RNS Number:3624J
Irish Life & Permanent PLC
07 March 2005
IRISH LIFE & PERMANENT PLC
Preliminary Results
12 months to 31 December 2004
Financial Highlights
For the year ended 31 December 2004
* Pre-tax contribution Euro400.2m (2003: Euro365.2m) +10%
* Total profit after tax and exceptional items Euro411.2m (2003: Euro261.8m) +57%
* Basic earnings per share 156.4 cent (2003: 99.5 cent) +57%
* Total earnings per share 152.5 cent (1) (2003: 97.2 cent) +57%
* Total contribution earnings per share 120.0 cent (1) (2003: 111.6 cent) +8%
* Total dividend per share 55.0 cent (2003: 51.0 cent) +8%
Banking
New Loans issued Euro7,980m +33%
Loan Book Growth Euro3,909m +23%
ROI Mortgage New Business Euro4,949m +30%
ROI Mortgage Book Growth Euro2,463m +20%
Bancassurance Sales (2) Euro54.6m +11%
Life Assurance
Life & Investment New Business (3) Euro460.0m +44%
Value of New Business3 Euro54.8m +20%
Final Dividend per Share 38.5 cent
Total Dividend per share 55.0 cent +8%
Shareholders Funds per Share (1) Euro8.77 (2003: Euro7.81)
Total Tier 1 Capital Ratio 11.2% (2003: 11.1%)
Life Solvency Cover (times) 1.7 (2003: 1.8)
(1) Including shares held for the benefit of life assurance
policyholders
(2) Unless otherwise indicated all life and pensions sales are
expressed on a weighted average premium equivalent basis
(3) Republic of Ireland and UK
Financial Highlights
For the year ended 31 December 2004
Summary of Results
The total profit after tax for the year ended 31 December 2004 is set out
below:-
2004 2003
Eurom Eurom
Pre-tax Contribution before Short-term Investment
Fluctuations and Other Charges/Credits
Republic of Ireland / UK Operations
Banking & Other Activities 122.5 128.8
Life Assurance Activities 215.1 189.7
Share of Associated Company 62.6 45.2
Pre-tax Contribution - ROI/UK 400.2 363.7
Contribution - US - 1.5
Total Pre-tax contribution 400.2 365.2
Short Term Investment Fluctuations
Life Assurance Activities 26.9 27.5
Share of Associated Company 2.6 (2.0)
Other Charges/Credits
Goodwill Amortisation (11.6) (13.8)
Exceptional Items 21.1 (47.1)
Economic Assumption Changes 46.6 (20.2)
Profit before Tax and Minority Interest 485.8 309.6
Government Levy (12.2) (12.2)
Taxation (61.4) (35.9)
Minority Interest (1.0) 0.3
Total Profit after Tax 411.2 261.8
Commenting on the results David Went, Group Chief Executive, said:-
"The group's performance in 2004 was very satisfactory. On the back of the
booming Irish economy, with continued job creation and record housing demand
being particularly significant for our business, sales growth in all our
business lines was extremely strong. New lending was up 33%, the value of life
sales increased 17%, while investment inflows were ahead 23% to Euro1.6bln. Despite
margin pressures in the marketplace this strong sales growth, allied to tight
cost management with costs across the group flat on 2003, led to a very
satisfactory 10% growth in operating contribution which translates into 19%
growth on a comparable adjusted basis."
Commentary on Results
Accounting Policies
The accounting policies applied in the financial statements for the year ended
31 December 2004 are unchanged from the policies adopted in the 2003 annual
report.
The group, in line with all companies listed in the European Union, will be
required to prepare its financial statements in accordance with International
Financial Reporting Standards ("IFRS") from 1 January 2005. IFRS represents a
significant change from Republic of Ireland generally accepted accounting
policies (GAAP).
The group has a project in place to ensure compliance with IFRS for 2005. This
project, which is group wide, has examined the impact of the standards,
including the required changes to GAAP and the group's accounting policies, and
has ensured that all the necessary system and process changes are completed on
time.
Notwithstanding the adoption of IFRS from 2005 the group will continue to
provide embedded value results in respect of its life assurance activities, by
way of supplementary information, and will continue to manage its business on
this basis.
Group Overview
Total profit after tax and exceptional items for the year ended 31 December 2004
was Euro411.2m, a 57% increase on the Euro261.8m reported in 2003. Pre-tax profit
after exceptional items in 2004 was Euro485.8m compared to Euro309.6m in 2003, an
increase of 57%.
The 2004 outcome includes an exceptional profit of Euro21.1m, almost all of which
relates to a profit achieved on the disposal of Irish Estates Management
Limited. The outcome also reflects the positive impact resulting from changes to
the economic assumptions used in calculating the life assurance embedded value
which amounted to Euro46.6m. The latter changes arise from a reduction, from 8% to
7%, in the risk discount rate used to compute the embedded value in Ireland.
This reduction, which allows for underlying movements in euro gilt rates and the
corresponding changes in other economic assumptions, includes a 35 basis point
decrease in the risk element of the discount rate on foot of increased solvency
margin provisions and changes to the investment return assumptions on the assets
backing solvency, the impact of which is reported as an operating assumption
change. The corresponding 2003 results included an exceptional loss of Euro47.1m,
principally relating to a loss on the disposal of the group's remaining US
operating company. In addition in 2003 medium term interest rates had increased
resulting in a negative impact from economic assumption changes of Euro20.2m in
that year.
