Since New Ireland sold its general insurance operation, Irish National, earlier this year, there has been market speculation that the life assurance operation would be sold. The company is understood to have appointed corporate advisers. Market sources said a "sweetheart deal" behind closed doors for the company was unlikely. The sale of Irish National has made New Ireland more widely attractive on the market.

With the general insurance arm attached, the Central Bank would have been unlikely to approve the takeover of New Ireland by a bank or a building society because of the potential for heavy losses on general insurance business. A bidding process would generate a strong premium on the life assurance company which has a current market value, based on its share price, of more than £170 million.

In addition to Irish Life, Irish Permanent which owns the Irish Progressive life assurance operation, Canada Life and Eagle Star have been mooted as potential bidders. AIB, which owns Ark Life, and Bank of Ireland which own Lifetime, may be interested in expanding their stakes in the life assurance market. A number of insurers, including Hibernian and Norwich Union, said yesterday that they would be interested in looking at New Ireland which has a significant stake of the market.