RNS Number:8953C
Irish Life & Permanent PLC
29 August 2007
IRISH LIFE & PERMANET PLC
Interim Report
Six months to 30 June 2007
Presentation of Information
Statutory Basis (IFRS)
The Stock Exchange requires that the six months to June 2007 interim financial
information of the group be prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards as adopted
for use within the EU ("IFRS").
The statutory basis applies IFRS to all operations including the application of
IFRS 4 'Insurance Contracts' to the group's life assurance operations. IFRS 4
allows insurance contracts to continue to be accounted for under previous GAAP
as adjusted for any changes which results in more relevant and reliable
information. As a consequence of this the results for the group's insurance
contracts continue to be prepared under the embedded value methodology as
described below.
The statutory basis accounts are included on pages 30 to 40.
Embedded Value Basis (EV)
The EV basis shows the results of the group's life assurance operations
(including both insurance and investment contracts) prepared in accordance with
the European Embedded Value (EEV) Principles issued in May 2004 by the European
Chief Financial Officers' Forum. In October 2005 the CFO Forum published
Additional Guidance on EEV Disclosure applicable for financial reporting in the
year ending 31 December 2006 which has been reflected in this interim financial
information.
The results of all other operations are prepared in accordance with IFRS.
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 most commonly used by the investment community to assess the
performance of life businesses.
The EV basis results are included on pages 4 to 27.
Financial Highlights
6 months ended 30 June 2007 (Unaudited)
H1 2007 H1 2006 Growth
EV Basis %
Profit after tax Euro289m Euro202m 43
Total EPS 105.0 cent 74.0 cent 42
Operating profit before tax Euro321m Euro242m 33
Operating EPS 102.8 cent 81.3 cent 26
Statutory Basis (EU IFRS)
Profit after tax Euro222m Euro130m 71
EPS on continuing activities 83 cent 49 cent 69
Banking
New loans issued Euro6.3bln Euro6.4bln -
Lending book Euro37.0bln Euro30.0bln 23
Mortgage loan book (Ireland) Euro24.7bln Euro20.4bln 21
Life Assurance
Life new business
- APE Euro350m Euro249m 41
- PVNBP Euro2.4bln Euro1.7bln 41
Life and investment new business
- APE Euro594m Euro358m 66
- PVNBP Euro4.8bln Euro2.8bln 74
Dividend
Interim Dividend per share 22.5 cent 20.1 cent 11.9
Commenting on the results Denis Casey, Group Chief Executive said:
These are an outstanding set of results for the period. Each of our key
businesses has strong momentum and are setting the pace in their respective
markets.
The performance of the life business is particularly strong. The market for
life and pensions products has never been better and we are perfectly primed to
draw maximum advantage. We have grown market share to 30% in the combined
retail and corporate life market.
In permanent tsb, we achieved a very strong lending performance despite a more
subdued Irish housing market with loan book growth of 23% delivering a market
share of 21%. In addition we continued to dramatically grow our current account
customer base.
Looking forward, we are very confident about the outlook for the group through
the remainder of the year. The economy remains strong, there is exceptional
growth in the life and pensions market and permanent tsb is performing well.
Embedded Value Basis
Commentary on Results EV basis
Consolidated Income Statement - EV Basis
For the 6 months ended 30 June 2007 (Unaudited)
6 months to 6 months to 12 months to
30 June 2007 30 June 2006 31 Dec 2006
Eurom Eurom Eurom
Operating profit
Insurance and Investment Business 194 134 274
Banking 111 90 202
Other (1) (1) (2)
304 223 474
Share of associate / joint venture 17 19 55
Operating profit before tax 321 242 529
Short-term investment fluctuations 21 1 101
Effect of economic assumption changes (11) (29) (38)
Property income attributable to minority interests 7 - -
Other non operational costs (3) - -
Profit before tax 335 214 592
Taxation (36) (11) (28)
Total profit after tax 299 203 564
Minority interest (10) (1) (3)
Total profit after tax attributable to equityholders 289 202 561
Overview
Total profit after tax for the half year at Euro289m was 43% ahead of the first
half 2006 of Euro202m.