The continued improvement in investment markets in 2004 resulted in net positive
short-term investment fluctuations in 2004 of Euro29.5m (2003: Euro25.5m). This gain
principally represents the out-performance of investment markets as against the
investment return assumptions used in computing the embedded value of the
group's life assurance business.
The total pre-tax contribution increased 10% from Euro365.2m to Euro400.2m. The main
drivers behind this increase were the 13% rise in the contribution from life
assurance activities together with a significantly increased contribution from
the group's general insurance associate. The 2003 banking result included the
benefit of Euro26m of once-off gains resulting from a repositioning of the bank's
investment portfolio and accordingly the pre-tax contribution from the group's
banking and other activities fell from Euro128.8m in 2003 to Euro122.5m in 2004.
Adjusting for this item profits from banking and other activities were ahead
19%, driven by strong growth in new mortgage lending.
The contribution from the group's life activities increased 13% to Euro215.1m from
Euro189.7m with the value of new business ahead 20% to Euro54.8m (2003: Euro45.7m) on
foot of a 44% increase in life and investment sales to Euro460.0m.
The contribution from the group's holding in Allianz (Ireland), a general
insurance business, increased to Euro62.6m from Euro45.2m in 2003 reflecting a strong
underwriting result in favourable market conditions.
Banking & Other Activities
2004 2003
Eurom Eurom
Banking
Net interest income 349.3 331.9
Other income 12.7 18.7
Investment gains - 26.0
362.0 376.6
Operating & Corporate Expenses (232.4) (236.2)
Provision for bad and doubtful debts (9.3) (13.4)
Banking 120.3 127.0
Property management 2.2 1.8
Total Pre-tax Contribution 122.5 128.8
The pre-tax contribution generated by the group's banking and other activities
was Euro122.5m compared to Euro128.8m in 2003. The pre-tax contribution of the banking
activities was Euro120.3m compared to Euro127.0m in 2003. The 2003 outcome included
capital gains of Euro26m realised on the repositioning of part of the group's
investment portfolio as euro interest rates fell in the first half of 2003.
Excluding these capital gains, which are once off in nature, the underlying
level of contribution growth from banking and other activities was 19%
reflecting strong growth in new mortgage lending and a reduction in
administrative expenses.
Net interest income increased 5% to Euro349.3m from Euro331.9m reflecting strong
growth in the level of new lending, with asset balances growing 23% compared to
year end 2003, which offset the negative full year impact of reductions in euro
interest rates in 2003 on the bank's retail deposit spreads.
The net interest margin for the year was 1.40% compared to a margin of 1.63%
reported for the full year 2003. Reductions in euro interest rates in 2003 led
to downward pressure on retail margins in 2004 due to the impact of interest
rate floors in the retail deposit book. This impact was most pronounced in the
first half of the year resulting in a margin of 1.44% reported at the interim
stage. In addition the growth in new lending business led to a requirement to
fund asset growth largely in the wholesale markets which in turn led to a
dilution in the reported margin.
Total loans and advances to customers at 31 December 2004 were Euro21.0bln, an
increase of 23% over balances outstanding at year end 2003. Total gross new
lending was Euro8.0bln, 33% ahead of 2003. The growth in balances over the
principal business lines was as follows:
2004 2003 Growth
Eurom Eurom %
Mortgage Lending - ROI* 14,521 12,058 20
Consumer Finance 1,365 1,285 6
Commercial Lending 1,243 1,167 7
17,129 14,510 18
Mortgage Lending - UK (Stg#)* 2,755 1,844 49
Total Lending - eurom 21,035 17,126 23
*including securitised mortgages
Mortgage demand in the Republic of Ireland continued to be strong throughout
2004. Total gross new mortgages issued were Euro4.9bln, a 30% increase on the
Euro3.8bln issued in 2003. Residential mortgage balances outstanding increased 20%
to Euro14.5bln compared to Euro12.1bln at 31 December 2003.
In the UK mortgage market demand was strong in the "buy to let" sector in
particular and mortgage balances in Capital Home Loans, the group's centralised
mortgage lender which specialises in this area, increased by 49% to Stg#2.8bln
from Stg#1.8bln in 2003. Gross new mortgages issued in 2004 were Stg#1.3bln, an
increase of 47% over the 2003 level of Stg#0.9bln.
New commercial loans issued increased 76% to Euro353m from Euro201m in 2003 as the
group refocused its activities in this area. The commercial book balances
increased 7% to Euro1,243m from Euro1,167m. The consumer finance portfolio increased
6% to Euro1,365m from Euro1,285m on foot of new business issues of Euro748m (2003:
Euro731m).
Customer account balances outstanding at 31 December 2004 were Euro11.9bln compared
to Euro10.1bln in 2003 with particularly strong growth experienced in commercial
deposits and also current account balances which were ahead 17% year on year.
Other operating income fell to Euro12.7m compared to Euro18.7m in 2003 as fees and
commissions payable, which are offset against other income, increased to Euro40.7m
from Euro34.9m, principally as a result of the increased volumes of new residential
mortgages.
The reported other operating income includes no contribution from bancassurance
sales, the earnings from which, in line with the group's accounting policies,
are included in the pre-tax contribution reported within the group's life
assurance activities. Sales of life and pensions products within the banking
division in 2004 were Euro54.6m, an increase of 11% over 2003 (Euro49.3m). The pre-tax
contribution achieved on the bancassurance book of life business in 2004 was
Euro36.3m, 13% ahead of the Euro32.0m achieved in 2003.
