An American life insurance company is to expand its operations in Letterkenny, Co Donegal, and create 325 new jobs before the end of 2003.

The £5.5 million (#6.98 million) investment, backed by the IDA, at Prumerica Systems Ireland was announced yesterday by Tanaiste Mary Harney, who said it was "unqualified recognition of the suitability of regional locations for top quality service businesses".

She said it was a "further breakthrough" for the IDA in promoting the case for Objective One locations. Prumerica is a unit of the Prudential Insurance Company of America, which is among the largest financial institutions in the world. It is not affiliated with the UK-based Prudential PLC.

Prumerica opened a software development centre in Letterkenny last July and its target of creating 150 jobs within two years has already been reached. The company is now to establish an operations centre and the software development centre is also to be expanded. The Tanaiste said the expansion would provide further career opportunities for graduates from colleges in Letterkenny, Sligo and Derry.

The managing director of Prumerica, Mr Paul Carmody, said the vigorous Irish economy coupled with the rural beauty of Donegal had proved "extremely attractive" to IT professionals. He was confident his company would experience lasting success in Letterkenny.

The IDA's area director for the Border region, Mr Frank Conlon, said "an accelerated approach to the provision of high quality infrastructure" was necessary if recent successes were to be built on.

Ms Harney said yesterday's announcement brought to nearly 800 the number of new jobs announced in IDA-backed projects in just over six months. In addition to the 325 jobs to be created at Prumerica by the end of 2003, the company said there could be an additional 125 jobs as operations develop.

Another American-based company, Pacificare Health Systems announced an expansion in April creating 160 new jobs in Letterkenny.