This principally reflects strong growth in operating profit - which was ahead
33% in the period - combined with the impact on the embedded value of the
group's life business of changes in interest rates and growth in investment
markets which were net positive (Euro10m) in first half 2007 in comparison to the
overall negative impact (Euro28m) in the first half 2006.
At the operating level pretax profits were ahead 33% to Euro321m (2006: Euro242m) for
the first six months of 2007. Operating profits in the group's core banking and
life assurance business grew 36% to Euro304m from Euro223m in the prior year period.
This was driven by a 45% growth in the embedded value profits of the life
business to Euro194m (2006: Euro134m), reflecting buoyant new business volumes
combined with strong growth in the in-force book, and growth of 23% in the
group's banking profits which increased to Euro111m from Euro90m. This level of
profit growth in the bank reflects strong growth in risk assets and a robust net
interest margin performance.
The post tax contribution from the group's interest in Allianz (Ireland), a
general insurance business, was in line with the first half 2006 outcome at Euro18m
(2006: Euro19m).
Short term investment fluctuations reflect the impact of actual against assumed
investment returns on the embedded value of the group's life operations. The
outcome from the first six months of 2007 was a positive Euro21m compared to Euro1m in
2006 and reflects the comparatively stronger investment markets which prevailed
in first half 2007 when compared to first half 2006 and the fact that actual
returns exceeded the embedded value assumptions.
The first half 2007 outcome includes a negative Euro11m arising from changes in the
economic assumptions used to calculate the life assurance embedded value. This
principally relates to the impact of an increase in the risk discount rate used
to compute the embedded value from 7.4% to 8.0% as a result of increases in
medium term euro bond rates. In first half 2006 changes in the economic
assumptions led to a negative effect of Euro29m as the risk discount rate was
increased to 7.3% from 6.5%.
Other non operational costs of Euro3m in the first half 2007 represents the group's
contribution to the Irish government's social finance initiative fund. This is
a once off payment to a government led social initiative in which all of the
Irish banks agreed to participate.
The tax charge for the first half of the year of Euro36m gives an effective tax
rate on total profits of 11%. This compares with what was an exceptionally low
rate of 5% in the prior year which was principally due to the release of
timed-out deferred tax provisions on property capital allowances. At operating
profit level the effective tax rate is 12% and reflects the mix of life and
banking activities.
Banking Business
The results of the group's banking business for the six months to 30 June 2007
are set out below.
6 months to 6 months to 12 months to
30 June 2007 30 June 2006 31 Dec 2006
Eurom Eurom Eurom
Net interest income 241 199 429
Other income 22 23 45
Trading income 5 6 12
268 228 486
Administrative expenses (150) (134) (273)
Impairment provisions (8) (7) (14)
Operating profit before tax 110 87 199
Investment gains 1 3 3
111 90 202
Overall pretax profits in the group's banking business grew 23% to Euro111m in the
first half 2007 compared to Euro90m in 2006.
Net interest income rose 21% to Euro241m from Euro199m driven by strong growth in loan
and current account balances, a good performance from the bank's Treasury
operations and the positive impact of reduced regulatory liquidity holding
requirements.
The net interest margin for the six months to 30 June 2007 was 1.15% compared to
a margin of 1.19% reported for the full year 2006 and the first half of 2006.
In addition to the ongoing impact of increased levels of wholesale funding the
net interest margin was negatively affected by a repricing of new mortgage
business in response to competitive pressures in early 2007 and by basis risk in
the Irish mortgage portfolio as interest rates increased. Offsetting these
negatives was the positive impact of increasing interest rates on liability
spreads, particularly the yield on the banks growing current account portfolio,
and the impact of a reduced level of regulatory liquidity holdings which reduced
the level of liquid assets which the bank is required to hold from April 2007.