During 2004 the bank continued to focus upon and invest in programmes to improve
branch and head office efficiency, manage costs and improve customer service
levels. As a result of these initiatives operating costs (excluding corporate
costs) in 2004 at Euro225m were 1% below the 2003 level of Euro227m. Having regard to
the underlying level of salary inflation in the Irish economy this represents
the achievement of real cost reductions in the order of 5% to 6%. Cost
management will continue to be a key focus within the bank in 2005 and beyond.
The charge for bad and doubtful debt provisions in 2004 of Euro9.3m compares to
Euro13.4m in 2003. The reduction reflects the fact that, in light of forthcoming
accounting changes under IFRS, combined with the conservative level of
provisions held at the end of 2003, the bank did not increase the level of
general provisions held against the loan portfolio in 2004. Credit quality
within all of the group's loan portfolios remains robust and bad debt loss
levels are insignificant. Provisions held against the portfolios are
conservative with a reserve ratio of 50 basis points, compared to an arrears
ratio of 19 basis points.
The contribution from other activities of Euro2.2m represents profits for the year
from Irish Estates Management, the property management subsidiary, the sale of
which took place in December 2004.
Life Assurance Activities
2004 2003
Eurom Eurom
In-Force Business
Unwind of Discount Rate 99.7 89.1
Experience Variances 8.0 17.5
Horizon Development Expenditure (4.6) (11.3)
Operating Assumption Changes - Horizon 4.6 11.3
- Other 39.9 26.2
Expected Investment Return 4.2 4.9
Other Income 8.5 6.3
Pre-tax Contribution 160.3 144.0
New Business 54.8 45.7
Total Pre-tax Contribution 215.1 189.7
The total pre-tax contribution increased by 13% to Euro215.1m in the year ended 31
December 2004 from Euro189.7m in 2003 reflecting an 11% increase in the
contribution from the in-force business and a 20% increase in new business
profits.
The main component of the increase in contribution from the in-force business
was the earnings from the unwind of the discount rate which increased by 12% to
Euro99.7m (2003: Euro89.1m). This was due to the combination of growth in the in-force
book together with an increase in the risk discount rate at 31 December 2003.
Experience variances were positive at Euro8.0m in 2004 compared to Euro17.5m in 2003.
The reduction is due to an adverse persistency experience in 2004 in respect of
certain pension products together with the impact of higher staff
pension-related costs.
The retail business continued to make considerable progress on the
implementation of the Horizon project in 2004. The core objective of this
project is a fundamental redesign of the business processes to achieve
operational efficiencies and leveraged use of newer technology. All new business
is now being processed on the new system with migration of older policies on to
the system well under way and due for completion in 2005.
In the year ended 2004 development expenditure on the Horizon project of Euro4.6m
was written off in the embedded value as additional synergy gains arising from
the deployment of the technology were realised during the year. The capitalised
impact of these synergy gains, a positive Euro31m, was recognised as a change in
operating assumptions in 2004. This more than offset the capitalised costs of
achieving the synergies (Euro26.4m) which were also taken through the embedded
value as an assumption change so that the net assumption change impact was a
positive Euro4.6m.
The operating assumption changes of Euro39.9m principally relate to sustained
improvements in mortality experience which have now been capitalised. The
corresponding changes in 2003, amounting to Euro26.2m, arose mainly from a
reduction in the expense base following the disposal of the group's industrial
branch business in 2002. The operating assumption changes also include the
impact of increased solvency margin requirements under the Solvency 1 Capital
Regulations and changes in the assumed return on solvency assets. The negative
impact of these changes (Euro30m) has been offset by the reduction of 35 basis
points in the risk element of the discount rate. This reflects the reduced risk
associated with the business given the higher level of capital now required by
the regulations to support it.
The expected investment return is calculated by reference to the assumed
long-term investment return for equities and property included within the
embedded value combined with the actual earnings on short-term cash. The
expected return of Euro4.2m in 2004 compares to Euro4.9m in 2003.
Other income, which primarily represents the net contribution from subsidiary
companies, Cornmarket and Irish Progressive Services International, increased to
Euro8.5m from Euro6.3m in 2003.
The contribution from new business in 2004 increased 20% to Euro54.8m compared to
Euro45.7m in 2003. The principal reason for this uplift in new business
contribution was a 44% increase in combined life and investment new business
sales from Euro319.7m in 2003 to Euro460.0m in 2004.
Overall new business margins in Ireland for the year 2004 were 11.4% (2003:
13.3%) made up as follows:
2004 2003
% %
Life 13.0 13.8
Investment (ILIM) 7.9 10.5
11.4 13.3
A range of factors, including the increase in the risk discount rate in 2004,
higher annuity reinsurance costs and tougher markets for both protection and
single premium bonds, all combined to hold back life margins to 13% from 13.8%
in 2003. The reduction in investment management margins in 2004 is principally
due to the mix of business with a higher number of large ticket but lower margin
(on-balance sheet) sales being achieved in 2004 by the group's investment
management business, ILIM.
Sales in the group's principal life businesses are summarised below:-
2004 2003 Growth
Eurom Eurom %
Retail Life 178.4 151.9 17
Corporate Life 111.2 98.3 13
Irish life International 20.6 14.4 43
310.2 264.6 17
Investment (ILIM) 146.1 51.4 184
456.3 316.0 44
UK 3.7 3.7 -
460.0 319.7 44
Retail Life
The improved sales climate which emerged in the second half of 2003 continued on
through 2004. Retail sales in 2004 at Euro178.4m were 17% ahead of 2003 (Euro151.9m).
This increase in life sales was driven by a combination of strong growth in
pension business (as a result of public policy initiatives, particularly the
introduction of PRSAs), good demand for mortgage related protection products and
a recovery in demand for new regular savings as the impact of SSIAs recedes.
