Irish Life & Permanent has agreed the sale of its City of Westminster closed life fund in the UK to British life insurer Chesnara for £47.5 million (€70 million).
The price is broadly in line with earlier indications and represents a discount of 17 per cent to the fund's embedded value at the end of 2004. Chesnara confirmed the agreement yesterday.
The deal is conditional on the approval of its shareholders and the Financial Services Authority in the UK. The sale is expected to close in June.
City of Westminster Assurance is a wholly owned subsidiary of Irish Life & Permanent and is held through Irish Life (UK) Holdings plc. Irish Life acquired the group in 1993. The book was closed to new business in 1995 and in 1996 the business of Irish Life's UK branch was integrated into the company.
Last year it contributed €10 million to the group and was valued at €84.6 million, after paying a €6.5 million dividend to Irish Life & Permanent. The company has €1.1 billion in funds under management and Irish Life Investment Managers will continue to manage these funds.
Commenting on the deal yesterday, Irish Life & Permanent group finance director, Peter Fitzpatrick, said the disposal was in line with the group's strategy of focusing on its Irish operations.
"We've been looking at our strategic choices for the company for some time. While we have been happy with the financial performance of the business, it had no long-term strategic significance for us and therefore it was incumbent on us to explore other options."
Mr Fitzpatrick said the company was very happy with the deal, which it believes meets the needs of both policyholders in City of Westminster Assurance and its own shareholders.
Chesnara chief executive, Graham Kettleborough, said it was an important first strategic step for the company. "This book will run for twice as long as our existing fund and will allow us to continue to pay out dividends for much longer," he said.
Analysts expect that Irish Life & Permanent will write off its earnings from this sale as it is less than its book value. The group should take a hit of about €14 million, according to Merrion Stockbrokers.
The book contributed €10 million to group earnings last year. The fund is expected to continue to provide an income to Irish Life as it is continuing to manage it.
