1 billion (2002)
Stock Exchanges: Irish
Ticker Symbol: IPM
NAIC: 522110 Commercial Banking; 522298 All Other Non-Depository Credit Intermediation; 524113 Direct Life Insurance Carriers

Irish Life & Permanent Plc (ILP) is the Republic of Ireland's third largest financial institution. The combination of Irish Life, Irish Permanent, and TSB Bank, ILP operates in both the insurance and retail banking markets. Irish Life carries out the group's insurance operations and is the country's number one provider of life insurance and pension plans, as well as other savings and investment products for the retail market and, through its Corporate Business Division, provides group pension and other insurance products to corporations and other groups and associations. Together, Irish Life's operations command a 20 percent share of its domestic market. Irish Life's retail insurance products are sold via the company's own direct sales force, other insurance intermediaries, and also through the branch network of ILP's banking arm, permanent tsb. Formed through the merger of Irish Permanent and TSB Bank, permanent tsb offers a full range of personal finance products and services, and is also the country's largest provider of home mortgages. The banking arm operates more than 110 branch offices and 65 agencies throughout the Republic of Ireland. ILP has reoriented its operations since the beginning of the 21st century, selling off its holdings in the United States, France, Hungary, and elsewhere to focus its growth on the Irish market. Listed on the Irish stock exchange, ILP is led by CEO David Went.

Financial Privatization in the 1990s

The three principal components of the future Irish Life & Permanent operated for much of their existence as governmentrun financial institutions. The oldest of the three, and the last to join the expanded bank and insurance group, was TSB Bank.

TSB's history stemmed back to the early 19th century and the founding of the first Irish Savings Bank in Waterford in 1816. Additional Irish Savings Banks were then founded, starting with a bank in Cork in 1917, and followed by banks in Limerick, Monaghan, and Dublin. The passage of the Savings Bank Act of 1863 placed the savings banks under government control and restricted their operations exclusively to savings accounts and services for more than a century.

These restrictions began to be lifted in the mid-1960s, starting with the first in a series of new legislation passed in 1965 enabling the country's savings banks to offer a more expanded range of financial products and services. Over the next two decades, the banks, which remained independent of each other, were empowered to offer loan and mortgage products, credit cards, foreign exchange, and other services.

The move toward a single TSB Bank began in the late 1970s, when the Irish Savings Banks in Dublin and Monaghan merged their operations. The Cork and Limerick banks followed suit in 1986, followed two years later by the Waterford bank, which merged into the larger Dublin bank. Last, the Irish Savings Banks came together when the Cork and Limerick banks merged with the Dublin branch of the United Kingdom's Trustee Savings Bank (later acquired by Lloyds to form Lloyds TSB) to form TSB Bank in 1992. The new larger bank operated as an unincorporated statutory entity under the oversight of the Irish government's Ministry of Finance.

By then, two other Irish financial institutions were in the process of evolving into publicly held, private sector businesses. Irish Permanent, the oldest of the two, had been set up in 1884 as a building society, in part a movement founded in the 19th century to provide housing for the growing U.K. working class. Irish Permanent Building Society took as its mandate to promote thrift and abstinence among its members.

In 1939, Irish Permanent took on a new managing director, Edmund Farrell, who transformed the building society into the largest mortgage lender in Ireland. Yet Farrell was said to have considered the building society as his own—and went so far as to appoint his own son as his successor. The younger Farrell served as the bank's managing director, until Roy Douglas, who had formerly worked with Ireland's two largest financial groups, Central Bank of Ireland and AIB, was appointed as the group's head. Under Douglas, Irish Permanent began to branch out from its traditional mortgage lending role, launching a new subsidiary in 1992, Irish Permanent Finance Limited, to offer personal and car loans.

Yet Douglas was hired for a more specific purpose—that of taking advantage of changes in the country's banking laws that allowed a building society to convert its status into that of a publicly owned bank. By 1993, Irish Permanent, which had grown to more than 145,000 members, began preparations for its public launch. During due diligence, however, the building society discovered a discrepancy in its books, leading to suspicions that Edmund Farrell, Jr., had used the building society's funds to finance the renovation of his family's mansion. The accusation, later settled out of court, eventually led to Farrell's ouster, and the public offering was completed in 1994.

