David Harney on being a lifer at Irish Life

In 2008, David Harney took over as head of Irish Life's corporate business, which was then riding the crest of the wave. Within 12 months, new sales to corporate had halved, thanks to the crash of the Irish economy and global financial market.

“2007 was our record year ever in terms of profits and sales and then I came in when the world was changing and that was an interesting time,” he jokes.

Irish Life would later fall into State ownership following a €4 billion taxpayer bailout of its parent, the publicly-quoted Irish Life & Permanent.

Under Harney’s stewardship, corporate sales recovered to pre-crash levels and his reward came in February, when he was announced as group chief executive of Irish Life, which was acquired from the State by Canada’s Great-West Lifeco in mid-2013 for €1.3 billion.

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Harney succeeded Bill Kyle, who had been parachuted in from Canada to manage the local merger between Irish Life and Canada Life, and Irish Life's integration into the Great-West Lifeco family.

Having done the hard yards in terms of integration, and after three years of strong growth and profitability, Kyle passed the baton to Harney.

“My task is to continue that success,” Harney says, speaking from his large office in Irish Life’s campus on Abbey Street, which enjoys some of the best views of the city. “We have ambitious plans for growth going forward.”

Irish Life is in rude good health at the minute, and employs about 2,400 staff. In its second full year as a subsidiary of Great-West Lifeco, it contributed €204 million to its parent company’s profits. This was up 11 per cent on 2014.

Harney says 2016 has been another “strong year” for the business, growing its market share in life and pensions among corporate and in retail, while its two investment management companies have “performed very strongly”.

Optimistic

“We are very optimistic about the economy here,” he says. “You can look out the windows here and count the number of cranes. That wasn’t the case a few years ago. You get the sense that changes are happening. I’m naturally optimistic about Ireland as a country.”

Harney accepts that Brexit has created uncertainties. After the referendum result, Irish Life closed a property fund to redemptions but that restriction has since been lifted.

He has also been pleasantly surprised that Donald Trump’s election as president of the United States has been positive for equity markets, which seem to be encouraged by his plans for a major programme of infrastructure spending.

The Canadians have been sufficiently impressed by their Irish subsidiary to promote four senior executives to group roles.

Gerry Hassett was appointed as executive vice president of individual customers with Great-West Lifeco, Dervla Tomlin became group chief actuary, David McCarthy secured a senior finance role, while Eoghan Burns is the chief actuary for Canada Life Reinsurance.

Irish Life’s business comprises several different components – its life and pensions business has retail and corporate arms, there are two investment companies (Irish Life Investment Managers and Setanta), the newly-formed Irish Life Health, a life administration company, and Cornmarket, which deals with the public sector.

In March, it announced the creation of Irish Life Health. This involved buying out the 51 per cent of GloHealth that it didn’t already own, purchasing Aviva Health, and putting the two businesses together under a new brand with a 20 per cent market share.

The price of doing that transaction was never revealed. Harney describes it as a “significant investment” and a signal of Great-West Lifeco’s commitment to growing its Irish subsidiary.

“It’s a long-term investment. It’s a 20-30 year view. We’ve got immediate scale now having bought out Aviva and Glo. We’re close to the number two [Laya Healthcare] and we’ve a lot of opportunity to do good work for customers.

Competitive market

“It’s a very competitive market. Margins are very tough and we do have a tough time with the amount the public hospitals can charge. It’s not a very mature charging structure. But the opportunity is there to give people more choice and to do things a little more differently than others are doing.

“The way we see health insurance moving going forward is as a product helping people manage their health in a better way. We’re encouraging people to be healthier and to live a better life. Digital doctor is making it easier to see a GP.

“With a lot of the corporate clients now we’re integrating health insurance with wellness programmes in the workplace and that’s going to start happening more in the retail market as well. It’s health insurance and health management coming together. That’s going to be the way.”

State-owned VHI controls about half the market, having once held a monopoly, and Harney accepts that it will be a “while yet” before Irish Life would challenge that domination. “I’m not worried about that, we have big scale and over 400,000 customers that we need to look after.”

That said, premium prices are set to rise, going up by between 6 and 10 per cent across the three health insurance providers, which Harney puts down to increased charges from public hospitals, amounting to about €150 million a year.

“All of the adjustments in the prices that are going through at the moment go back to that charge,” he says. “If that wasn’t there prices would stabilise.

“We fully understand how much people pay for health insurance and it’s really disappointing for us to have bought out those companies in August and having to put through price increases in January.”

Headlines

While Irish Life has undoubtedly performed well in the past few years, it made the headlines for all the wrong reasons in June when Denis Casey, a former group chief executive of IL&P was convicted and jailed for his part in a €7.2 billion conspiracy to defraud.

