International ratings agency, Standard & Poor's, has affirmed its credit ratings for Irish Life and its US subsidiaries. S&P points to Irish Life's leading position in the rapidly expanding Irish economy, favourable demographics, a benign regulatory environment and the company's good operating performance, as providing the basis for its AA-rating.

On the downside though, it identifies a number of "offsetting factors" which may affect its future ratings, including the gradual erosion of its share of the Irish market in recent years, a high level of turnover of senior management level and a mixed record in implementing strategy.

S&P also noted that good earnings diversification was being offset by some weaknesses in the US operations, which form an increasingly prominent part of the group.

Irish Life welcomed the rating yesterday. A spokesman said it was aware of the business issues raised but believed that the rating was an endorsement of its strategy.

The strong rating for its US subsidiaries, Inter-State Assurance and First Variable Life Insurance, is based on explicit support for their operation from Irish Life, according to S&P. Among the major rating factors, it highlights the extremely strong capitalisation of its subsidiaries and commended Irish Life's distribution channels, which are now well diversified to include some links with leading banks and building societies.

The group has also managed to diversify its earnings, with less than 50 per cent of group operating profits now generated by core Irish Life insurance operations. The agency also noted Irish Life's "excellent" financial flexibility, stating that it could easily raise further debt and was well placed to participate in the expected consolidation of the Irish insurance market.

Highlighting the group's poor record in implementing its strategies, S&P cited its enforced withdrawal from Britain, aborted attempts to enter Norway and France, a steadily eroding market share in Ireland, disappointing performance of its recent US acquisitions and the abortion of a major and urgently-required information technology project in Ireland in 1997.