Total loans and advances to customers at 30th June 2007 were Euro37.0bln an
increase of 9% on balances outstanding at 31st December 2006 (Euro33.8bln) and a
23% increase on outstanding balances at 30 June 2006 of Euro30bln. The growth in
balances over the principal business lines was as follows:
30 June 30 June Growth 31 Dec
2007 2006 2006
Eurobln Eurobln % Eurobln
Mortgage lending ROI * 24.7 20.4 21 23.1
Consumer finance 2.2 1.9 16 2.0
Commercial lending 2.1 1.7 27 1.9
29.0 24.0 21 27.0
Mortgage lending - UK (#Stg) * 5.4 4.1 30 4.6
Total lending - Eurom 37.0 30.0 23 33.8
* including securitised mortgages
Irish residential mortgage balances outstanding grew 21% to Euro24.7bln when
compared to balances outstanding at 30 June 2006 of Euro20.4bln. The first half
2007 saw a moderation in the level of activity in the Irish housing market from
the unprecedented levels experienced in the first half 2006 (when new mortgage
issues were 70% higher than the first half 2005) reflecting the effect of rising
euro interest rates and the uncertainty around changes to stamp duty on
residential property before the General Election. As a consequence total gross
new mortgages issued at Euro3.5bln were down 19% on first half 2006 issues of
Euro4.2bln.
In the UK Capital Home Loans, the group's centralised mortgage lender, had an
extremely successful first half 2007 with balances outstanding increasing 30% to
Stg#5.4bln compared to Stg#4.1bln outstanding at 30 June 2006 on foot of very
strong new business flows. Gross new issues were ahead 62% to Stg1.1bln (2006:
Stg#0.7bln) as the company expanded its geographic distribution reach.
The consumer finance portfolio grew 16% to Euro2.2bln compared to Euro1.9bln at 30
June 2006. New consumer finance loans issued in the first six months of 2007
were ahead 10% to Euro0.9bln compared to Euro0.8bln in the corresponding prior year
period. The commercial loan portfolio at 30 June 2007 was Euro2.1bln compared to
Euro1.7bln at 30 June 2006 an increase of 27%.
Customer account balances at 30 June 2007 were Euro14.4bln (30 June 2006: Euro12.8bln)
an increase of 12%. In the first half of 2007 the bank continued its focus on
the acquisition of new current account customers with 35,000 new accounts opened
in the period following on from the 68,000 new accounts opened in 2006. This
outcome was particularly pleasing in light of the increasing competition in the
current account market place in the first half of the year. Reflecting the new
account gains current account balances increased 17% to Euro2.7bln (30 June 2006:
Euro2.3 bln).
Other income at Euro22m is in line with first half 2006 (Euro23m) and principally
reflects the impact of the bank's fee free current account strategy.
Other income excludes any contribution from bancasurance 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 2007 were Euro59m, an increase
of 51% on the first half 2006 (Euro39m). The pre-tax operating profit achieved on
the Bancassurance book of life business was Euro37m in the first half 2007, up 29%
on the first half 2006 of Euro28m.
Trading income of Euro5m generated by Group Treasury was in line with that achieved
in the first half 2006 (Euro6m) and to a large extent reflects the pre hedging of
committed fixed rate mortgage exposures which, under IFRS are marked to market
when the hedge is matched to actual loans. Treasury continues to be risk
adverse with low value at risk limits in place and a conservative liquidity
portfolio being held.
Administration expenses in the first half 2007 increased 12% to Euro150m from
Euro134m. This increase reflects growth in new business volumes, particularly
within Capital Home Loans, and a short term increase in resources required to
deal with the high level of maturing of special savings incentive accounts
("SSIAs"). Excluding these items the underlying level of cost growth was in the
region of 7%.
Reflecting the excellent credit quality which prevails within all of the group's
loan portfolios impairment provisions grew at a slower pace than growth in the
portfolios. The impairment provision charge grew 14% to Euro8m in the first half
2007 (2006: Euro7m) compared to an increase of 23% in the loan portfolios.
Provisions held continue to be conservative with reserves of Euro61m compared to
arrears of Euro48m.
Investment gains of Euro1m to June 2007 (2006: Euro3m) represents profits achieved on
the disposal of investment property in the first six months of the year.
