RNS Number:9183Q
Irish Life & Permanent PLC
07 September 2005
IRISH LIFE & PERMANENT PLC
Interim Report
Six months to 30 June 2005
PRESENTATION OF INFORMATION
Statutory Basis (IFRS)
The statutory basis applies IFRS to all operations including the application of
IFRS 4 'Insurance Contracts' to the group's life assurance operations. The group
has availed of the deferred transitional date in respect of IAS 39 'Financial
Instruments : Recognition and Measurement', IAS 32 'Financial Instruments :
Disclosure and Presentation' and IFRS 4 'Insurance Contracts' and therefore has
not restated 2004 comparatives for the impact of these IFRSs. The pro-forma
comparatives for the period ended 30 June 2004 are adjusted for the impact of
these IFRSs.
The statutory basis of accounts are included on pages 23 to 31.
Embedded Value basis (EV)
The EV results of the group's life assurance operations are prepared in
accordance with the European Embedded Value (EEV) Principles issued in May 2004
by the European Chief Financial Officers' Forum. Life assurance operations were
previously presented in accordance with the Association of British Insurers'
paper of December 2001 'Supplementary Reporting for Long Term Insurance Business
(The Achieved Profits Method)'. 2004 results have been restated to reflect this
change.
The group has focused on the EV basis, as it believes that EV is a more
realistic measure of the performance of life businesses than the statutory IFRS
basis. The EV basis is used throughout the group to assess performance, and it
is also the measure used by the investment community to assess the performance
of life businesses.
The results of all other operations are prepared in accordance with IFRSs which
are expected to apply at 31 December 2005. 2004 results have been restated to
reflect this. In order to provide more meaningful comparison, this restatement
also includes the main impacts of IAS 39 and IAS 32. The IASB has given a
deferred transition date for these IFRSs under which 2004 results can continue
to be reported on an ROI GAAP basis.
Financial Highlights
6 months ended 30 June 2005 (Unaudited)
H1 05 H1 04 Growth
EV Basis
Profit after tax Euro220m Euro182m 21%
EPS 81.5 cent 67.5 cent 21%
Operating profit before tax Euro196m Euro187m 5%
Operating profit EPS 62.3 cent 58.9 cent 6%
Statutory Basis1
Profit after tax Euro171m Euro128m 34%
EPS on continuing activities 64.0cent 48.6 cent 32%
New loans issued Euro4.2bln Euro3.7bln 13%
Lending book Euro23.3bln Euro19.1bln 22%
Mortgage loan book (Ireland) Euro15.7bln Euro13.2bln 19%
Life and investment new business
- APE Euro260m Euro195m 33%
- PVNBP Euro1.9bln Euro1.4bln 40%
Interim Dividend 17.7 cent 16.5 cent 7%
Commenting on the results David Went, Group Chief Executive, said:
"The strong momentum which built up in all our core businesses in 2004 continued
through the first half of 2005 when sales growth in all our business lines was
extremely strong. New lending was up 13%, life and investment sales increased
33% with retail life sales ahead 24%, while investment inflows, on the back of
prolonged superior investment performance were ahead 123% to Euro750m. Particularly
pleasing was the very strong growth in new business earnings in our life
business which were up 61% on an EV basis while the 8% growth in net interest
income within our banking business was satisfactory. Overall the strong first
half and the continued momentum with the business leaves us well placed for a
successful full year outcome."
EV BASIS
Commentary on Results EV basis
Consolidated Income Statement - EV Basis
For the 6 months ended 30 June 2005 (Unaudited)
6 months to 6 months to 12 months to
30 June 2005 30 June 2004 31 Dec 2004
Eurom Eurom Eurom
Operating profit on continuing operations
Insurance and Investment Business 109 102 192
Banking 66 65 139
Other (3) (2) -
172 165 331
Share of Associate 24 22 56
Operating profit before tax on continuing operations 196 187 387
Short-term investment fluctuations 42 15 26
Effect of economic assumption changes 30 - 30
Other credits 2 2 21
Profit before tax 270 204 464
Taxation (19) (17) (33)
Government levy (6) (6) (12)
245 181 419
(Loss)/profit after tax on discontinued operations (24) 2 10
221 183 429
Minority interest (1) (1) (2)
Total profit after tax 220 182 427
Total profit after tax for the 6 months ended 30 June 2005 was Euro220m, a 21%
increase on the Euro182m reported in 2004. The 2005 first half outcome includes a
loss after tax of Euro24m incurred on the disposal of the group's closed life
assurance business in the UK, City of Westminster Assurance, which is reported
below the line as profit after tax on discontinued operations. The profit after
tax before discontinued activities increased 35% to Euro245m from Euro181m for the
half-year June 2004. Pre-tax profits (before discontinued activities) were Euro270m
in the first half 2005, an increase of 32% on the 2004 level of Euro204m.
The outcome in the first half 2005 includes a positive impact of Euro30m resulting
from changes to the economic assumptions used in calculating the life assurance
embedded value (2004: Euronil). This principally reflects the impact of a reduction
in the risk discount rate used to compute the embedded value from 6.7% to 6.1%
which arose due to a reduction in euro gilt rates.
The continued improvement in investment markets in the first half of 2005
resulted in net positive short term investment fluctuations of Euro42m (2004:
Euro15m). This gain represents the out-performance of investment markets compared
to the investment return assumptions used in computing the embedded value of the
group's life assurance business.
On 2 June 2005 the group sold its closed UK life business, City of Westminster
Assurance, for a consideration, after transaction costs, of Euro65m. The loss
arising on this disposal of Euro24m, (which includes Euro2m profit arising in the
period up to date of disposal) is included in profit after tax on discontinued
operations.
The operating profit before tax for the first half 2005 was Euro196m, a 5% increase
on 2004 (Euro187m). This growth was principally driven by a 7% growth in the
contribution from the group's life assurance activities on foot of strong growth
in new business profits which were ahead 61% to Euro45m. The banking result in the
first half 2005 was broadly flat at Euro66m principally due to a negative Euro7m in
trading profits which arose on positions which were closed out due to the mark
to market requirements of IFRS. Excluding this item underlying banking profits
were ahead 12%.