Almost immediately afterward, Irish Permanent Plc, as the new bank was called, faced a threat to its existence after U.K. banking giant, and former building society, Abbey National bought a nearly 10 percent stake in its Irish counterpart. At the time, the move was widely viewed as the prelude to a full-scale takeover bid.

In the meantime, Irish Permanent began an effort to gain scale, buying Guinness & Mahon (Ireland) Ltd. in 1994 in order to add on that firm's private banking operation. The bank made a second purchase that year, adding Prudential Life of Ireland Ltd. Subsequently renamed as Irish Progressive Life Assurance Company, the acquisition added a life and pensions component to the bank.

Irish Permanent's interest in insurance products led the company to suggest a merger with another recent entrant into Ireland's publicly listed financial community, Irish Life, in 1996. Yet Irish Life, then under the lead of David Kingston, refused Irish Permanent's offer.

Douglas continued to seek new opportunities to build Irish Permanent, however. In 1997, as Irish Permanent's own fortunes rose with the buoyant Irish economy, Douglas reiterated the company's intention to expand as an Irish financial leader. This time, Douglas's target was TSB Bank, which was rumored to be up for possible privatization before the end of the decade. As Douglas told the Irish Times: "It appears that TSB may be on the market in the not-too-distant future. We are interested. We believe the TSB and ourselves would be a strong business fit and a strong cultural fit."

Yet, before that event, Irish Permanent was given a new opportunity for Irish Life. When David Kingston retired, David Went, a somewhat flamboyant figure in the world of British banking who had previously worked at Ulster Bank before heading up British private banker Coutts, was installed as his replacement. Shortly after Went's appointment, he announced his intention to build Irish Life into one of the country's top-tier financial institutions. That announcement provided Douglas with the signal to make a new offer for a merger between Irish Life and Irish Permanent.

Irish Life had been formed in 1939 through the combination of nine insurance companies—five British and four Irish—that had been active in the Irish market. The Irish government, through the Ministry of Finance, held a share in the new insurance company, and by 1947 had gained control of 90 percent of Irish Life.

Irish Financial Mega-Merger for the New Century

Irish Life remained focused on its domestic market throughout the next decades, becoming the country's largest insurance provider. In the 1960s, however, Irish Life entered the U.K. market as well, opening the first of two branches in that country in 1966. Irish Life also gained its own banking arm, through a 25 percent stake in Irish Intercontinental Bank, which remained majority controlled by Belgium's Kredietbank. The state-owned company's international ambitions took on more steam in the 1980s, when it began entering a number of new markets, notably the United States, where it acquired Interstate Assurance Company in 1987. This move was followed by an entry into the Scandinavian and French markets at the beginning of the new decade.

By then, the Irish government was preparing to privatize a number of state-owned companies. Irish Life was earmarked as one of the first to be privatized, in large part to enable the company to accelerate its international expansion effort. In 1990, Irish Life was reorganized as a holding company and given the name Irish Life Plc. The following year, Irish Life was privatized, with a simultaneous listing on the London and Irish stock exchanges. The Irish government nonetheless retained a 34 percent stake in the company in order to shield it from potential takeovers.

Irish Life began making a series of acquisitions. In 1993, it picked up England's City of Westminster Assurance Company Ltd. (CWA), adding to its own British presence. Those operations were combined under the CWA umbrella in 1997. In the United States, Irish Life bought up that country's First Variable Life in 1994, then Guarantee Reserve in 1997. Irish Life also joined Kredietbank in a joint venture to acquire a 48 percent stake in Hungary's K&H Bank.

Company Perspectives:

The Irish Life & Permanent group is a leading provider of personal financial services in the Irish market.

