DUBLIN — Ireland agreed Tuesday to sell the country's largest insurance company, Irish Life, to Great-West Lifeco of Canada for (EURO)1.3 billion ($1.75 billion) in a move to reduce its deficit and longer-term debts.
The agreement caps a year of efforts by Ireland to sell the profitable business, which has 2,200 employees who manage more than 1 million policies with assets of (EURO)37 billion ($50 billion). Ireland also will receive one (EURO)40 million ($54 million) dividend payment from Lifeco when the sale closes in July.
The government last year paid (EURO)1.3 billion to acquire the Irish Life unit as it nationalized and split up its debt-crippled parent bank, Irish Life & Permanent. Lifeco was considered the front-runner to acquire the insurer because the Winnipeg-based company's subsidiary, Canada Life, has been in Dublin since 1903 and is the biggest Canadian employer in Ireland.
Allen Loney, president and chief executive officer of Great-West Lifeco, told a Dublin press conference that Canada Life would merge into a company retaining the Irish Life brand. He said the purchase "allows us to achieve, with a single transaction, the leading position in life insurance, pensions and investment management" in Ireland, a country of 4.6 million.
Finance Minister Michael Noonan heralded the sale as further evidence of Ireland's rebound from its 2008 property crash, the nationalization of five of its six banks, and the country's own rescue by the European Union and International Monetary Fund in 2010. Ireland hopes this year to resume normal borrowing on bond markets and repair its battered credit rating.
"Today's deal is the first time during this crisis that a company in which we have invested has been returned fully to private ownership. This is a historic transaction and provides the Irish taxpayer with a full return on its investment in Irish Life," Noonan said.
Irish Life and Lifeco said they expected some job losses over the next two years as Canada Life's current headquarters moves into the Irish Life headquarters and duplicated positions are eliminated. Lifeco said it expects the Irish Life acquisition to boost earnings about 10 percent in 2014, the first full year of ownership.
The sale leaves Irish taxpayers as the owner only of the lossmaking half of the dismantled Irish Life & Permanent, a retail bank called Permanent TSB. It is heavily exposed to Ireland's shellshocked property market as the country's top mortgage provider. Many of its 174,000 mortgage policies are money-losing either because homeowners have fallen behind on payments or their interest rates are legally fixed to rock-bottom European Central Bank rates, below Permanent's own funding costs.
The Irish Life sale represents part of Ireland's agreement with EU and IMF creditors to reduce its deficits by 2015 to the eurozone limit of 3 percent of gross domestic product. Ireland's 2010 deficit soared to an EU-record 32 percent because of bank-bailout costs, but the government now hopes to reduce this year's deficit to below 7.5 percent of GDP.
And Ireland's Finance Department said the sale profits should allow Ireland's projected end-of-2013 debt to decline from a projected 121.3 percent of GDP to 119.9 percent.