The contribution from the group's holding in Allianz (Ireland), a general
insurance business, increased to Euro24m in the first half 2005 from Euro22m in 2004
reflecting a strong underwriting result in continuing favourable market
conditions and the good investment markets which prevailed in the period.
Banking Business
The results of the group's banking business presented on an IFRS basis for the 6
months to 30 June 2005 are set out below.
6 months to 6 months to 12 months to
30 June 2005 30 June 2004 31 Dec 2004
Eurom Eurom Eurom
Net interest income 184 171 349
Other income 22 21 39
Trading income (7) - 6
199 192 394
Administrative expenses (127) (122) (245)
Impairment provisions (6) (5) (10)
Operating profit before tax 66 65 139
The total pre-tax contribution generated by the group's banking and other
activities in the first half 2005 was Euro66m compared to Euro65m in 2004. The 2005
outcome was negatively impacted by Euro7m of trading losses which arose on
positions closed out due to the mark to market requirement of IFRS. These losses
could not be offset by gains of Euro12m arising on the closing out of interest rate
positions on transition to IAS 39 which are required to be amortised over 3
years. Excluding this negative item the underlying pre-tax contribution in the
bank was ahead 12%.
Net interest income increased 8% to Euro184m from Euro171m with continued strong
growth in the level of new lending and current account balances offsetting the
impact of increased levels of wholesale funding on the net interest margin.
The net interest margin for the half year 2005 was 1.34% compared to a margin of
1.40% reported for the full year 2004 and 1.44% for the first half 2004. The
principal reason for this reduction which was anticipated was the requirement to
fund the growth in new lending business and associated liquidity largely in the
wholesale markets.
Total loans and advances to customers at 30 June 2005 were Euro23.3bln, an increase
of 10% on outstanding balances at 31 December 2004 and 22% ahead of outstanding
balances at 30 June 2004. Total gross new lending at Euro4.2bln was 13% ahead of
the first half 2004 of Euro3.7bln. The growth in balances over the principal
business lines was as follows:
30 June 31 Dec Growth
2005 2004
Eurom Eurom %
Mortgage lending ROI 15,699 14,553 8
Consumer finance 1,509 1,381 9
Commercial lending 1,246 1,249 -
18,454 17,183 7
Mortgage lending - UK (#Stg) 3,267 2,756 19
Total lending - Eurom 23,301 21,090 10
The strength of the Irish residential mortgage market continued in the first
half of 2005. Total gross new mortgages issued were Euro2.5bln, a 12% increase on
the Euro2.2bln issued in the first half of 2004. Residential mortgage balances
outstanding increased 8% to Euro15.7bln compared to Euro14.6bln outstanding at 31
December 2004. Mortgage demand was also strong in the UK with Capital Home
Loans, the group's centralised mortgage lender, issuing Stg#671m in gross new
mortgages in the first half 2005, up 17% on the Stg#574m issued in the first
half 2004.
Mortgage balances outstanding in the UK increased 19% to Stg#3.3bln from
Stg#2.8bln at 31 December 2004.
New consumer finance loans issued increased 19% to Euro554m compared to Euro466m in
the first half 2004 principally reflecting a strong new car finance market in
the first half of the year. Reflecting this growth in new business the consumer
finance portfolio increased 9% to Euro1.5bln from Euro1.4bln at 31 December 2004. The
commercial finance portfolio at Euro1.2bln was largely unchanged from 31 December
2004 and the bank intends to target growth in this area as a priority going
forward.
Customer account balances increased from Euro11.9bln at 31 December 2004 to
Euro12.2bln at 30 June 2005.
Other operating income at Euro22m was 5% ahead of first half 2004 (Euro21m) reflecting
a modest level of growth in current account and related fee income following on
from the bank's very successful fee-free current account marketing strategy. In
total 33,000 of the group's new current accounts were opened in the bank in the
first half 2005 due to the success of this strategy with a 20% increase in
current account balances which grew to Euro1.9bln. Growth in current accounts will
remain a key focus for the bank in the second half of the year.
As previously 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 profit reported in the group's life assurance
activities. Sales of life and pensions products in the bank in the first half
2005 were Euro28m, an increase of 8% on the first half 2004 (Euro26m). The pre-tax
operating profit achieved on the bancassurance book of life business was Euro21m in
the first half 2005, up 11% on first half 2004 of Euro19m.
Trading income in the first half 2005 was negative at Euro7m (first half 2004
Euronil). This arose due to certain positions taken in financial instruments which
fall to be accounted on a mark to market basis. These positions were closed out
in the first half of the year. The losses arising could not be offset by gains
of Euro12m which arose in the closing of certain interest rate positions as part of
the transition of the balance sheet to meet the hedging requirements of IAS 39
as these gains fall to be amortised to net interest income over the next 3
years.
Operating and corporate expenses increased 4% to Euro127m from Euro122m in the first
half 2005. Cost management will continue to be a key focus within the bank
through the remainder of the year and into 2006.
Impairment provisions against bad debts in 2005 were Euro6m compared to Euro5m
incurred in the first half 2004 reflecting the robust credit quality which
prevails within all of the group's loan portfolios where realised bad debt loss
levels are insignificant. Provisions held against the portfolios continued to be
conservative, notwithstanding the write back in general provisions necessitated
under IAS 39, with a reserve ratio of 23 basis points compared to an arrears
ratio of 18 basis points.
Insurance and Investment Business
The results of the group's insurance and investment business presented on an EV
basis, for the six months to 30 June 2005 as set out below.
6 months to 6 months to 12 months to
30 June 2005 30 June 2004 31 Dec 2004
Eurom Eurom Eurom
New business contribution 45 28 58
Contribution from in-force business
Expected return 38 35 69
Experience variances 9 12 11
Operating assumption changes 7 17 39
Expected investment return 10 10 19
Development expenditure - - (4)
64 74 134
Operating profit before tax 109 102 192
Operating profit before tax increased 7% to Euro109m in the first half 2005
compared to Euro102m in the first half 2004 reflecting a 61% increase in new
business contribution which improved to Euro45m from Euro28m in the first half 2004
which offset a 13% reduction in the contribution from the in-force business,
largely due to a Euro10m reduction in the level of operating assumption changes.
