Anglo Irish Bank is about to apply to the Department of Enterprise and Employment for a licence to set up an insurance company. The bank will also apply to the Central Bank for approval of its new line of business.
Confirming the plan, Anglo Irish director Mr Tiarnan O'Mahoney said the bank hoped to have its new insurance company fully operational by September 1st.
If the licence and approval are obtained, the bank expects that the new insurance operation will generate just under 10 per cent of group profits within about three years.
The new company will develop and offer its own savings and investment-type insurance products, increasing competition in this section of the life assurance market. Anglo Irish will be competing with Irish Life and Permanent, Friends First and subsidiaries of AIB and the Bank of Ireland in the life assurance, pensions and savings markets.
Mr O'Mahoney said the move was very important strategically for Anglo. He explained that bank customers planning their financial futures generally wanted a mixture of three types of product: deposits, equities and pensions.
"Traditional insurance and banking areas are overlapping and banks that cannot offer their customers the savings and investment products they want could lose those customers. Retention of customers is very important to us. If we cannot offer these type of products we could lose customers as depositors. But we need the licence and approval to offer these type of insurance products," Mr O'Mahoney said.
Anglo Irish plans to concentrate on the deposit-related savings and investment market and has specifically targeted annuities and pension-type products. "We have not been able to offer annuity products to people planning for their retirement because we do not have an insurance licence. And there are opportunities in the pension area.
Anglo is particularly interested in the area of self-administered pension schemes since the changes in the tax rules introduced significant tax advantages for self-employed people setting up their own pension plans - if they plan properly", Mr O'Mahoney said. But Anglo Irish is not planning to offer traditional life assurance policies and will therefore not bring new competition into this market.
"We will buy traditional life policies for one of the existing suppliers as we need them," he said. The bank is not interested in entering the general insurance markets.
The operation will be based in the bank's headquarters in St Stephen's Green, Dublin. Anglo Irish has already recruited an actuary to head the operation.
In its application to the Department of Enterprise and Employment, the bank will be required to state the types of business it wants to write, and any licence issued will specify these classes of business. If the company wants to expand into new business areas, it may need to go back to the Department for an extension of its licence.
Central Bank approval is required for any new activity planned by a licensed bank. The Central Bank assesses each application in terms of the likely impact on the capital and liquidity of the bank concerned.
