Bank of Ireland's takeover of New Ireland makes clear strategic sense for the bank, though it has paid a full price at £273.6 million.

If it wanted to stay in the life assurance market Bank of Ireland needed to become a player of significance in an increasingly competitive market. The acquisition dramatically increases its market share and gives it the market spread and presence it failed to achieve with its own company, Lifetime. It gives the bank a good slice of the pension market, a market where Lifetime had failed to build any presence.

The operations are complementary: with Lifetime selling savings and protection products through Bank of Ireland branches; and New Ireland strong in the pensions market with a good broker network and a direct sales force.

The acquisition emphasises the point that banks can pick up a certain amount of the relatively straightforward life assurance business such as savings products which are close to what customers traditionally buy from banks. But when it comes to the more complicated products such as pensions where customers want advice and time, banks have not been as successful.

Expanding by buying an expert in this area makes good sense for Bank of Ireland. But it will have to justify the price it has paid with results. On the plus side there will be some opportunities to grow the business by feeding "warm" Bank of Ireland commercial contacts to the New Ireland sales force. And there could be some back office synergies in the medium term.

But on the negative side there could be some resistance from some members of New Ireland's broker network to selling in direct competition to the bank's branches. Other insurers are saying they expect to get some business because of this.

The bank has said that Lifetime and New Ireland will be run as two separate stand-alone operations. But no one in the market would be surprised to see the Lifetime business subsumed into the larger New Ireland in time.