Consolidation in the insurance sector is expected to gather pace this year while international merger and takeover moves outside Ireland will change the line-up in the Irish market. And the move into the Irish life assurance market this year by British company, General Accident, should intensify competition.
One of the most interesting international moves in 1997 was the hostile bid for French insurer Assurance General de France (AGF) by the Italian company, Generali, and the white knight £7 billion counter bid from the German company, Allianz.
The situation played out at year end with a deal between Allianz, Generali and AGF giving Allianz control of AGF (subject to regulatory approvals).
The deal will cause changes in the Irish market. The impact could be confined to a merger of the larger AGF operations in Ireland with Allianz's small Cornhill business.
But the takeover of AGF would require Irish Life to assess its 30 per cent stake in AGF-Irish Life - the holding company for AGF's Irish businesses Church and General and Insurance Corporation.
Irish Life will have to decide if its AGF-Irish Life holding is a strategic stake in line with its corporate objective of broadening its range of financial products or just an income stream. It is not clear yet what Allianz's attitude would be to the Irish operations. Will it want to stay in the small Irish market and, if it does, will it want to retain a significant partner?
In the Irish market one of the most interesting moves last year was Bank of Ireland's takeover of New Ireland, a sign that the bank assurance drive will continue.
In both the general and life businesses, smaller operators will remain under intense pressure in a competitive and difficult market where significant scale or clear niche positioning will become more important in the battle to keep customers and win new ones.
Building scale is seen as important to get economies of scale and returns from investment in information technology and to deliver cost-effective products and services.
But in an overcrowded market with intense price competition, building scale is difficult. In the general insurance market, the top five companies have about 70 per cent of the market while there are a large number of small companies with shares of less than 5 per cent.
In the life market where 28 companies compete, the top five companies account for 58 per cent of premium income. Only four of these 28 companies are predominantly Irish-owned.
Smaller companies are seen as at risk, or, as possible takeover targets.
Some of the consolidation moves in 1997 reflected decisions by international assurers to pull out of the relatively small Irish market. These included the French group UAP which sold Irish National to Eagle Star and New Ireland to Bank of Ireland - in France UAP merged with AXA to become Europe's largest insurer.
Eureko, which owns Friends Provident and Celtic, acquired the direct operator Touchline as French insurer GAN left the Irish market.
AMEV was sold by its Dutch/ Belgian owners, Fortis, for £13 million to Royal & Sun Alliance - they had merged in late 1996 to form Royal Sun Alliance.
Dutch group ANSVAR pulled out of the market making an arrangement with Guardian PMPA that it would offer renewals to clients. Other consolidations included the takeover by Hibernian of the commercial lines business of Celtic from Eureko. Hibernian signed a strategic agreement with Bank of Ireland to underwrite all Premier Direct's insurance business, replacing Cornhill from January 1998.
Entrepreneur Sean Quinn set up a direct general insurance business early in 1997.
After the collapse of some investment intermediaries owing funds to customers, the Central Bank was appointed to take over the regulation of this sector. Towards the end of 1997 there were strong hints from Government sources that the Bank could be appointed to take over regulation of all the operators in the financial services sector.
The blurring of the lines between traditional savings products and life assurance products will continue. Depending on the product, life companies can be in competition with banks, building societies, the Post Office credit unions and health insurers for customers.
