NEW Ireland Holdings is understood to be close to finalising the sale of its general insurance subsidiary, Irish National Insurance. Industry sources said Eagle Star was expected to emerge as the buyer of the operation. The British-based Independent Insurance was mentioned as another interested bidder.

New Ireland managing director - Mr Jack Casey was not available for comment yesterday. Other company sources declined to comment. Sources at Eagle Star were not available for comment.

New Ireland is 83 per cent owned by the British-based Sun Life and Provincial Holdings which is itself owned by the French group Union Assurances de Paris. In November, UAP and another French insurer AXA announced plans to merge their operations to create the world's second-largest insurance company and one of the world's largest asset managers.

There has been speculation in the insurance market for some time about UAP's position in the Irish market. Irish Life shares have risen throughout the year on speculation that the French group would move to buy out the minority share holders. In recent months, however, there has also been speculation about the possible sale by UAP of one or both operations in the competitive Irish market which is served by a large number of insurers.

New Ireland Holdings shares closed yesterday at £10 valuing the company at £108 million. The company consisting of the life assurance operation New Ireland assurance, the general operation Irish National Insurance and a financial services company New Ireland Financial Services reported a 42 per cent rise in pretax profits to £10.4 million in 1995.

Within the group, Irish National's per-tax profits increased from £149,000 to £3.2 million despite an increase in its underwriting losses from £3.3 million to £5.78 million. Industry sources said the general insurance operation was put on the market because of the difficulty of increasing its scale in an over supplied market where 27 general companies are competing for premium income.

Irish National ha about 4 per cent of the general insurance market. Eagle Star has just over 6 per cent of the general market. With about 250 people employed at Irish National, industry sources expressed concern that there would be significant level of redundancies after a takeover.

It is not clear what UAP's intentions about its ownership of New Ireland - the Irish life assurance market is very competitive with 24 companies competing for business.

In 1995 UAP reorganised its Irish and British operations into a new holding company. The move followed the group's takeover of Sun Life Assurance, one of the top five insurance companies in Britain in terms of premium income. In 1994 UAP bought a general insurer in Britain, Provincial Group.

UAP bought into New Ireland in 1976 when it acquired a 33.4 per cent stake. In 1987 it increased its holding to 52 per cent and a major restructuring was carried out. This involved the setting up of a holding company - New Ireland Holdings - and separate subsidiaries for the life and general business.