Sources close to the bank insisted that the Aviva tie-up was not “a done deal”. At the company results presentation in April, the bank said no decision had been made on the future of Ark Life, and the bank was considering “a number of options”.
Aviva is regarded as the strong favourite to land a deal, however, and life market sources believe a transaction is close to reaching heads of agreement stage. It is understood the race to acquire Ark is now a straight fight between Eureko and Aviva.
Under the Aviva deal, it is proposed that Ark Life would remain a tied agent of AIB and its products would still be sold in AIB branches. Ownership of Ark, however, would either pass to the Aviva unit Hibernian Life, or be held jointly by the two institutions. A tie-up with Hibernian would also strengthen Ark Life’s pension division which is regarded as an underperformer in a buoyant market.
Hibernian overtook Ark Life as the third largest player in Ireland’s life assurance market last year as the AIB unit’s share slumped to 9%. Bank of Ireland’s Lifetime and Irish Life head the market.
In 2004, AIB pulled out of a deal to purchase the Irish operations of Eagle Star, which is the fifth largest player in the market.
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Eureko’s approach is a statement of its intent in the Irish market, where it ranks as the seventh largest player. Friends First has 220,000 Irish customers. Rabobank, which owns ACCBank and recently entered the deposit market here, has a 37% stake in Eureko. Rabo merged its insurance unit Interpolis with Eureko’s Achmea in April. Eureko recently raised €500m in a debt fundraising for “general corporate purposes” and has flagged the possibility of floating on the stock market.
The sale of Ark Life would put a cloud over the future of AIB Investment Managers (AIBIM), the €10 billion asset manager that has propped up investment performance tables. AIBIM manages about €2.5 billion on behalf of Ark Life. The bank’s own pension fund accounts for another €3.4 billion of assets under management.
Ark Life made after-tax profits of €63m last year, accounting for less than 2% of AIB’s group profits. However, any deal will involve a major strategic move for the bank. The Ark Life sale, which has been under negotiation for close to a year, is likely to be one of the first strategic announcements to be made by Eugene Sheehy, AIB’s new chief executive.