The arrival of David Went as head of Irish Life spelled the end of the company's international strategy, however. Judging that Irish Life had been unable to establish a solid presence on the international market against the global industry's financial heavyweights, Went instead decided to refocus Irish Life on the domestic market. Irish Life began selling off its international holdings as Went announced his intention to transform the insurance company into one of Ireland's top financial firms.

That announcement provided Irish Permanent's Douglas with the opening to propose a new merger between his company and Went's, and by November 1998 the two sides had reached an agreement that, at a value of £2.8 billion, represented the country's largest ever merger. The new company, called Irish Life & Permanent (ILP), created Ireland's number three financial institution with a full range of banking and insurance products.

As it worked to complete its sell-off of its noncore holdings, ILP began looking for acquisitions to bolster its financial services operations. In 1999, the company acquired Dublin-based Woodchester Investment Brokers, which had been part of GE Capital. Much of the group's efforts over the next two years, however, went toward integrating the two rather different corporate cultures of its Irish Life and Irish Permanent wings.

By 2001, however, that integration was, in large part, complete. The company also took a big step toward its refocusing effort that year, when it sold Interstate Assurance and First Variable Life to Protective Life Insurance Company, based in Alabama. The deal resulted in a loss of some $70 million for the company.

Yet by then ILP had taken a major step forward in its "Irish First" strategy that year when it completed an agreement to acquire TSB Bank for EUR 430 million. The deal involved the merger of TSB into the Irish Permanent banking arm, creating a new Irish banking powerhouse, permanent tsb. The combined operation offered a banking network of more than 110 branches throughout the country, and gave ILP a 25 percent share of Ireland's mortgage market, and 20 percent of the country's insurance market.

ILP completed its exit from the U.S. market in 2003, when it sold its Guarantee Reserve Life Insurance unit to Reassure America Life, a branch of Swiss Re Life & Health America. In the meantime, ILP's domestic market continued to grow strongly, especially in the mortgage market. ILP also was boosted with the decision by a number of its competitors to end their free banking services, driving new customers to ILP's own free banking accounts. With its business building strongly, ILP began plans to challenge the country's state-owned banking leaders for the top spot in the new century.

Key Dates:

1816:: Irish Savings Bank is founded in Waterford, followed by banks in Cork, Dublin, Limerick, and Monaghan.
1884:: The Irish Permanent Building Society is founded in Dublin.
1939:: Irish Life is created through the merger of nine British and Irish insurance companies.
1947:: The Irish government gains 90 percent control of Irish Life.
1966:: Irish Life adds a U.K. branch office.
1977:: The Dublin and Monaghan banks merge.
1986:: The Cork and Limerick banks merge.
1987:: Irish Life acquires its first U.S. subsidiary, Interstate Assurance Company.
1999:: Waterford bank is merged into Dublin bank.
1991:: Irish Life is privatized and listed on the Irish and London exchanges.
1992:: The completion of the amalgamation of Irish Savings Banks forms the state-controlled TSB Bank.
1994:: Irish Permanent converts to public company status and lists on the Irish stock exchange.
1998:: Irish Life and Irish Permanent agree to merge, creating Irish Life & Permanent Plc (ILP).
2000:: ILP and TSB Bank agree to merge, creating permanent tsb as a banking subsidiary of ILP.
2001:: ILP sells off most of its U.S. holdings as it refocuses on the Irish market.
2003:: ILP completes its exit from the U.S. market with the sale of Guarantee Reserve Life Insurance Company.

Principal Subsidiaries

Capital Home Loans Limited (U.K.); City of Westminster Assurance Company Ltd. (U.K.); Cornmarket Investment Brokers Limited; Irish Life Assurance Plc; Irish Life International Limited; Irish Life Investment Managers Limited; Irish Permanent (IOM) Limited (Isle of Man); Irish Permanent Finance Limited; Irish Progressive Services International Ltd.

Principal Competitors

Barclays Bank PLC; AIB Group; Allied Irish Banks P.L.C.; Bank of Ireland; DePfa-Bank Europe PLC; Anglo Irish Bank Corporation PLC; Ulster Bank Ltd.; Bank of Scotland Ireland Ltd.; National Irish Bank Ltd.