Single premium investment sales in the Retail Life business continue to be
sluggish as investor confidence lags the recovery in markets. Sales were ahead
across all distribution channels with a particularly strong performance from the
direct sales force which now includes brokers signed up to our Onesource option
. On foot of this strong sales performance the group believes that it has
increased market share to in excess of 20%.
The retail business made continued progress on the implementation of the Horizon
project in 2004 with all new business now being processed on the new system and
migration of the "back book" of older policies now 60% complete. It is
anticipated that the project, which is on target, will complete in 2005. Costs
within the retail division decreased by 1% over 2003 due to Horizon cost
savings.
Corporate Life
The economic backdrop for corporate business sales, the key driver of which is
employment and salary growth in the Irish economy, continued to be very
favourable in 2004 with good increases in employment and salary levels which
benefited the business. Sales grew 13% to Euro111.2m from Euro98.3m in 2003 with
strong growth in all product categories. Defined contribution sales were ahead
14% led by incremental sales on existing schemes while protection and risk sales
were ahead 6%.
Investment Management
ILIM was the top performing pension fund manager in Ireland in 2003 and 2004 and
its flagship consensus fund now enjoys a proven 10 year record of tracking the
benchmark index over all time frames. ILIM generated total institutional inflows
of Euro1.6bln in 2004 an increase of 23% on the prior year. In 2004 the bulk of
these inflows comprised on-balance sheet sales in contrast to 2003 when the
sales mix was predominantly segregated or off-balance sheet. On foot of strong
sales and good investment performance funds under management increased 22% from
Euro16.7bln at 31 December 2003 to Euro20.3bln in 2004.
Capital and Liquidity
The group's capital and liquidity position remained strong at 31 December 2004.
The Tier 1 and total capital ratios were 11.2%. (31 December 2003: 11.1%) while
the liquidity ratio with the group's banking business was 25% (31 December 2003:
26%). The solvency margin in Irish Life Assurance plc, the group's principal
life assurance business was covered 1.7 times by available assets (31 December
2003: 1.8 times).
Taking advantage of favourable market conditions the group raised Euro150m in
additional upper Tier 2 capital within its banking operations in August 2004. As
a result of this transaction the group is very comfortably positioned as regards
its capital requirements in the future.
Dividends
The directors have proposed a final dividend of 38.5 cent per share. Subject to
shareholder approval the dividend will be paid on 25 May 2005 to shareholders on
the register as at 29 April 2005. The ex dividend date is 27 April 2005. The
final dividend will bring the total dividend for the year to 55.0 cent, an
increase of 8% on the 2003 total dividend of 51.0 cent per share. The dividend
is covered 2.8 times by total profit (2.2 times at the contribution level) and
represents an approximate yield of 3.7% on the basis of the share price at the
beginning of March 2005.
Outlook
The outlook for the Irish economy continues to be extremely positive in terms of
job creation, increasing wealth and general economic activity. The group's
leading position in the Irish retail financial services marketplace, combined
with the breadth of its distribution channels and range of products, leave it
very strongly positioned to optimise the opportunities presented by this
favourable economic backdrop. The group remains very confident of another strong
performance in 2005 and the year has started well.
For further information contact:
Name Telephone No. Mobile No. Email address
Barry Walsh 353 1 7042678 087 681 8157 barry.walsh@irishlife.ie
David McCarthy 353 1 8563050 087 256 7292 david.mccarthy@irishlife.ie
Media:
Ray Gordon 353 1 6788099 087 241 7373 ray@mrpa.ie
Group Profit and Loss Account year ended 31 December 2004
Notes 2004 2003
Eurom Eurom
Banking and other activities
Interest receivable and similar income 6 847.6 712.0
Interest payable and similar charges (498.3) (380.1)
Net interest income 349.3 331.9
Fees and commission receivable 44.5 45.0
Fees and commission payable (40.7) (34.9)
Dealing profits 5.8 6.1
Other banking income 7 3.1 28.5
Income from other activities 6.9 6.1
368.9 382.7
Administrative expenses 8 (237.1) (240.5)
Provision for bad and doubtful debts 9 (9.3) (13.4)
Profit arising from banking and other 122.5 128.8
activities
Life assurance activities
Earned premiums
Continuing operations 3,622.2 2,307.5
Discontinued operations - USA - 60.8
3,622.2 2,368.3
Investment return 1,838.2 1,625.7
Increase in shareholders' value of in-force 123.2 40.6
business
Claims incurred (1,336.4) (1,191.9)
Change in other technical provisions
Non unit linked business (94.8) (3.3)
Unit linked business (3,564.6) (2,306.1)
Operating expenses 8 (291.2) (317.2)
Tax attributable to life assurance activities 10 (34.5) (25.9)
Profit arising from life assurance activities 262.1 190.2
after taxation
Tax attributable to the profit on life 10 26.5 8.3
assurance activities
Profit arising from life assurance activities 2 288.6 198.5
before taxation
Goodwill (11.6) (13.8)
Profit arising from operating activities
Continuing operations 399.5 312.5
Discontinued operations - USA - 1.0
399.5 313.5
Group Profit and Loss Account year ended 31 December 2004
Notes 2004 2003
Eurom Eurom
Profit arising from operating 399.5 313.5
activities brought forward
Share of profits of associated 65.2 43.2
undertaking
464.7 356.7
Profit on disposal of Irish Estates 4 19.0 -
Management
Profit on disposal of tangible fixed 4 2.1 3.2
assets
Loss arising on disposal of US business 4 - (50.3)
