AIB/Aviva to open pensions company next year

AIB and British insurance giant Aviva predict that their newly announced life and pensions joint venture will be in business early next year.

The two confirmed yesterday that they are to join forces to form what will be the State's third-biggest life and pensions operator by combining AIB subsidiary Ark Life and the Aviva-owned Hibernian Life & Pensions.

The joint venture will operate as a separate company from its parents. Aviva will control 75.01 per cent of the business through Hibernian, while AIB will have the remaining 24.99 per cent.

The vehicle for the joint venture will be Hibernian Life Holdings (HLH). It will receive all the shares in Ark Life from AIB in return for a payment of €195.4 million and 24.99 per cent of HLH.

The new venture's managing director designate, Tony O'Riordan, current head of Hibernian Life & Pensions, said yesterday the payment was necessary for Aviva to secure the 75 per cent stake in the new business.

"Hibernian had to make the payment to AIB," he said. "If it had been neutral, there would have been a different balance in ownership. Aviva's strategy is that it wants to be a net investor in the Irish market."

The combination will have an estimated embedded value of €1.36 billion, and sales of €226 million. It will employ 800 people.

Both the Irish Financial Regulatory Authority and the European Commission will have to approve the new deal. Assuming that this happens, Hibernian said yesterday that it expects it to go through early next year.

The two entities will sell the products under the Ark Life and Hibernian brands. AIB will sell its products through its branch network, while Hibernian will continue to use its brokers around the country. AIB will be an exclusive agent for HLH. Mr O'Riordan explained yesterday that the opportunity to combine the brokers with the bank's 280 retail branches was one of the key drivers for the deal.

AIB's asset management arm, AIB Investment Managers (AIBIM) currently has the €2.6 billion assets of Ark Life's policy holders under its management.This will be transferred to Hibernian Investment Managers (HIM), which is a subsidiary of Aviva's UK-based fund management, Morley.

However, including the Ark Life assets, AIBIM has a total of €11.5 billion under management. The new arrangement will still leave it with €9 billion. There was speculation that AIB would also sell the investment management business. However, this has been performing strongly in recent months, and the bank has effectively quelled rumours of a sale.

UK-based Aviva has a total of €300 billion under management worldwide. The company will keep 100 per cent ownership of Hibernian's general insurance business, the biggest in the Republic.

Davy Stockbrokers analysts, Scott Rankin and Emer Lang, agreed that the deal would have a "neutral" impact on the bank's earnings per share. They said their target share price remained €20.

The union that represents most of AIB's staff, the Irish Bank Officials' Association (IBOA) said it would be demanding a meeting to get "firm assurances" from the institution about the deal's likely impact on staff.

"IBOA members in Ark LIfe are extremely concerned about the impact this sale will have on their future careers," said general secretary, Larry Broderick.

"IBOA has sought an urgent meeting with AIB chief executive Eugene Sheehy to ensure that arrangements in relation to the proposed sale and the impact it has on IBOA members is subject to full consultation, negotiation and agreement."