IRISH Permanent is in the market to buy life assurance operations, according to chief executive Mr Roy Douglas. "We are looking for acquisitions. Our primary focus is in Ireland across the range of retail financial service businesses. Geographically our next port of call would be the UK. The problem is there are not many suitable acquisitions. Our options are open. The issue is finding acquisitions which make sense in terms of what we want to do."

Nothing has been ruled out but an acquisition is not imminent, he added, speaking to The Irish Times ahead of today's annual general meeting.

Irish Permanent's strategy is to provide its customers with the full range of products in the retail financial services sector. The company sees life assurance as a market with strong growth potential and as a natural extension of its existing savings business. "Life assurance is a market for us. It is the longer-term savings market."

The company went into the life assurance business when it bought the Irish business of Prudential Life for £32 million in late 1994. That operation chipped in £9.5 million of pretax profits last year.

Irish Permanent has the funds to make an acquisition. The company is well-capitalised, has capacity to add Tier two capital and could raise money in the market if a suitable opportunity arose. "The change from mutual status to a publicly quoted company means we can now contemplate things of a quantum we could not consider before," according to Mr Douglas.

In its drive to bring retail financial products to customers "in whatever way the customer wants", Mr Douglas sees it as essential that Irish Permanent maintains a number of different distribution channels for all its products. The company has 93 branches backed up by another 90 agents throughout the country. This channel is "close to ideal size" as technology and the buying habits of younger people lead to changes in the way products are distributed.

Some 60 per cent of Irish Progressive's life assurance sales are through brokers with the balance of sales through its direct salesforce and the Irish Permanent network. "Intermediaries will remain an important part of the market for all retail financial products," he predicts.

In its core mortgage and deposit operations, Irish Permanent launched a direct telephone sales operation this year. About 30 per cent of its mortgages come from financial intermediaries including insurance brokers and accountants.

Mr Douglas is not taking all the credit for the strong rise in the company's share price from 180p on flotation in 1994 to 380p today. "Our performance has been good, but when Abbey National came in and took a 9.9 per cent stake that boosted the shares, and the overhang of unclaimed shares seems to have boosted the price too."

The Abbey National boost comes from speculation that the British financial institution may launch a bid for Irish Permanent when its five-year period of protection from takeover under the Building Societies Act 1989 expires in October 1999.

Also, the 15 million unclaimed shares will be cancelled in October, unless they have been claimed by members of the former mutual society. This will automatically boost the company's earnings per share.

Abbey National, which now has a 9.4 per cent stake, "is a passive shareholder, very supportive of the board and management", Mr Douglas said. "We are looking at a number of areas where we could co-operate on a business level. We won the contract to provide administrative services and computer support to Abbey National's subsidiary Scottish Mutual in the International Financial Services Centre. That is the first-tangible evidence of our business link."

Other areas under examination include the use of Abbey National's automated teller machines in Britain and co-operation on treasury operations. So far an examination of Abbey National's products has not turned up "anything we could mirror here".

Asked about executive salaries at Irish Permanent, Mr Douglas said the company's remuneration and compensation committee sets the salary packages of senior executives. It is company policy that executive salaries should be in the upper quartile of salaries paid in the financial services sector, he said.

"Our board has a strong view that it wants performance and it is prepared to pay for it. It sets aggressive performance targets for executives and,, pays people to get that performance.

On his own compensation - in 1995 Mr Douglas was paid £269,503 and Irish Permanent made pension contributions of £71,836 for him - he said the package was designed to attract him into the company and to give him the incentive to achieve certain objectives. "The package is heavily weighted towards performance," he said.

Mr Douglas joined the company in June 1991 from AIB where he was group general manager of the bank's British operations. His 1995 package consisted of a basic salary of £205,020, fees of £20,400, benefits including a company car worth £17,563 and an annual bonus of £26,520. While his basic salary rose by 2 per cent, the performance related bonus paid in 1995 was well short of the £86,000 paid in 1994.

Does this mean that the board was not happy with his performance in 1995, the year Irish Permanent's pre-tax profits increased by 21 per cent to £42.4 million?

"The bonus paid in 1995 reflects profits earned in 1994," Mr Douglas explained. Despite a 20 per cent rise in pre-tax profits for 1994, the growth was below the record 35 per cent profit growth for 1993, he said.

"Every year the board sets a range of largely financial targets such as pre-tax profits, cost containment . . . The targets are set at the beginning of the year so I know clearly what I have to achieve.

If I don't make the target my bonus just doesn't happen. In 1994 high objectives were set and we didn't deliver. Though the performance was good, the previous year was a record and we were down on that," Mr Douglas said.

In addition to his annual bonus incentive, Mr Douglas has share options under a longer-term incentive scheme. When Irish Permanent was floated, Mr Douglas was given options to acquire 366,000 company shares at the 180p flotation price - but the options can only be exercised if the company meets specific earnings per share growth targets over a three-year period.

"The earliest I could exercise the options will be October 1997 and I will consider then what I will do." At today's price, exercising the options and selling the shares would give Mr Douglas a profit of £732,000.

HIS share option scheme replaced a long-term cash bonus scheme which operated when Irish Permanent was a mutual building society. Under this scheme, which has been frozen since the flotation, eight senior Irish Permanent managers including Mr Douglas will share payouts of £1.633 million with accrued interest next year. Payments will be made if performance targets for the years 1992 to 1996 are met.

Asked about the payment of fees of £84,660 to non-executive chairman Mr John Bourke last year, Mr Douglas said the role of the Irish Permanent chairman was "very important". Mr Bourke spends an average of three days a week at the company, he said, adding that "this payment is all he gets". Mr Bourke has "no pension from Irish Permanent, no company car or other perks".