Great-West Lifeco was always keen to return to the fray once the Irish economy showed signs of improvement, says chief executive Allen Loney

Allen Loney enjoyed the mild February weather in Ireland this week. The Great-West Lifeco’s president and chief executive lives in Toronto, Canada where temperatures can drop to minus 15 degrees at this time of year.

It’s even colder in Winnipeg, where Great-West Lifeco has a major operational base.

“When I go there I generally only ever spend about 60 seconds at a time outside,” he jokes at our meeting in the Four Seasons hotel in Ballsbridge.

“Just going from the car into the office and that type of thing. You don’t hang around outside for too long in those temperatures.”

Loney has also been basking this week in the warm glow from his company’s €1.3 billion acquisition of Irish Life, which was announced on Tuesday.

The Government is delighted to have a large, credible overseas financial group investing in Ireland.

Auction process

At the press conference to announce the deal, the Minister for Finance Michael Noonan said it was a signal that Ireland is once again open for business – a message he reinforced to various investors and analysts at a series of meetings in London this week.

The top brass in Irish Life is also enthusiastic about the deal. It removes them from state ownership and provides them with the backing of a company with a stock market value of about €19 billion, and a AA credit rating.

The deal was a long time in the making.

In September 2011, Great-West Lifeco joined the auction process for Irish Life. It was one of 51 interested parties.

The company made an offer to the Government of €1.1 billion but pulled out of the deal in November 2011 when Loney and his colleagues got the jitters about the euro financial crisis.

“It was pretty straightforward really. During November , the temperature in the EU and the euro zone, and particularly in Ireland, too, rose to the point where everyone was wondering what’s going to happen,” he says.

“That’s a concern to any financial institution that’s entrusted with its policyholders’ money.

“I felt I couldn’t continue to recommend to the board that we went forward [with the deal] so we withdrew. But we withdrew on good terms.”

According to Loney, Government officials were getting “similar messages” from other parties involved in the auction process.

“So that was that but we were always keen to return to the fray just as soon as conditions became calmer and that frankly happened quicker than we could ever have expected.”

Great-West Lifeco approached the Government at the end of November last year to recommence talks on an acquisition. It carried out extensive due diligence before Christmas, with negotiations on a price beginning in January.

Not that Loney is totally convinced that the worst of the financial crisis is completely behind us.

“We don’t believe that it’s absolutely impossible for things to regress but most people believe that Europe will not now fall apart, that the euro zone will be sustained.”

Some commentators believe the Canadians have got Irish Life for a steal. The Government is getting back exactly what it paid for Irish Life in June last year to what was the then Irish Life Permanent plc plus a €40 million dividend.

Irish Life has remained profitable through the credit crunch, has a 30 per cent market share and, in Loney’s own words, is the “dominant brand” in the sector here. It is well placed to benefit when the economic recovery gathers momentum.

“It’s a fair price,” is how Loney describes the sum to be paid.

“Time will tell whether it’s a steal or not. Our experience is that when you do an acquisition and look back on it in two or three years when the dust has settled, you almost forget the price.

“The issue is did it work, did the companies meld together?

He says the price “doesn’t require us to achieve unbelievable things to justify it”.

“Sometimes people pay prices . . . they discount everything good that could ever happen and don’t take account of any negatives,” he adds.

Loney points out that there still are “worrying” aspects to the performance of the Irish economy.

“We haven’t assumed that it will roar forward but have assumed it will achieve a little bit of headway . . . 2 per cent a year, that type of thing. It’s not back to the glory days .”

Market leader

Loney and Great-West Lifeco are no strangers to the Irish market. He was born in Lurgan, Co Armagh in 1945 and spent much of his early years as an actuary with Canada Life in the UK, travelling to the Republic on company business.

Great-West Lifeco owns Canada Life, which has operated in Ireland since 1903 and has a 5 per cent market share.

“That was helpful,” Loney admits. “The model of Irish Life is similar to ours. It’s not predicated on taking high risks. That chimed very nicely with our method of operation.”

Acquiring Irish Life is undoubtedly “transformational” for the Canadian multinational’s business here. It will make it the market leader here overnight.

But it is probably worrying to staff at Canada Life, who now find that they will be merged into the larger Irish Life business and will have to move to its Abbey Street head office.

