Financial companies have had a stunning start to the year, benefiting from a whole host of positive factors, but this observer is at a loss about why Irish Life has performed so strongly, with the share currently up 14 per cent on the turn of the year at a 460p alltime high.

The reluctance of some senior executives to invest in the company for the long-term and instead take a quick profit from share options is not a positive sign, while the group's investment performance is poor.

The group's current high standing in the market can probably be explained by expectations that the new chief executive, Mr David Went, will ring the changes that are required on the life and pensions side of the business. New chief investment officer, Ms Sileanne Wootton, is expected to make further changes to improve what has been a poor investment performance in recent years.

However, Irish Life's failure in the bidding for New Ireland is a blow to its growth prospects, as it would have given Irish Life a probably unchallengeable leadership in the Irish market. The New Ireland deal, however, makes Bank of Ireland/Lifetime into a major challenger, especially in the pensions market.

But Irish Life should still have a major role to play when the inevitable rationalisation in the life and pensions industry gathers pace. At some stage, the fringe players will be winkled out and Irish Life should be at the head of the bidding queue.

However, if the group's performance does not improve substantially in the next couple of years, it could itself become a takeover target from an overseas asssurer looking for an immediate large exposure to the Irish life and pensions market.

The onset of EMU will undoubtedly result in Irish financial services companies coming under the microscope, and Irish Life, Irish Permanent, Anglo Irish, the soon-to-be floated First National and even the two big banks will not be immune to takeover moves from outside.