The expected return on the in-force book increased 9% to Euro38m from Euro35m due to
the growth in the in-force book which offset the impact of the reduction in the
risk discount rate from 7.3% to 6.7%.
Experience variances were positive at Euro9m compared to Euro12m in first half 2004.
The reduction is principally due to the capitalisation of positive mortality
experience in 2004 reflecting sustained improvements in that experience. This
leads to lower variances relative to the revised expected experience.
The operating assumption changes of Euro7m arising in the first half 2005
principally relate to productivity and expense gains achieved. This compares to
Euro17m in the first half 2004 which included Euro10m for the capitalisation of
positive mortality experience.
The expected investment return relates to earnings on shareholder assets
including solvency capital and is calculated by reference to the assumed
long-term investment return for equities and property combined with the actual
earnings on short-term cash. The return of Euro10m is in line with the prior
period.
The assumptions underlying the embedded value continue to be conservatively
based.
The new business profits in the first half 2005 increased 61% to Euro45m from Euro28m
in 2004. The principal reason for this significant uplift in new business
contribution was a 33% increase in combined life and investment new business
sales to Euro260m on an APE basis in first half 2005 from Euro195m in 2004 combined
with improved new business margins.
Overall new business margins on an APE basis were 17% in the first half 2005
compared to 14% in 2004 made up as follows:
30 June 30 June
2005 2004
% %
Life 20 16
Investment (ILIM) 11 9
17 14
A number of factors including a favourable product mix, improved pricing on
protection products, lower unit selling costs and the reduction in the risk
discount rate in 2005 all combined to push life margins to 20% from 16% in 2004.
The increase in investment margins is largely due to the mix of business.
APE2 sales in the group's principal life businesses are summarised below:
30 June 30 June Growth
2005 2004
Eurom Eurom %
Retail Life 102 82 24
Corporate Life 74 71 4
Irish Life International 9 8 13
185 161 15
Investment (ILIM) 75 34 123
260 195 33
When calculated on the basis of present value of new business premiums ("PVNBP")
margins improved from 2.1% in the first half 2004 to 2.4% in 2005 which is
broadly the same order as the improvement under the APE basis
The PVNBP margin is calculated as follows:
30 June 30 June
2005 2004
% %
Life 3.2 2.5
Investment (ILIM) 1.1 0.9
2.4 2.1
PVNBP3 sales in each of the group's principal life businesses are set out below:
30 June 30 June Growth
2005 2004
Eurom Eurom %
Retail life 661 567 17
Corporate life 395 377 5
Irish Life International 92 78 18
1,148 1,022 12
Investment (ILIM) 750 337 123
1,898 1,359 40
Retail Life
The sales climate for the Retail Life division remained very favourable in the
first half of 2005 with continued investor confidence on the back of strong
investment markets providing a favourable backdrop. Retail sales increased 24%
on an APE basis (17% on the PVNBP basis) to Euro102m in the first half 2005 from
Euro82m in 2004.
While sales across all product lines and channels were strong, sales of savings
products (up 69%), pensions (up 29%) and protection (up 25%) were particularly
strong. The group believes that this strong sales performance has improved its
overall market share position in the first half of 2005.
The retail business continued to make good progress on the implementation of the
Horizon project in the first half of 2005 with migration of the "back book" of
older policies now 95% complete. The project, which has been an unqualified
success, will be fully completed in the second half of 2005.
Corporate Life
The key driver for corporate life sales is employment and salary growth in the
Irish economy. Market conditions continued to be favourable in the first half of
2005 with new business sales on an APE basis increasing 4% to Euro74m from Euro71m in
2004 ( PVNBP basis growth was 5%). Protection and risk sales were particularly
strong ahead 32% in the first half 2005 but this growth was offset by lower
demand for annuities and personal retirement bonds.
Investment Management
In the first half of 2005 ILIM continued to be the top performing pension fund
manager in Ireland over the last three years. On foot of this performance ILIM
generated total APE inflows of Euro75m (gross inflows of Euro750m) in the first half
of 2005, an increase of 123% over the Euro34m generated in the first half 2004.
Arising from this strong level of new sales and good investment performance,
funds under management increased 14% from Euro21.3bln at 31 December 2004 to
Euro24.4bln at 30 June 2005.
Capital and Liquidity
The group's capital and liquidity positions remained strong at 30 June 2005. The
Tier 1 total capital ratios were 10.6% (31 December 2004: 11.2%) while the
liquidity ratio within the group's banking business was 26% (31 December 2004:
25%). 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
2004: 1.7 times).
Dividend
The directors have declared an interim dividend of 17.7 cent for the first six
months of 2005. This compares to an interim dividend paid in 2004 of 16.5 cent.
The dividend will be paid on 16 November 2005 to shareholders on the register as
at 7 October 2005. The ex dividend date is 5 October 2005.
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@mrpakinman.ie
Basis of Preparation EV
Earnings generated by the group's life assurance operations are prepared in
accordance with the European Embedded Value (EEV) Principles issued in May 2004
by the European Chief Financial Officers' Forum. For businesses other than life
assurance the results have been prepared based on the recognition and
measurement requirements of the IFRS issued by the IASB and adopted by the EU
which are expected to apply at 31 December 2005.
IFRS brings into force phase 1 of the International Accounting Standard Board's
("IASB") insurance accounting project. In view of the phased implementation of
IFRS for insurance business, the group believes that shareholders will continue
to place considerable reliance on embedded value information relating to the
life assurance business. The statutory interim financial information includes
insurance contracts written in the life assurance business based on embedded
value earnings calculated using the EEV principles developed by the European CFO
forum. The EV basis financial information extends these principles to investment
contracts written in the life assurance business.
The group's results were previously prepared on an ROI GAAP basis under which
life assurance operations were presented in accordance with the Association of
British Insurers' paper of December 2001 'Supplementary Reporting for Long Term
Insurance Business (The Achieved Profits Method)'.
2004 results have been restated to reflect the new reporting basis. Restatements
for 12 months to 31 December 2004 were issued on 21 July 2005 and restatements
for 6 months to 30 June 2004 were issued on 25 August 2005, copies of these
restatements are available from the group's website (www.irishlifepermanent.ie).
These restatements do not constitute the company's statutory accounts for the
year ended 31 December 2004 which were prepared under ROI GAAP.