Casey and two former executives of Anglo Irish Bank and IL&P were found guilty of conspiring to make Anglo's books look €7.2 billion healthier than they actually were.

Judge Martin Nolan said the senior executives had taken part in a “dishonest, deceitful and corrupt” scheme to make Anglo Irish Bank’s finances look stronger than they were.

Casey, who joined Irish Life Assurance in 1980 as a trainee accountant, was sentenced to two years and nine months in prison. He is appealing the conviction.

Did the trial damage Irish Life’s brand?

“Something like that doesn’t happen without damaging the brand,” Harney says. “People were surprised or disappointed that something like that could happen, but it didn’t cause any long term issues with the business.

“The nature of what we do is about long term relationships with customers. That survived and we’re still the most trusted brand in the market.”

In spite of the reputational damage, Harney said Irish Life did not lose any clients following the trial. “We didn’t, no. It was something that happened that shouldn’t have happened.”

What lessons have been learned by the company? “For me, the reflection is that you have to have very good governance structures because people come under pressure. It’s hard to call out a particular thing that was missing. There’s no governance weakness that I could point to, but there’s an awareness maybe that decisions like this need to be broader based. People can’t take pressure situations in a smaller group.”

Harney says changes have been made internally to ensure that a similar situation does not arise again.

“Processes have been introduced and there’s a lot more interaction between the executive group and the board and a lot more diversity on the board. There’s a whole new regulatory regime that has changed the structures in companies. It’s impossible to see how a thing like that could happen again.”

Was he surprised when details of the transaction first emerged?

“We were all surprised because there was no knowledge of the transactions. People were surprised and shocked that it happened.”

Harney grew up in Barrymore, a small village on the Roscommon side of Athlone. “We were part-time farmers, my father was a Guard, we had a bed and breakfast and stuff like that.”

He went to school in Athlone and was “pretty good” at maths. He joined Irish Life straight from school in 1986 and started off in an area of the business that did actuarial reviews for defined benefit schemes “We used to work out the cost that employers had to pay. It used to be about 6 to 8 per cent.”

His training was on the job, switching between the various parts of the group. “I moved all around the business as part of the training scheme.”

Master’s degree

He later did a master’s degree in financial mathematics in DCU and held senior roles in finance, sales and marketing before securing the top job.

He admits to having being approached on a “number of occasions” to move to other companies and he even thought of emigrating to Canada back in the 1990s. But he stayed loyal to Irish Life.

“I was getting a lot of opportunities in the group to work in different areas, and Irish Life went through a lot of guises over the years. It’s always been an exciting place to work.”

Harney’s father retired as a garda aged 50, with a secure pension in his back pocket. The debate now is how we are going to fund pensions into the future given that people are living longer, while also encouraging those without provision for their old age to begin saving.

Is the state pension sustainable?

“I don’t think it will be there in its current guise. It’s the bedrock of the pension system. The private pension system has accumulated €100 billion for people, which is a huge sum of money, but the vast number of people rely on the State pension. It’s going to become more expensive over time and, as a country, we need to save more over time.”

He is in favour of a system of auto-enrolment – where workers are automatically enrolled in a pension scheme – being introduced here as it has been in many other countries. It has long been talked about without being delivered.

“It will still be a couple of years before it happens. The benefit is that we save more as a country. Starting a pension is an easy thing to put off and you just keep putting it off and off and off.

“The big attraction of auto enrolment is that it kick-starts people and forces them to make the start. It takes away the procrastination. The countries that have introduced it have found no negative reaction to it. People know they have to save for retirement.”

Harney accepts that not all employers are on board and there will be debate about how the money should be collected, who should be opted in, and whether the money should be managed centrally.

“But by and large, there is consensus that it’s needed. I’d say we’ll have a very good debate next year on the design, and start to see options out there. You’d hope that by 2020 a system could be in place.”

Harney admits to having a good pension himself, but Irish Life hasn’t been immune to external forces, with changes to its own defined benefit scheme under negotiation with staff and their unions.

“That’s going to close to future accruals,”he says, adding that it had already closed to new members in 2007. “We’re going through that change at the moment. Lower interest rates and people living longer are creating a lot of pressure on defined benefit schemes. You have a duty of care in these things and you have to make the right decisions, not signing up to promises that can’t be kept. It is difficult but it has to be done.”

Name: David Harney

Job: Chief executive, Irish Life

Age: 47

Lives: Dartry

Family: Married with three boys aged between six and nine

Hobbies: Plays a bit of golf

Something that might surprise: He played Gaelic football growing up. "I was usually stuck in at corner forward. I was too small to be any good."

Something we might expect: He's got a good pension.