Irish Life & Permanent (IPM.I) has suspended the sale of its life insurance arm and the Irish government will likely have to put 1 billion euros into the bancassurer to meet tough new capital requirements under an EU-IMF bailout.
Canada Life had been the lead candidate to buy the business, but the price and economic turmoil killed all bids. With a 4 billion euros capital hole, the bancassurer had put Ireland's largest life insurer up for sale earlier this year.
Ireland's government has already poured 2.7 billion euros into Irish Life & Permanent, and was relying on the sale of the life insurance arm to avoid having to use more public funds to shore the group up.
Irish Life & Permanent will separate its life business and banking arm by March 2012.