The directors acknowledge their responsibility for the preparation of the EV
basis information.
The group's provisional accounting policies and a description of the key
differences between ROI GAAP, IFRS and EEV are set out in the EEV and IFRS
transition documents issued on 21 July 2005.
The methodology applied to produce the EV basis for the period to 30 June 2005
is consistent with the methodology used to produce the restated EV information
for the year to 31 December 2004 and six months to 30 June 2004.
Certain IFRS that will be effective or available for early adoption at 31
December 2005 are still subject to change and to the issue of additional
interpretation. Accordingly the group's accounting policies and consequently the
financial information presented may change prior to the publication of the
group's 2005 annual report.
KPMG, the group's auditors, have reviewed the EV basis information.
Consolidated Income Statement - EV basis (Unaudited)
Six months to 30 June 2005
Notes 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Operating profit on continuing operations
Insurance & investment business 109 102 192
Banking 66 65 139
Other (3) (2) -
172 165 331
Share of associate 24 22 56
Operating profit before tax on continuing operations 1 196 187 387
Short term investment fluctuations 42 15 26
Effect of economic assumption changes 30 - 30
Other credits 2 2 2 21
Profit before tax 270 204 464
Taxation 5 (25) (23) (45)
Profit for the period on continuing operations 245 181 419
(Loss)/profit after tax on discontinued operations 3 (24) 2 10
Profit for the period after tax 221 183 429
Minority interest (1) (1) (2)
Profit attributable to equity holders 220 182 427
Earnings per share including own shares held
for the benefit of life assurance policyholders (cent) 81.5 67.5 158.4
Operating earnings per share including own shares 62.3 58.9 124.2
held for the benefit of life assurance policyholders (cent)
Consolidated Balance Sheet - EV basis (Unaudited)
As at 30 June 2005
30 June 30 June 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Assets
Cash and other receivables 289 205 243
Investments 21,416 17,719 20,436
Loans and receivables to banks 5,100 5,233 4,508
Loans and receivables to customers 23,721 19,186 21,133
Interest in associated undertaking 152 112 136
Reinsurance assets 1,959 1,531 1,738
Shareholder value of in-force business 999 916 940
Net post retirement benefit asset 66 66 65
Other assets 583 543 569
Other debtors 555 427 355
Total assets 54,840 45,938 50,123
Liabilities
Customer accounts 13,284 13,243 12,846
Debt securities in issue 13,109 10,425 10,879
Non-recourse funding 2,146 990 2,193
Derivatives 277 14 131
Insurance contract liabilities 3,764 3,770 3,850
Investment contract liabilities 17,889 13,903 16,193
Outstanding insurance and investment claims 109 118 115
Net post retirement benefit liability 172 165 169
Other liabilities 577 384 457
Subordinated liabilities 1,057 782 951
52,384 43,794 47,784
Share capital 86 86 86
Share premium 58 52 52
Retained profits 2,238 1,930 2,126
Capital reserves 135 122 129
Own shares held for the benefit of life (72) (54) (64)
assurance policyholders
Shareholders' equity 2,445 2,136 2,329
Minority interest 11 8 10
2,456 2,144 2,339
Total liabilities and equity 54,840 45,938 50,123
Consolidated Statement of Recognised Income and Expense EV Basis (Unaudited)
Six months to 30 June 2005
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Revaluation of property & equipment 1 - -
Change in value of available for sale financial assets (1) - -
Net amount recognised directly in equity - - -
Profit for the period 221 183 429
Total recognised income and expense for the period 221 183 429
Minority interests (1) (1) (2)
Attributable to equity holders 220 182 427
Movement in cost of own shares (8) - (10)
Dividends paid (104) (97) (142)
Total recognised income and expenses 108 85 275
Notes to the 2005 EV basis financial information
Six months to 30 June 2005
1. Operating Profit before tax
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Insurance & investment business
New business 45 28 58
contribution
Profit from existing
business
- Expected return 38 35 69
- Experience variances 9 12 11
- Operating assumption 7 17 39
changes
Development expenditure - - (4)
Expected investment 10 10 19
return
Operating profit before 109 102 192
tax
Banking
Net interest income 184 171 349
Non interest income 15 21 45
199 192 394
Administrative expenses (127) (122) (245)
including depreciation
Impairment losses on (6) (5) (10)
loans and receivables
Operating profit before 66 65 139
tax
Other activities
Non-interest income 22 23 48
Administrative expenses (25) (25) (48)
including depreciation
Operating profit before (3) (2) -
tax
Share of associate 24 22 56
Total operating profit 196 187 387
2. Other Charges/Credits
(a) Disposal of property and equipment
In the six months to 30 June 2005 the group disposed of a number of bank
branch properties and realised a profit before tax of Euro2m (2004 : Euro2m).
(b) Sale of Irish Estates Management
In December 2004 the group disposed of its property management subsidiary
Irish Estates Management Limited, the results for the 12 months ended 31
December 2004 include Euro19m profit arising on this disposal.
3. Discontinued Operations
On 2 June 2005 the group disposed of its UK life assurance subsidiary City of
Westminster Assurance Company Limited. The net proceeds were Euro65m, this compares
to a carrying value at date of disposal of Euro91m. The results for the period to
disposal (a profit of Euro2m) together with the loss on disposal are shown in the
income statement as discontinued operations. 2004 results have also been
reclassified to discontinued operations.