An unspecified number of voluntary redundancies will be delivered by the merger, as Great-West Lifeco seeks annual cost savings of €40 million.

Loney met about 400 Canada Life employees in Dún Laoghaire on Wednesday to brief them about the deal.

“It was a very good meeting . . . dealing with what’s going to change. We’ll be fair with our staff and there will be equality of opportunity,” he says.

Loney is also confident that the merged business will grow over time. Two and two will add up to more than four, he says. “The whole business will grow and I expect that some of the other activities that we carry out here in Dublin – the reinsurance, the German operation, the information systems support for Europe – will grow too.”

Loney wouldn’t reveal Canada Life Ireland’s financial performance but acknowledged that it’s been “tougher sledding” since the economy crashed in late 2008.

“Our business has been fairly persistent and we have had no investment blow-ups. It’s profitable but it’s making less profit than it was.”

Why has Canada Life only got a 5 per cent market share even though it’s been in the market for 110 years. Irish Life wasn’t founded until 1939?

“We’ve some pretty strong competitors here. To be a life insurance company, you have to have a basic platform and machinery, and in the modern world that costs a lot of money. That was an issue and has been for several years now.”

Was it a case that the company had to double its bet here or leave the table?

“We never really thought about the latter. We’re here for the long term and we don’t turn tail and run easily.”

With Irish Life’s chief executive Kevin Murphy due to step down when the deal closes in July, speculation is mounting as to who will run the merged businesses.

“We haven’t made our minds up yet,” Loney says, adding that it was a “possibility” that someone might be brought in from Canada.

New products

“We’ll make a decision on that pretty quickly. For sure there will be [Canadian] representation on the board of Irish Life.”

Irish Life has a 30 per cent stake in insurer Allianz Ireland and a 49 per cent holding in fledgling health insurer GloHeath.

He says the Allianz investment has “performed pretty well in the past couple of years”.

On GloHealth, he says: “At Great-West, we dont’ really understand the Irish health [insurance] market but we would intend to learn more about it.

“We are a big player in the health market in Canada and that would be a business we would be interested in. We’ll see how it eventuates.”

Will Great-West Lifeco bring new products to Irish Life?

“There’s one product that Canada Life has been reasonably successful with recently and that’s the guaranteed minimum withdrawal benefit product.

“I’ve heard the sales leaders in Irish Life express enthusiasm for that product. That’s a possibility.”

It’s no exaggeration to say that Loney is a vastly experienced industry executive.

He grew up in Lurgan and went to boarding school in Northern Ireland before earning a scholarship in mathematics at Cambridge University.

His father was a headmaster and his mother a housewife. After university, Loney thought about becoming an actuary.

“I only had a vague notion of what an actuary was but it seemed like reasonable remuneration,” he explains.

He joined Commercial Union (now part of Aviva) before moving to Canada Life in 1971 at its London office.

In 1981, he moved to a senior position within the company in Toronto and, six years later, he was dispatched to Atlanta, Georgia to run its US business.

After 11 years there, he returned to Toronto and was one of the lead executives in Canada Life’s demutualisation.

“Those were exciting days. That was almost a two-year programme,” Loney recalls.

“It went very well and was very challenging and interesting work.”

In 2003, Great-West acquired Canada Life and five years later, Loney got a tap on the shoulder to lead the global business.

“I was very honoured actually because I wasn’t expecting it. It’s been a wonderful experience ever since, although it would have been nice not to have had the financial crisis, which has been pretty much non-stop.”

He retains a hint of a Northern accent, mixed with a soft North American twang.

Tall and broad shouldered, Loney is an avuncular character. He will be 68 later this year and jokes about his shadow growing longer with age.

On the topic of retirement, Loney ponders for a few moments before answering.

“What will I say about that. I’ve got lots of things I want to do with my life. I will retire from the business for sure. You can’t keep going forever.

“It’s 46 years since I started and it’s getting close to enough.”

CV Allen Loney

Name: Allen Loney

Job: President and chief executive of Great-West Lifeco

Why in the news?Has just agreed to buy Irish Life from the Government for €1.3 billion

Age: 67

Lives: Toronto, Canada. Also has a home in Italy.

Family: Married with three adult children.

Something we might expect: He's a big fan of Irish rugby.

Something that might surprise: He has a keen interest in streetcars, trams and trains.