Profit on ordinary activities before 485.8 309.6
taxation
Tax on profit on ordinary activities 10 (73.6) (48.1)
412.2 261.5
(Profit)/loss attributable to minority (1.0) 0.3
interests
Profit for the financial year after 411.2 261.8
taxation
Dividends - interim paid (44.5) (40.6)
Dividends - final proposed (103.8) (97.0)
Profit retained for the financial year 262.9 124.2
Transfer to non-distributable reserves (172.5) (59.9)
Release of revaluation reserve 1.1 -
Profit retained brought forward 356.7 292.4
Profit retained carried forward 448.2 356.7
Earnings per share (cent) 11 156.4 99.5
Fully diluted earnings per share (cent) 11 155.4 99.3
Earnings per share including own shares
held
for the benefit of life assurance 11 152.5 97.2
policyholders (cent)
Earnings per share based on total
contribution including own
shares held for the benefit of life 11 120.0 111.6
assurance policyholders (cent)
Group Balance Sheet as at 31 December 2004
2004 2003
Notes Eurom Eurom
ASSETS
Attributable to banking and other activities
Cash and balances at central banks 128.2 187.0
Government bills and other eligible bills - 86.8
Loans and advances to credit institutions 2,823.7 2,781.2
Loans and advances to customers 18,810.0 16,027.5
Securitised assets - mortgage assets 2,225.4 1,098.7
Less: non recourse funding (2,193.2) (1,076.1)
32.2 22.6
Debt securities - listed 3,223.5 2,600.6
Interest in associate company 129.5 90.8
Investment properties 21.5 23.6
Tangible fixed assets 210.8 221.3
Other assets/debtors
- Amounts falling due within one year 122.5 175.7
- Amounts falling due after one year 17.1 17.8
Prepayments and accrued income 237.8 212.5
Total assets attributable to banking and other 25,756.8 22,447.4
activities
Attributable to life assurance activities
Investments:
Investment properties 93.3 97.8
Equity shares and units in unit trusts 143.8 148.4
Debt and other fixed income securities 1,748.1 1,651.0
Loans secured by mortgages and policies 4.7 3.1
Deposits with credit institutions 597.4 602.0
2,587.3 2,502.3
Assets held to cover linked liabilities 16,393.5 12,847.4
Shareholders' value of in-force business 992.6 878.3
Reinsurer's share of technical provisions 1,443.5 1,298.3
Other assets/debtors
- Amounts due within one year 125.0 127.0
- Amounts falling due after one year 68.0 64.9
193.0 191.9
Tangible fixed assets 69.9 45.3
Cash at bank 98.3 49.9
Prepayments and accrued income 31.9 51.8
Total assets attributable to life assurance 21,810.0 17,865.2
activities
Intangible assets
Goodwill on acquisition 186.0 197.6
Total assets 47,752.8 40,510.2
Group Balance Sheet as at 31 December 2004
2004 2003
Notes Eurom Eurom
LIABILITIES
Attributable to banking and other activities
Deposits by credit institutions 1,082.3 2,759.0
Customer accounts 11,927.0 10,060.4
Debt securities in issue 10,944.1 8,081.4
Other liabilities/creditors
- Amounts falling due within one year 65.6 43.5
Accruals 198.4 198.5
Dividends 103.8 97.0
Provision for liabilities and charges 9.9 20.8
Subordinated liabilities 933.9 793.9
Total liabilities attributable to banking and 25,265.0 22,054.5
other activities
Attributable to life assurance activities
Life assurance technical provisions 3,415.3 3,176.8
Technical provision for linked liabilities 16,457.8 12,902.0
Other liabilities/creditors
- Amounts falling due within one year 256.5 274.7
- Amounts falling due after one year 5.0 0.0
Accruals 43.4 43.8
Provision for deferred taxation - 1.3
Total liabilities attributable to life assurance 20,178.0 16,398.6
activities
Capital and reserves
Share capital 12 86.3 86.2
Share premium 12 51.9 51.2
Other capital reserves 12 6.9 6.9
Revaluation reserve 77.3 80.6
Non-distributable reserve 13 1,694.7 1,522.3
Profit and loss account 13 448.2 356.7
2,365.3 2,103.9
Own shares held for the benefit of life assurance (64.3) (54.6)
policyholders
Shareholders' funds attributable to equity 2,301.0 2,049.3
interests
Equity minority interests - life assurance 8.8 7.8
activities
Total liabilities 47,752.8 40,510.2
Statement of Total Recognised Gains and Losses year ended 31 December 2004
2004 2003
Eurom Eurom
Profit for the financial year 411.2 261.8
(Losses)/gains on revaluation of tangible fixed assets (2.2) 80.6
Exchange adjustments on investment in overseas
subsidiaries net
of exchange adjustments on related foreign currency (0.1) (3.0)
borrowings
Total recognised gains and losses relating to the year 408.9 339.4
Reconciliation of Movement in Shareholders' Funds year ended 31 December
2004
2004 2003
Eurom Eurom
At 1 January 2,049.3 1,844.4
Total recognised gains and losses 408.9 339.4
Dividends paid and proposed (148.3) (137.6)
Issue of share capital 0.8 1.9
Change in cost of own shares held for the benefit of (9.7) 1.2
life assurance policyholders
At 31 December 2,301.0 2,049.3
Group Cash Flow Statement year ended 31 December 2004
2004 2003
Eurom Eurom
Net cash inflow / (outflow) from banking and other 54.4 (989.6)
activities
Net cash inflow from life assurance activities 148.6 43.3
Net cash inflow / (outflow) from operating activities 203.0 (946.3)
Dividends received from associated undertaking 15.7 -
Returns on investment and servicing of finance
Interest paid on subordinated loan (41.4) (38.4)
Taxation
Tax paid (35.7) (44.4)
Capital expenditure and financial investment
Purchase of tangible fixed assets (18.6) (19.9)
Sale of tangible fixed assets 9.2 12.2
Acquisitions and disposals
Sale of Irish Estates Management 20.9 -
Equity dividends paid (141.5) (129.7)
Financing
Shares issued 0.8 1.9
Issue of subordinated liabilities 143.5 159.7
Increase / (decrease) in cash 155.9 (1,004.9)
Notes to the Preliminary Announcement year ended 31 December 2004
1. Changes in Accounting Policies & Presentation of Information
The accounting policies are unchanged from those outlined on pages 34 to 37 of
the 2003 annual report.