4. Life and investment new business
Life business (continuing operations)
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Present value of new business premiums (PVNBP)
- Single Premium 534 496 1,029
- Regular premium 131 111 207
- Regular premium capitalisation factor 4.7 4.7 4.8
PVNBP 1,148 1,022 2,029
Annual Premium Equivalent (APE) 185 161 310
New business contribution 37 25 46
New business margin
- PVNBP 3.2% 2.5% 2.3%
- APE 20.0% 15.6% 14.9%
ILIM
Present value of new business premiums (PVNBP) 750 337 1,601
Annual Premium Equivalent (APE) 75 34 160
New business contribution 8 3 12
New business margin
- PVNBP 1.1% 0.9% 0.8%
- APE 10.7% 9.1% 7.6%
Total new business
Present value of new business premiums (PVNBP) 1,898 1,359 3,630
Annual Premium Equivalent (APE) 260 195 470
New business contribution 45 28 58
New business margin
- PVNBP 2.4% 2.1% 1.6%
- APE 17.3% 14.5% 12.4%
5. Taxation
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Life operations
Operating profit (12) (12) (15)
Short term investment 12 6 18
fluctuations
Economic assumptions (8) - (10)
(8) (6) (7)
Banking operations (10) (10) (25)
Taxation on disposal of (1) (1) (1)
property and equipment
(19) (17) (33)
Government levy on financial (6) (6) (12)
institutions
(25) (23) (45)
6. Analysis of profit after tax on continuing activities
Six months to 30 June 2005
Gross Tax Net
Eurom Eurom Eurom
Operating profit
Insurance and investment 109 (12) 97
business
Banking 66 (10) 56
Other (3) - (3)
Share of associate 24 - 24
196 (22) 174
Short term investment 42 12 54
fluctuations
Effect of economic 30 (8) 22
assumption changes
Other credits (charges) 2 (1) 1
Government levy on financial - (6) (6)
institutions
270 (25) 245
7. Shareholders' Equity
30 June 30 June 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Insurance and investment 1,690 1,557 1,689
business
Banking 455 302 350
Other activities 33 29 30
Associate Undertakings 152 112 136
Goodwill 198 198 198
2,528 2,198 2,403
Minority interest (11) (8) (10)
Deduction in respect of
own shares held for the
benefit
of life assurance (72) (54) (64)
policyholders
Shareholders' equity 2,445 2,136 2,329
Investment and insurance business assets
are analysed as follows
30 June 30 June 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Property 76 92 93
Equities 14 15 11
Debt securities - 19 20
Deposits 503 443 440
Other assets and 98 72 185
liabilities
691 641 749
Shareholders' value of 999 916 940
in-force business
1,690 1,557 1,689
Analysis of movement in shareholders' equity attributable to investment and insurance business
Six months to 30 June 2005
Net Worth VIF Total
Eurom Eurom Eurom
Shareholders' equity as 749 940 1,689
at 1 January 2005
Operating profit after 41 56 97
tax on continuing
operations
Short term investment 10 44 54
fluctuations
Effect of economic (2) 24 22
assumption changes
Profit after tax on 43 (67) (24)
discontinued operations
Exchange rate movements (2) 2 -
Capital movements (148) - (148)
Shareholders' equity as 691 999 1,690
at 30 June 2005
The shareholders' equity as at 30 June 2005 (31 December 2004)
includes required capital of Euro514m (Euro488m) within the net
worth. The shareholders' value of in-force is net of a deduction
of Euro116m (Euro112m) in respect of the cost of maintaining the
required capital.
7. Shareholders' Equity (continued)
Analysis of insurance and investment business operating profit after tax
Six months to 30 June 2005
Net Worth VIF Total
Eurom Eurom Eurom
New business contribution (59) 95 36
Profit from existing business
- Expected return 74 (39) 35
- Experience variances 12 - 12
- Operating assumption 6 - 6
changes
- Expected investment return 8 - 8
Operating profit after tax 41 56 97
8. Interest receivable and similar income
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Loans and receivables to 343 316 629
customers
Loans and receivables to 59 50 103
banks
Debt securities and other 40 36 54
fixed income securities
Lease and instalment finance 33 31 62
475 433 848
Inter-group charges (2) (2) (5)
eliminated on consolidation
473 431 843
9. Operating expenses
Administrative and 250 239 488
acquisition expenses
Depreciation 14 15 30
Software amortisation 5 4 10
269 258 528
Analysed as follows
Banking operations 127 122 245
Life insurance
Administrative 87 82 168
Acquisition 47 38 83
Change in deferred (11) (3) (11)
acquisition costs
Development expenditure - - 5
Other operations (includes 25 25 48
corporate costs)
275 264 538
Inter-group charges (6) (6) (10)
eliminated on consolidation
269 258 528
10. Provision for impairment of loans and receivables
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
At start of the period 47 43 43
Charged against income statement 6 5 10
Amounts written off (3) (3) (6)
At end of the period 50 45 47
At end of period
Specific 31 28 29
Collective 19 17 18
50 45 47
11. Loans and receivables to customers
30 June 30 June 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Residential mortgage loans 20,546 16,565 18,460
Commercial mortgage loans 1,246 1,179 1,249
Finance lease, instalment 1,509 1,408 1,381
finance and term loans
23,301 19,152 21,090
Money market funds 352 - 8
Deferred fees, discounts and 203 122 164
fair value adjustments
23,856 19,274 21,262
Inter-group loans and (135) (88) (129)
receivables
23,721 19,186 21,133
12. Funds Under Management
30 June 30 June 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Funds managed on behalf of 18,051 14,159 16,383
unit-linked policyholders
Funds managed on behalf of 2,400 2,499 2,587
non-linked policyholders
20,451 16,658 18,970
Off-balance sheet funds 3,926 2,311 2,370
24,377 18,969 21,340
13. Earnings per share
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 disclosed.
The calculation is set out below:
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Weighted average ordinary shares in issue and ranking for
dividend excluding own shares held for the benefit of life
assurance policyholders 262,604,139 263,146,299 262,998,704
Weighted average ordinary shares held for the benefit of
life assurance policyholders 7,340,402 6,408,176 6,614,727
Weighted average ordinary shares in issue and ranking for
dividend including own shares held for the benefit of life
assurance policyholders 269,944,541 269,554,475 269,613,431
Profit for the period Euro220m Euro182m Euro427m
EPS including own shares held for the benefit of life 81.5 cent 67.5 cent 158.4 cent
assurance policyholders
Operating profit after tax for the period Euro168m Euro159m Euro335m
Operating EPS including own shares held for the benefit of
life assurance policyholders 62.3 cent 58.9 cent 124.2 cent
14. Reconciliation of Shareholders equity on EV basis to IFRS basis
Net worth VIF Total
Eurom Eurom Eurom
Statutory shareholders' equity as 1,375 526 1,901
at 30 June 2005
Move IFRS insurance VIF to after 100 (100) -
tax basis
Shareholder value of in-force on - 583 583
investment contracts
Changes in presentation of cost of 21 (21) -
FOGs
Deferred front end fees on 166 - 166
investment contracts
Deferred acquisition costs on (166) - (166)
investment contracts
Other IFRS 4 reserve adjustments (88) - (88)
Unwind own shares statutory 38 - 38
adjustment
Impact of discounted unit-linked (9) 9 -
CGT provisions
Deferred tax on IFRS 4 adjustments 11 - 11
EV basis shareholders' equity as at 1,448 997 2,445
30 June 2005
Notes to the 2005 EV basis financial information
Six months to 30 June 2005
15. EV Assumptions
Principal economic assumptions
The assumed future pre-tax returns on fixed interest securities are set by reference to gross redemption
yields available in the market at the end of the reporting period. The corresponding return on equities and
property is equal to the fixed interest gilt assumption plus the appropriate risk premium. An asset mix based
on the assets held at the valuation date within policyholder funds has been assumed within the projections.
