22nd Nov 2005 09:00
Allied Irish Banks PLC22 November 2005 Embargoed until 9.00 a.m. 22 November 2005 AIB announces joint venture with Aviva Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) today announces that it has agreedthe terms of a joint venture with Aviva plc ("Aviva") for the manufacture anddistribution of life and pensions products in the Republic of Ireland (the"Transaction"). The joint venture brings together Hibernian Life & Pensions Limited ("HibernianLife & Pensions"), the third largest company in the Irish long-term savingsmarket, and Ark Life Assurance Company Limited ("Ark Life"), the fourth largest.AIB will own an interest of 24.99 per cent in the joint venture and will enterinto an exclusive distribution agreement. Hibernian will own 75.01 per cent ofthe new combined operation. key points • AIB will own a 24.99 per cent interest in the joint venture and will receive a cash payment of up to €205.4 million. • The pro-forma estimated value of the new combined operation as at 31 December 2004 would have been €1,326 million. This value has been determined using those values reported to shareholders at that date, being €467 million for Ark Life on an Embedded Value basis and €859 million for Hibernian Life & Pensions on a European Embedded Value basis. • Sales on an annual premium equivalent basis ("APE") from the combined entities were €226 million on a pro forma basis for 2004. • The joint venture transaction will generate a one off gain on completion of circa. €145 million for AIB. It is anticipated that completion will take place in 2006. Thereafter, a combination of (i) the return on capital released from the Transaction when fully reinvested in the business (ii) the commission income from the continued distribution of products and (iii) share of the joint venture profits is expected to have a broadly neutral effect on earnings per share ("EPS"). • The joint venture will have scale and will be well positioned in the market to benefit from the uplift in the life, pensions and investments market in Ireland. • AIB as Ireland's largest bank will bring to the joint venture its proven distribution capability, with access to over 1.6 million retail customers in Ireland. • Aviva is a leading partner for bancassurance distributors with a reputation for creativity and innovation with a proven manufacturing capability. • AIB will focus on its core expertise of product distribution while acquiring a significant stake in a product manufacturer with multi-channel access. • AIB will have significant input into product design and specification as well as being able to access a full suite of products to meet the needs of its customers. Further Information about the Joint Venture The parties to the Transaction are as follows: (i) AIB, (ii) Hibernian Group plc("Hibernian Group"), and (iii) Hibernian Life Holdings Limited ("Hibernian LifeHoldings"). Under the terms of the Transaction, the parties have agreed to theissue of shares by Hibernian Life Holdings to AIB and to the acquisition byHibernian Life Holdings of the entire issued share capital of Ark Life. On completion of the Transaction, Hibernian Life Holdings will become the jointventure vehicle. AIB will hold a 24.99 per cent interest in the share capital ofHibernian Life Holdings and Hibernian Group will own the balance of the shares.Ark Life and Hibernian Life & Pensions will be wholly owned subsidiaries ofHibernian Life Holdings. A shared services company will be established toservice the operational requirements of each of the joint venture companies. Hibernian Investment Managers Limited will assume the management of policyholderfunds invested through Ark Life as part of the joint venture agreement. AIBInvestment Management Limited ("AIB Investment Management") and AIB FundManagement Limited, which together represent AIB's asset management business inIreland, will continue to focus on the management of institutional funds. Inaddition, AIB Investment Management will be one of a number of alternative fundofferings available to the customers of the joint venture. Hibernian Life & Pensions, Hibernian Life Holdings, Ark Life and AIB will enterinto an exclusive distribution agreement for five years and is renewable forfurther five-year terms up to 2031. On completion of the Transaction, it is intended that a senior executive of AIBwill become a non-executive director on the board of Hibernian Group. The boardof Hibernian Life Holdings will comprise the same members as the board ofHibernian Group. The management team of the joint venture will include BillyFinn, Managing Director of Ark Life, and Tony O'Riordan, currently ManagingDirector of Hibernian Life & Pensions, will become managing director of thejoint venture. Completion of the Transaction is conditional upon the approval of the EuropeanCommission and the Financial Regulator, which it is anticipated will be receivedin the first quarter of 2006. Hibernian Life Holdings will acquire all of the shares in Ark Life from AIB andHibernian Investment Management will acquire the contract to manage thepolicyholders' funds invested through Ark Life in exchange for a 24.99 per cent.interest in Hibernian Life Holdings and a balancing cash payment of €195.4million. A deferred cash payment of up to €10 million is payable subject to thefulfilment of certain performance criteria. Commenting, Donal Forde, Managing Director of AIB Republic of Ireland, said: "Since 1991, AIB has built an extremely successful bancassurance businessthrough Ark Life. This joint venture marks the formation of a new leading playerin the life, pensions and investments market in Ireland. In combining the provendistribution capability of AIB with the international bancassurance experienceof Aviva, we believe that we have devised an innovative formula that willprovide a comprehensive range of quality products to our customers." Commenting, Bryan Jenkins, Chief Executive of Hibernian Group, said: "This is a transformational deal for Hibernian. Joining forces with Ireland'sbiggest retail bank confirms our position as a leading life company in Ireland.This partnership will bring us broader distribution capability, building on thealready strong relationship we have with our broker partners. It provides uswith an opportunity to significantly grow our life business while achievingoperational economies of scale by bringing the two companies together. The dealwill offer customers greater product choice and access to a wider range of fundoptions and managers, which will be available through the AIB network frommid-2006." Under the Listing Rules of each of the Irish Stock Exchange and the UK ListingAuthority, the above transaction, in aggregate, is classified as a Class 2transaction. AIB Corporate Finance Limited, which is regulated by the Financial Regulatorunder the Investment Intermediaries Act, 1995, acted as financial adviser to AIBin relation to the Transaction. Enquiries: Alan Kelly +353 (0) 1 660 0311 Head of AIB Group Investor RelationsRonan Sheridan +353 (0) 1 641 4651 AIB Group Press Officer Notes (1) Ark Life is the wholly owned life assurance subsidiary of AIB. Itdistributes life, pensions and investments products through the AIB branchnetwork. In the year ended 31 December 2004, Ark Life made an Embedded Valueprofit before taxation of €72 million. As at 31 December 2004, Ark Life had anEmbedded Value of €467 million. The gross assets of Ark Life were €4,779 millionas at 30 June 2005. For further information on AIB Group, see www.aibgroup.com/investorrelations (2) Aviva is the world's sixth largest insurance group and the UK's largestinsurance group. It is one of the leading providers of life and pensionsproducts in Europe with substantial businesses throughout the world. Aviva hassignificant experience in bancassurance with sales from this channel accountingfor almost 26 per cent of the group's life and pensions sales for the ninemonths ended 30 September 2005. The group has major bancassurance arrangementsthroughout the world. (3) Hibernian Life & Pensions is part of the Aviva Group. Its life and pensionsproducts are predominantly distributed through the broker market channel. In theyear ended 31 December 2004, Hibernian Life & Pensions made an operating profitof €282 million and had a European Embedded Value ("EEV") of €859 million. Thegross assets of Hibernian Life & Pensions on an EEV were €7,532 million at 31December 2004. -ENDS- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ALBK.LAviva