2. Analysis of the profit and loss account : supplementary information
The profit before tax includes the results of the life business on an embedded
value basis and reflects the impact of investment market fluctuations on the
group's results. The following analyses show:
(a) The contribution from the group and associate company on the basis of an
assumed longer term level of investment return on the assets of the group's
life and the associate company's general insurance business and before goodwill
and other charges/credits.
(b) An analysis of the components of the embedded value of the life business.
(a) Contribution before short term investment fluctuations, goodwill and other
charges/credits
2004
Ireland UK Total
Eurom Eurom Eurom
Continuing Operations
Life assurance activities (b) 205.0 10.1 215.1
Banking and other activities 90.9 31.6 122.5
Group Contribution 295.9 41.7 337.6
Share of associate's 62.6 - 62.6
contribution
Total Contribution 358.5 41.7 400.2
2003
Ireland UK Total
Eurom Eurom Eurom
Continuing Operations
Life assurance activities (b) 183.7 6.0 189.7
Banking and other activities 103.2 25.6 128.8
Group Contribution 286.9 31.6 318.5
Share of associate's 45.2 - 45.2
contribution
Total Contribution - Continuing Operations 332.1 31.6 363.7
Discontinued US life 1.5
operations
Total Contribution 365.2
The total contribution is reconciled to the profit and loss account as
follows:
2004 2003
Eurom Eurom
Total contribution 400.2 365.2
Short term investment
fluctuations
Life assurance 26.9 27.5
Share of associate company 2.6 (2.0)
Goodwill amortisation (11.6) (13.8)
Effect of economic assumption changes on life assurance 46.6 (20.2)
profits
Other charges/credits 21.1 (47.1)
Profit before tax 485.8 309.6
2. Analysis of the profit and loss account : supplementary information
(continued)
(b) Analysis of contribution from life assurance activities
2004
Ireland UK Total
Eurom Eurom Eurom
Continuing Operations
New business contribution 52.0 2.8 54.8
Contribution from existing business
Unwind of discount rate 91.7 8.0 99.7
Experience variances 13.1 (5.1) 8.0
Development expenditure (4.6) - (4.6)
Operating assumption changes 42.0 2.5 44.5
Expected investment returns 2.3 1.9 4.2
Other income 8.5 - 8.5
Contribution from life assurance 205.0 10.1 215.1
activities
Short term fluctuations in investment returns 26.9
Effect of economic assumption changes 46.6
Life assurance achieved profits 288.6
2003
Ireland UK Total
Eurom Eurom Eurom
Continuing Operations
New business contribution 42.0 3.7 45.7
Contribution from existing business
Unwind of discount rate 80.2 8.9 89.1
Experience variances 23.6 (6.1) 17.5
Development expenditure (11.3) - (11.3)
Operating assumption changes 39.0 (1.5) 37.5
Expected investment returns 3.9 1.0 4.9
Other income 6.3 - 6.3
Contribution from life assurance 183.7 6.0 189.7
activities
Contribution from discontinued US life 1.5
assurance activities
Short term fluctuations in investment 27.5
returns
Effect of economic assumption changes (20.2)
Life assurance achieved profits 198.5
3. Analysis of shareholder net assets
2004 2003
Eurom Eurom
Life assurance
Ireland 1,611.7 1,439.5
UK 84.6 81.7
1,696.3 1,521.2
Banking and other activities
Ireland 315.3 262.7
UK 47.0 39.4
362.3 302.1
Associate company 129.5 90.8
Attributable to goodwill 186.0 197.6
Minority Interest - life assurance activities (8.8) (7.8)
Shareholders' funds 2,365.3 2,103.9
Deduction in respect of own
shares held for the benefit of life
assurance policyholders (64.3) (54.6)
2,301.0 2,049.3
Life assurance assets are analysed as follows:
2004 2003
Eurom Eurom
Shareholders' net assets (life
assurance activities)
Property 92.7 89.8
Equities 10.6 27.0
Fixed interest 20.4 18.4
Deposits 444.8 417.5
Other assets 135.2 90.2
703.7 642.9
Shareholders' value of in-force business 992.6 878.3
1,696.3 1,521.2
The value of in-force business excludes the solvency capital attributable to
shareholders of Euro330.2m (2003: Euro276.1m).
Shareholders' value of in-force is net of a deduction of Euro74.6m (2003: Euro47m) in
respect of the cost of maintaining the solvency margin.
4. Other Charges/Credits
(a) Disposal of Irish Estates Management
On 23 December 2004 the group sold its property management subsidiary Irish
Estates Management Limited to a group of private and institutional investors.