30 June 31 Dec 30 June
2005 2004 2004
Equity risk premium 3.0% 3.0% 3.0%
Property risk premium 2.0% 2.0% 2.0%
Risk free rate 2.9% 3.5% 4.2%
Investment return
- Fixed interest 2.1% - 3.8% 2.5% - 4.2% 3.0% - 4.9%
- Equities 5.9% 6.5% 7.2%
- Property 4.9% 5.5% 6.2%
Risk margin 3.2% 3.2% 3.1%
Risk discount rate 6.1% 6.7% 7.3%
Expense inflation 3.5% 3.6% 4.0%
Other assumptions
The assumed future mortality, morbidity and persistency assumptions are based on published tables of rates,
adjusted by analyses of recent operating experience.
The management expenses attributable to life assurance business have been analysed between expenses relating
to the acquisition of new business and the maintenance of business in-force. No allowance has been made for
future productivity improvements in the expense assumptions.
Projected tax has been determined assuming current tax legislation and rates.
EEV results are computed on a before and after tax basis.
Treatment of financial options and guarantees (FOGs)
The main options and guarantees for which FOG costs have been determined are
(a) Investment guarantees on certain unit-linked funds, where the unit returns to policyholders are
smoothed subject to a minimum guaranteed return (in the majority of cases the minimum guaranteed
change in unit price is 0%, usually representing a minimum return of the original premium). An
additional management charge is levied on policyholders investing in these funds, compared to similar
unit-linked funds without this investment guarantee. This extra charge is allowed for in calculating
the FOG cost;
(b) Guaranteed Annuity Rates on a small number of products
(c) Return of Premium death guarantees on certain unit-linked single premium products;
(d) Guaranteed benefits for policies in the closed with-profit fund.
The main asset classes relating to products with options and guarantees are European and International
equities, Property, and government bonds of various durations.
The Deloitte's TSM Streamline Market Consistent model is used to derive the cost of FOGs. The model is
calibrated to the yield curve and to the market prices of equity options. Ten years of historical weekly data
are used to derive the correlation between the returns of different asset classes.
The model uses the difference between two inverse Gaussian distributions to model the returns on each asset
class. This allows the model to produce fat-tailed distributions, and provides a good fit to historical asset
return distributions.
The statistics relating to the model used as at 30 June 2005 are set out in the following table:
10-Year Return 20-Year Return
Mean1 StDev2 Mean StDev
European Assets (euro)
Bonds 3.2% 2.3% 3.7% 3.5%
Equities, Property 3.2% 18.7% 3.7% 20.4%
UK Assets (Sterling)
Bonds 4.2% 2.1% 4.3% 4.7%
Equities 4.2% 17.1% 4.3% 18.6%
1. The Market Consistent nature of the model means that that all asset classes earn the risk free rate.
No value is added by investing in riskier assets with a higher expected rate of return. The Means
quoted above reflect this.
2. Standard Deviations are calculated by accumulating a unit investment for n years in each simulation,
taking the natural logarithm of the result, calculating the variance of this statistic, dividing by
n and taking the square root. The results are comparable to implied volatilities quoted in
investment markets.
STATUTORY BASIS
Commentary on Statutory Results
As outlined in the basis of preparation note on page 24, the group has availed
of the exemption granted by the IASB not to restate 2004 comparatives for IAS
32, IAS 39 and IFRS 4. The statutory results for six months to June 2004 and for
the year to 31 December 2004 do not therefore reflect the impact of applying
these IFRS. These IFRS which cover insurance business and loans and advances
have a fundamental impact on the results of the group.
Statutory profits after tax for the six months to 30 June 2005 are Euro171m, a
reduction of Euro5m on 2004.
The group has previously published pro-forma results which restated 2004 results
assuming that IAS 39 and IFRS 4 had been implemented in 2004. These restatements
are available on the group's website. To enable a more meaningful comparison
between the half year results 2005 to 2004, the pro-forma income statement has
also been included in the interim 2005 accounts.
On a pro-forma basis the statutory results for the period are Euro43m, or 34%
higher than the same period in 2004, increasing from Euro128m to Euro171m. The key
driver behind this increase was growth in new business, good growth in
investment markets and tight cost control. In the life business new business
issued on an APE basis increased 33%. On the bank mortgage balances increased
19% with total assets ahead half year on half year by 22%. On the cost side
administrative and acquisition expenses increased 5% from Euro239m to Euro250m in the
first half of 2005.
The EV information set out on pages 3 to 22 employs embedded value methodology
for all of the group's insurance and investment business. The statutory results
include embedded value for insurance contracts only. Banking and other
businesses are accounted for under the same basis in both statutory and EV
results.
Basis of Preparation Statutory Basis
EU law requires that the next annual consolidated financial statements of the
group, for the year ended 31 December 2005, be prepared in accordance with
International Financial Accounting Standards ("IFRS") as adopted for use within
the EU.
IFRS brings into force phase 1 of the International Accounting Standard Board's
("IASB") insurance accounting project. In view of the phased implementation of
IFRS for insurance business, the group believes that shareholders will continue
to place considerable reliance on embedded value information relating to the
life assurance business. The statutory interim financial information includes
insurance contracts written in the life assurance business based on embedded
value earnings calculated using the EEV principles developed by the European CFO
forum. The EV basis financial information on pages 3 to 22 extends these
principles to investment contracts written in the life assurance business.
