A recovery in sales in Ireland and higher investment earnings because of the strength of the stock market in the first half of the year helped lift net operating profits at Irish Life by 40 per cent to £88.5 million in the first six months of the year.
However, the company warned that operating profits in the second half would be affected by the global equity market slump of recent weeks.
"Based on current conditions, this is likely to result in a reversal of much of the investment gains and also the capitalised value of unit-linked management fees," chief executive Mr David Went said.
Group sales rose by 38 per cent to £94.9 million in the first half although the strong performance in Ireland - where sales bounced back following the resolution of last year's dispute with field sales staff - was offset by weaker sales in the US.
The low interest-rate environment there led to a marked fall-off in fixed annuity sales, which hit Interstate, Irish Life's US subsidiary specialising in the sale of interest-sensitive products. Guarantee Reserve reported a 12 per cent increase in first-half sales and performed in line with expectations, the company said.
Meanwhile, First Variable has a new management team in place and relocated its operations from Boston to Chicago which impacted on its first-half sales performance.
Overall, US operating profit fell to $12.3 million (£8.3 million) from $14.5 million while sales were down 10 per cent at $32.5 million.
"The last six months were disappointing in the US compared to the high standards set over the last number of years," Mr Went said. But he added that US management was refocusing on the recurring premium market, targets had been set and the group was aiming for greater integration of the US businesses.
"You don't lose faith in a company just because it has one setback," Mr Went said. He added that among Interstate management there was "a real sense of urgency to regain their place as one of the stars of the Irish Life stable".
In Ireland, operating profit nearly doubled to £38 million from £19.5 million in the first six months of 1997 as life and pension sales increased by 18 per cent.
Irish Life said retail sales rose to £20.5 million from £13.9 million while corporate sales were up 8 per cent to £15.7 million.
But the contribution from associated businesses fell to £7.7 million from £10.6 million in the first half of 1997, principally because of a weak underwriting result at Irish Life's general insurance affiliate, AGF-Irish Life. However, Irish Intercontinental Bank in which Irish Life has a 25 per cent stake, increased its contribution by 14 per cent while Irish Life Finance Group, which is 50 per cent owned by Irish Life, grew advances by 23 per cent.
Overall, investment earnings rose by 36 per cent to £42.7 million while product earnings grew by 30 per cent to £45.8 million. Within that, however, the value of new business fell by 27 per cent to £5.7 million, reflecting both the increased competition for market share in Ireland and the sharp fall in US annuity sales, Irish Life said. It announced a 10 per cent increase in the interim dividend to 4.30p. Irish Life's embedded value - which measures the value of the business in force plus the value of shareholders' investments - increased to £3.20 per share, up from £2.76.