The profit on the disposal of this business was as follows:
Carrying value prior to disposal* Eurom
Consideration (net) 0.6
19.6
19.0
*After declaration of a special dividend of Euro3.5m
No taxation charge arose. The group profit arising from operating activities in
2004 includes Euro2.2m attributable to Irish Estates Management Ltd. (2003: Euro1.8m).
(b) Disposal of fixed assets
As part of the integration and restructuring of the group's banking operations
the group disposed of a number of branch properties, the profit realised on
these sales was Euro2.1m (2003: Euro3.2m).
(c) Disposal of US business
The group disposed of its remaining US subsidiary, Guarantee Reserve Life
Insurance Company in 2003, the loss on the disposal of the business was Euro50.3m.
5. New life assurance business
2004 2003
Eurom Eurom
Earned premiums at full value
Ireland
Recurring 207.3 167.7
Single 2,489.8 1,482.5
United Kingdom
Recurring 1.9 1.9
Single 18.0 18.0
USA (Discontinued)
Recurring - 17.5
2,717.0 1,687.6
Annual premium equivalent
Ireland 456.3 316.0
UK 3.7 3.7
USA (Discontinued) - 17.5
460.0 337.2
Annual premium equivalent is calculated by weighting single premium business
written at 10% of premiums and recurring premium business at 100% of premium.
6. Interest receivable and similar income
2004 2003
Eurom Eurom
Loans and advances to customers 629.9 510.4
Loans and advances to credit institutions 101.9 49.2
Debt securities and other fixed income securities 54.0 88.4
Lease and instalment finance 61.8 64.0
847.6 712.0
7. Other banking income
Other banking income in 2003 includes Euro26.0m realised profits on the
disposal of debt securities as part of a strategy to reposition the
portfolio in response to the reduction in market interest rates.
8. Operating and administrative expenses
2004 2003
Eurom Eurom
(a) Attributable to banking and other activities
Banking operating expenses 224.8 227.1
Corporate costs 7.6 9.1
Other activities 4.7 4.3
237.1 240.5
(b) Attributable to life assurance activities
Life assurance operating expenses 198.0 210.6
Acquisition expenses 83.4 90.9
Corporate costs 5.2 4.4
Development expenditure 4.6 11.3
291.2 317.2
9. Provision for bad and doubtful debts
2004 2003
Eurom Eurom
Opening balance 91.7 85.6
Charged to the profit and loss account 9.3 13.4
Amounts written off (6.2) (7.3)
At 31 December 94.8 91.7
The closing balance is made up as follows:
Specific 39.3 37.3
General 55.5 54.4
Total 94.8 91.7
The analysis of the group's provisions for bad and doubtful debts by category of
loans and advances to customers is as follows:
2004
Specific General Total
Eurom Eurom Eurom
Residential mortgage loans 2.8 36.7 39.5
Commercial mortgage loans 3.1 5.8 8.9
Other loans 33.4 13.0 46.4
Closing provision at 31 December 39.3 55.5 94.8
2004
2003
Specific General Total
Eurom Eurom Eurom
Residential mortgage loans 2.0 35.6 37.6
Commercial mortgage loans 3.2 5.8 9.0
Other loans 32.1 13.0 45.1
Closing provision at 31 December 37.3 54.4 91.7
2003
10. Taxation
(a) Tax attributable to life assurance activities
Tax attributable to life assurance is analysed below and includes amounts in
respect of policyholders and the tax on the change in shareholders' value of
in-force business which is calculated with reference to the effective
corporation tax rate applicable in each of the relevant territories.
2004 2003
Eurom Eurom
Corporation taxation 27.0 27.0
Overseas tax 0.0 (0.8)
Deferred taxation (1.3) (3.5)
Duties and levies - 1.3
Tax on change in shareholders' value of in-force business 8.8 1.9
34.5 25.9
(b) Tax attributable to profit on ordinary activities is analysed as
follows:
2004 2003
Eurom Eurom
Tax attributable to profit on life assurance activities
Corporation tax 17.7 6.4
Tax on change in shareholders' value of in-force business 8.8 1.9
26.5 8.3
Corporation tax on banking and other activities 34.6 15.5
Deferred taxation (credit)/charge on banking and other (10.9) 3.7
activities
Tax attributable to group's share of profits of
associated undertakings 10.8 7.4
Tax on disposal of properties 0.4 1.0
61.4 35.9
Government levy on financial institutions (i) 12.2 12.2
73.6 48.1
(i) The Irish Government has imposed a charge of Euro100m per annum on the deposit
taking business of the Irish domestic banks. The group's share of this charge
which will pertain until 2005 is Euro12.2m per annum.