2005 interim financial information on pages 26 to 31 has been prepared on the
basis of the recognition and measurement requirements of the IFRS issued by the
International Accounting Standards Board (IASB) and adopted by the EU which are
expected to apply at 31 December 2005.
Certain IFRS that will be effective or available for early adoption at 31
December 2005 are still subject to change and to the issue of additional
interpretation. Accordingly the group's accounting policies and consequently the
financial information presented may change prior to the publication of the
group's 2005 annual report.
In particular, the EU adopted a carved out version of IAS 39 in October 2004
which restricted the use of the fair value option for financial liabilities. It
is expected that recent amendments made to IAS 39 will result in the EU
endorsing a revised version of IAS 39 which would allow the use of the fair
value option in certain circumstances and the group would avail of this option.
In the meantime the group has followed the guidance issued which clarifies that
liabilities which under the EU insurance accounts directive were permitted to be
measured at fair value can continue to be measured on this basis.
The accounting policies applied in the interim statement are those expected to
apply in the first set of annual IFRS financial statements for the year ended 31
December 2005. These are set out in Appendix 2 of the Transition to IFRS -
Restatement of 2004 financial information published on 21 July 2005 which is
available on the group's website (www.irishlifepermanent.ie).
The 2005 statutory financial information has been prepared on a consistent basis
with 30 June 2004 and 31 December 2004 restatements.
2004 comparative basis
The 2004 comparative financial information on pages 26 to 31 is prepared under
the reporting basis for statutory comparatives under IFRS for the 2004 financial
year. This basis reflects all standards with the exception of IAS 32, IAS 39 and
IFRS 4 where transitional concessions have been permitted by the IASB. These
concessions allow the group to continue to report comparatives for areas covered
by these standards on a ROI GAAP basis for 2004 only. These transitional
concessions include the accounting policies for loans and advances, debt
securities, derivatives and life insurance.
In addition the comparative income statement figures have also been shown on a
pro-forma basis to provide more meaningful comparative information by showing
the June 2004 financial information including the impact on the financial
information of the recognition and measurement principles of IAS 32, IAS 39 and
IFRS 4, with the exception of the income statement impact of derivative hedge
accounting where the necessary documentation was not in place prior to the
standard being agreed in late 2004.
In preparing the 2004 comparative information the group has adjusted amounts
previously reported in financial statements under ROI GAAP. The impact of the
transition from ROI GAAP to IFRS at 31 December 2004 is set out and explained in
the "Transition to IFRS - Restatement of 2004 Financial Information" document
published on 21 July 2005. This document also sets out and explains the impact
of the adoption of IAS 32, IAS 39 and IFRS 4 on shareholders equity at 1 January
2005. The impact of adopting IFRS for 30 June 2004 is set out in "Transition to
IFRS - Restatement of Preliminary Interim 2004 Financial Information" published
on 25 August 2005.
Estimates and assumptions
Certain amounts recorded include estimates and assumptions made by management
about insurance liability reserves, investment valuations, interest rates,
demographic and other factors. Actual results may differ from the estimates
made. Where estimates had been made under ROI GAAP, consistent estimates (after
adjustments to reflect any difference in accounting policies) have been made on
transition to IFRS. Judgements affecting the group's balance sheet have not been
revisited with the benefit of hindsight.
Consolidated Interim Income Statement - Statutory Basis (Unaudited)
Six months to 30 June 2005
Statutory Pro-forma
6 months 6 months 12 months 6 months
to 30 June to 30 June to 31 Dec to 30 June
2005 2004 2004 2004
Eurom Eurom Eurom Eurom
Interest receivable 473 432 843 431
Interest payable (287) (259) (491) (259)
186 173 352 172
Fees and commission income 30 29 60 29
Fees and commission expenses (3) (21) (41) (3)
Net trading income (7) - 6 -
Premiums on insurance 269 1,373 3,557 260
contracts
Reinsurers' share of premiums (73) - - (32)
on insurance contracts
Net investment return 1,614 769 1,680 765
Fees from investment 94 7 15 79
contracts and fund management
Change in shareholders' value 48 125 154 45
of in-force business
Other income - 5 10 4
Net operating income 2,158 2,460 5,793 1,319
Claims on insurance contracts (180) (587) (1,234) (195)
Reinsurers' share of claims 48 - - 48
on insurance contracts
Change in insurance contract (89) (1,392) (3,581) (115)
liabilities
Change in investment contract (1,472) - - (648)
liabilities
Administrative and (250) (234) (482) (239)
acquisition expenses
Depreciation and amortisation
Tangible fixed assets (14) (15) (30) (15)
Intangible assets - software (5) (4) (10) (4)
Impairment losses on loans (6) (4) (9) (5)
and receivables
Net operating expenses (1,968) (2,236) (5,346) (1,173)
Operating profit 190 224 447 146
Share of operating profits of 24 22 56 22
associated undertakings
Profit on the sale of 2 2 2 2
property and equipment
Profit on the disposal of IEM - - 19 -
Profit on ordinary activities 216 248 524 170
before taxation
Total taxation expense (47) (73) (137) (42)
Profit for the period on 169 175 387 128
continuing activities
Profit from discontinued 3 2 8 1
activities
Profit for the period 172 177 395 129
Minority interests share of (1) (1) (2) (1)
profit
Profit attributable to 171 176 393 128
shareholders
Earnings per share on
continuing activities
Basic (cent) 64.0 66.9 146.4 48.6
Fully diluted (cent) 63.5 66.4 145.5 48.3
Earnings per share on
discontinued activities
Basic (cent) 1.1 0.8 3.0 0.4
Fully diluted (cent) 1.1 0.8 3.0 0.4
Consolidated Interim Balance Sheet - Statutory Basis (Unaudited)
As at 30 June 2005
30 June 30 June 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Assets
Cash and balances at central banks 163 86 176
Items in the course of collection 126 119 67
Loans and receivables to banks 5,100 5,233 4,508
Loans and receivables to customers 23,721 19,008 20,911
Debt securities 7,802 7,138 8,371
Equity shares 11,591 8,843 10,134
Investment properties 1,889 1,632 1,736
Derivatives 133 106 117
Interest in associated undertaking 152 112 136
Goodwill and other intangible assets 256 224 251
