Irish Life & Permanent has reached agreement to sell its last remaining business in the United States, the Guarantee Reserve Life Insurance company, for $121 million (€112 million), some $55 million below its book value.
The company, which is based at Calumet City in Illinois, had been valued on Irish Life & Permanent's books at $176 million but had delivered a disappointing performance in recent years.
It is to be purchased for cash by Reassure America Life, a subsidiary of Swiss Re Life & Health America in the second quarter of this year.
Guarantee Reserve's value to the group was written down further last year. In 2000 it appeared on its books valued at $208 million.
Irish Life & Permanent does not expect to have to pay any tax following the disposal and the proceeds will be included in its 2003 accounts. In a statement the Irish life assurance and banking group said the purchase price reflected the "strategic significance" of the sale for the group and the depressed market conditions.
It has been trying to sell the business for some time as part of its efforts to focus completely on expanding its business in the Republic. In 2001, Guarantee Reserve was responsible for most of the €2 million in losses recorded by the group in the US.
Last year, it sold its two other US businesses, Interstate Assurance and First Variable, based in Chicago, for €296 million.
Guarantee Reserve was operating in the lower margin end of the retail insurance business where there are few competitors.
Under the terms of the deal there is a provision for an adjustment to the purchase price to reflect movements in capital and any surplus at the company at the date of completion, according to Irish Life & Permanent.
The company is being advised by Salomon Smith Barney and Dewey Ballantine.
The group will announce results for 2002 next week. Some analysts have reduced their earnings forecasts for Irish Life & Permanent to reflect the impact of weak equity markets on the group.
Profits in the first half of 2002 plunged by 25 per cent to €95.2 million after a €55 million loss on the equity markets affected its earnings.
Some €39 million of the loss was associated with the drop in unit-linked fee income. The group also recorded a €16 million loss from Irish Life & Permanent's associated company, Allianz-Irish Life.