11. Earnings per share
2004 2003
(a) Basic EPS
Profit for the financial year Euro411.2m Euro261.8m
after taxation
Weighted average ordinary shares in issue 262,998,704 262,989,230
and ranking for dividend excluding own
shares held for the benefit of life
assurance policyholders
EPS 156.4 cent 99.5 cent
(b) Fully diluted EPS
Weighted average of potential dilutive
ordinary shares
arising from the group's share 1,597,711 615,402
option schemes
Weighted average number of ordinary 264,596,415 263,604,632
shares used
in the calculation of fully diluted EPS
Fully diluted EPS 155.4 cent 99.3 cent
(c) Basic EPS including shares held for the benefit of life assurance
policyholders
As permitted under Irish Legislation the group's life assurance subsidiary holds
shares in Irish Life & Permanent plc for the benefit of policyholders. Under
accounting standards these are now required to be deducted from the total number
of shares in issue when calculating EPS. In view of the fact that Irish Life &
Permanent plc does not hold the shares for its own benefit, EPS based on a
weighted average number of shares in issue is also disclosed. The calculation is
set out below:
Weighted average ordinary shares in issue and ranking for dividend excluding own
shares held for the benefit of life assurance policyholders
Weighted average ordinary shares in 262,998,704 262,989,230
issue and ranking for dividend
excluding own shares held for the
benefit of life assurance
policyholders
Weighted average ordinary shares held 6,614,727 6,414,328
for the benefit of life assurance
policyholders
Weighted average ordinary shares in issue and ranking for
dividend including own shares held 269,613,431 269,403,558
for the benefit of life assurance
policyholders
Basic EPS including own shares held 152.5 cent 97.2 cent
for the benefit of life assurance
policyholders
(d) EPS based on total contribution
2004 2003
Per Per
Share Share
Eurom cent Eurom cent
Earnings as reported above 411.2 152.5 261.8 97.2
Adjustments
Short term investment fluctuations (29.5) (10.9) (25.5) (9.5)
Goodwill 11.6 4.3 13.8 5.1
Profit on the disposal of tangible fixed (2.1) (0.8) (3.2) (1.2)
assets
Profit on the disposal of Irish Estates (19.0) (7.0)
Management
Loss on disposal of US business - - 50.3 18.7
Effect of economic assumption changes (46.6) (17.3) 20.2 7.5
on life assurance profit
Tax relating to the adjustments (3.1) (1.2) (16.4) (6.1)
Minority interest 1.0 0.4 (0.3) (0.1)
Total contribution after tax 323.5 120.0 300.7 111.6
Weighted average ordinary shares in issue 269,613,431 269,403,558
and ranking for dividend including own
shares held for the benefit of life
assurance policyholders
EPS based on total contribution after 120 cent 111.6 cent
taxation
The EPS based on total contribution is presented to illustrate the underlying
movement in earnings of the group and as such excludes short term investment
fluctuations, items of an exceptional nature, goodwill amortisation and minority
interests.
12. Called up share capital, share premium, merger reserve and other capital
reserves
Number of Share Share Merger Capital
Shares Capital Premium Reserve Reserves
Eurom Eurom Eurom Eurom
At 1 January 269,494,255 86.2 51.2 (21.2) 28.1
Shares issued during the 196,497 0.1 0.7 - -
year
At 31 December 2004 269,690,752 86.3 51.9 (21.2) 28.1
During 2004 the company issued 196,497 ordinary shares of Euro0.32 each with a
nominal value of Euro0.1m for cash of Euro0.8m as a result of the exercise of options
under the group's share options schemes.
The merger reserve is the difference between the shares issued by Irish
Permanent plc and the nominal value of the issued share capital of Irish Life
plc on the merger of the companies. The share premium arising on the shares
(Euro2,698m) issued in connection with the merger has been classified with the
merger reserve rather than with the other share premium in existence in the
company.
Capital reserves represent the share premium (Euro20.7m) of Irish Life plc at the
date of the merger and Euro7.4m capital redemption reserve arising from the
repurchase and cancellation of shares.
13. Revenue reserves
Profit and loss Non-distributable
account reserves
2004 2003 2004 2003
Eurom Eurom Eurom Eurom
At 1 January 356.7 292.4 1,522.3 1,465.4
Profit for the financial year 411.2 261.8 - -
Dividends (148.3) (137.6) - -
Transfer to non-distributable (172.5) (59.9) 172.5 59.9
reserves
Release of revaluation reserve 1.1 -
Exchange adjustment on net
investment in
overseas subsidiaries - - (0.1) (3.0)
At 31 December 448.2 356.7 1,694.7 1,522.3
14 Value of in-force business
The principal assumptions used in the calculation of shareholders' value of in-force business include the
following:
Ireland UK
31-Dec 31-Dec 31-Dec 31-Dec
2004 2003 2004 2003
% % % %
Risk discount rate 7.00 8.00 7.80 8.00
Investment returns
Fixed Interest 2.5 to 4.2 3.0 to 4.9 4.57 4.75
Equities & Property 5.60 6.25 6.55 6.75
Expense inflation 3.60 4.00 2.75 2.75
15. Segmental Analysis
2004 2003
Eurom Eurom
Interest Income
Ireland 708.3 626.7
UK 139.3 85.3
847.6 712.0
Net Interest Income
Ireland 316.0 303.5
UK 33.3 28.4
349.3 331.9
Gross premiums written
Ireland 3,698.2 2,403.3
UK 64.9 70.9
US (Discontinued) - 70.5
3,763.1 2,544.7
Profit on operating activities before tax
Banking and other activities
Ireland 90.9 103.2
UK 31.6 25.6
122.5 128.8
Life assurance activities
Ireland 275.5 189.6
UK 13.1 7.9
US (Discontinued) - 1.0
288.6 198.5
Goodwill (11.6) (13.8)
399.5 313.5
Total Assets
Banking and other activities
Ireland 23,807.6 20,627.6
UK 1,949.2 1,819.8
25,756.8 22,447.4
Life assurance activities
Ireland 20,628.2 16,758.1
UK 1,181.8 1,107.1
21,810.0 17,865.2
Goodwill 186.0 197.6
47,752.8 40,510.2
16. The financial information set out above, which is unaudited, does not
constitute the company's statutory accounts for the year ended 31 December 2004.
The statutory accounts for 2004 will be finalised on the basis of the financial
information presented by the directors in the preliminary announcement and
together with the auditors' report thereon will be delivered to the register of
companies following the company's annual general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSEFLLSISELD
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