Property and equipment 326 319 318
Shareholders' value of in-force business 526 1,115 1,143
Deferred acquisition costs 172 - -
Reinsurance assets 1,959 1,241 1,444
Net post retirement benefit asset 66 66 65
Other assets 142 161 93
Prepayments and accrued income 413 335 325
Total assets 54,537 45,738 49,795
Liabilities
Deposits by banks 1,493 2,071 1,250
Customer accounts 11,791 11,171 11,587
Debt securities in issue 13,109 10,425 10,928
Non recourse funding 2,146 990 2,193
Derivatives 277 14 2
Insurance contract liabilities 3,764 17,423 19,803
Investment contract liabilities 17,863 - -
Outstanding insurance and investment 109 118 115
claims
Net post retirement benefit liability 172 165 169
Current tax liabilities 48 38 44
Deferred tax liabilities 118 171 181
Other liabilities 379 248 168
Deferred front end fees 173 - -
Accruals and deferred income 129 120 242
Subordinated liabilities 1,057 782 934
52,628 43,736 47,616
Shareholders Equity
Share capital 86 86 86
Share premium 58 52 52
Retained profits 1,622 1,734 1,904
Other reserves 135 122 126
Shareholders equity excluding minority 1,901 1,994 2,168
interest
Minority interest 8 8 11
Shareholders equity including minority 1,909 2,002 2,179
interest
Total liabilities and equity 54,537 45,738 49,795
Consolidated Statement of Recognised Income and Expense Statutory Basis (Unaudited)
Six months to 30 June 2005
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Revaluation of property & equipment 6 - 4
Change in investment/insurance contract liabilities arising from the (1) - (1)
revaluation of property and equipment
Change in value of available for sale financial assets (1) - -
Net amount recognised directly in equity 4 - 3
Profit for the period 172 177 395
Total recognised income and expense for the period 176 177 398
Minority interests (1) (1) (2)
Attributable to equityholders 175 176 396
Movement in cost of own shares (7) - (10)
Dividends paid (104) (97) (142)
Total recognised income and expense 64 79 244
Consolidated Interim Cashflow Statement Statutory Basis (Unaudited)
Six months to 30 June 2005
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
Eurom Eurom Eurom
Net cashflow (outflow)/inflow from (153) 125 345
operating activities
Investing activities
Purchase of property and equipment (20) (11) (27)
Sale of property and equipment 6 5 11
Purchase of intangible assets (11) (4) (38)
Sale of Irish Estates Management - - 21
Limited
Sale of City of Westminster Assurance 69 - -
Company Limited
Dividends received from associated 8 5 16
undertaking
52 (5) (17)
Financing activities
Issue of ordinary share capital 6 1 1
Issue of new subordinated liabilities 74 - 144
Interest paid on subordinated (35) (36) (41)
liabilities
Equity dividends paid (104) (97) (142)
(59) (132) (38)
Tax paid (28) (17) (88)
(Decrease) / increase in cash (188) (29) 202
Notes to the 2005 Interim Statement - Statutory basis
Six months to 30 June 2005
1. Reconciliation of Opening Shareholders Equity
As outlined in the basis of preparation note the group adopted
IAS 32, IAS 39 and IFRS 4 with effect from 1 January 2005. The
impact of opening shareholders equity of these changes is as follows
Eurom
Shareholders' equity at 31 December 2004 2,168
IAS 39
Impairment provisions 50
Effective yield 77
Available for sale 3
IFRS 4
Deferred acquisition costs 151
Deferred front end fees (168)
Shareholders' value of in-force business on (514)
investment contracts
Other reserve changes 62
Shareholders' equity at 1 January 2005 1,829
Full details of these changes are included in the document
"Transition to IFRS - Restatement of 2004 Financial
Information" which was issued on 21 July 2005.
2. Discontinued activities
On 2 June 2005 the group disposed of its UK life assurance
subsidiary City of Westminster Assurance Company Limited. The
proceeds net of costs were Euro65m, the profit after tax for
the period up to the date of disposal was Euro3m, no profit or
loss arose on disposal.
3. Earnings per share
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2005 2004 2004
(a) Basic EPS
Weighted average ordinary shares in issue and ranking for 262,604,139 263,146,299 262,998,704
dividend
Profit on continuing operations for the period Euro168m Euro174m Euro385m
EPS on continuing operations 64.0 66.9 146.4
Profit on discontinued operations for the period Euro3m Euro2m Euro8m
EPS on discontinued operations 1.1 0.8 3.0
(b) Fully diluted EPS
Weighted average of potential dilutive ordinary shares 1,987,836 1,778,982 1,597,711
arising from the group's share option schemes
Weighted average number of ordinary shares used in the 264,591,975 264,925,281 264,596,415
calculation of fully diluted EPS
Fully diluted EPS on continuing operations 63.5 66.4 145.5
Fully diluted EPS on discontinued operations 1.1 0.8 3.0
4 The interim financial information was approved by the board of directors on 6 September 2005.
Independent review report to Irish Life & Permanent plc
Introduction
We have been engaged by the company to review the financial information set out
on pages 23 to 31 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Irish Stock Exchange. Our review has been undertaken so that we
might state to the company those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual financial statements except where any changes, and the reasons
for them, are disclosed.
As disclosed in the basis of preparation note on page 24 to the financial
information, the next annual financial statements of the Group will be prepared
in accordance with IFRSs adopted for use in the European Union. The accounting
policies that have been adopted in preparing the financial information are
consistent with those that the directors currently intend to use in the next
annual financial statements. There is, however, a possibility that the directors
may determine that some changes to these policies are necessary when preparing
the full annual financial statements for the first time in accordance with those
IFRSs adopted for use by the European Union. This is because, as disclosed in
the basis of preparation note, the directors have anticipated that certain
standards, which have yet to be formally adopted for use in the EU, will be so
adopted in time to be applicable to the next annual financial statements.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
Review of interim financial information issued by the Auditing Practices Board
for use in Ireland and the United Kingdom. A review consists principally of
making enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.
KPMG
Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
6 September 2005
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QQLFBEKBXBBB
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