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 2007 are set out below:
6 months to 6 months to 12 months to
30 June 2007 30 June 2006 31 Dec 2006
Eurom Eurom Eurom
New business contribution 82 65 128
In-force business contribution
Expected return
In-force 59 46 89
Net worth 16 10 26
Experience variances 21 8 14
Assumption changes 16 5 17
112 69 146
Operating profit before tax 194 134 274
In-force Business
The operating profit before tax on the group's life business for the 6 months
ended 30 June 2007 was Euro194m a 45% increase on the corresponding period in 2006.
The new business contribution increased 26% to Euro82m from Euro65m reflecting a
very strong sales performance.
The expected return on the in-force book increased 28% to Euro59m (2006: Euro46m) due
to strong growth in the portfolio in addition to the impact of an increase in
the opening risk discount rate from 6.5% to 7.4%.The expected return on net
worth, which relates to earnings on shareholder assets calculated by reference
to the assumed long-term rate of return on equities property and bonds and the
actual return on short-term cash increased to Euro16m from Euro10m in 2006 reflecting
higher euro interest rates and growth in the net worth of the insurance
business.
Experience variances continued to be very positive at Euro21m compared to Euro8m in
2006 with continued strong risk experience achieved on both mortality and
morbidity. Assumption changes, largely relating to expense productivity gains
as a result of lower unit costs resulting from book growth in excess of cost
inflation, were a positive Euro16m compared to Euro5m in 2006. The assumptions
underlying the embedded value continue to be prudent.
New Business
The new business contribution in the half year 2007 increased 26% to Euro82m from
Euro65m in 2006. This outcome was driven by a 41% increase in life new business
sales (excluding ILIM) to Euro350m (2006: Euro249m) on an APE basis (41% on a PVNBP
basis).
Sales APE Basis PVNBP Basis
H1 07 H1 06 Change H1 07 H1 06 Change
Eurom Eurom % Eurom Eurom %
Retail Life 208 135 54 1,409 943 49
Corporate Life 122 98 24 744 568 31
International 20 16 25 204 163 25
350 249 41 2,357 1,674 41
Investment (ILIM) 244 109 124 2,443 1,089 124
Total 594 358 66 4,800 2,763 74
Retail Life
Demand in the retail life assurance market was very strong in the first half of
2007 with retail life sales increasing 54% to Euro208m from Euro135m in 2006. On a
PVNBP basis sales were ahead 49% to Euro1.4bln. Sales were strong in all
distribution channels. From a product perspective sales of pensions (up 66%)
and investments (up 56%) were particularly strong driven by excellent investment
performance, the introduction of a new self-administered pension product and in
lump sum investments benefiting from maturing SSIAs. With regard to protection
sales these were ahead 3% reflecting the more subdued residential mortgage
market in first half 2007.
Corporate Life
Market conditions for the group's corporate life business were very favourable
in the first half of 2007 with continued growth in salaries and employment in
the Irish economy. New business sales were ahead 24% to Euro122m from Euro98m in
first half 2006. While sales were strongly ahead in all product lines sales of
new defined contribution schemes and annuities were particularly buoyant.
Annuity sales benefited from an increase in the use of annuity products to buy
out defined benefit pension scheme liabilities.
Investment Management
Continued excellent fund management performance on both the active and passive
side of the group's investment management business led to record levels of fund
inflows in the first half of 2007. Gross new inflows were Euro2.4bln (including
Euro679m arising from on the acquisition of the EBS Summit Funds) compared to
Euro1.1bln in the first half 2006. As a result of these strong inflows group funds
under management increased 13% to Euro36bln from Euro31.8bln at the year ended 31
December 2006.
New Business Margins
Overall new business margins, excluding ILIM were 19.5% compared to 20.6% for
the full year 2006. Including ILIM new business margins were 13.9 % compared to
18.1% for the full year 2006 made up as follows:
APE Basis PVNBP Basis
H1 07 FY 06 H1 07 FY 06
% % % %
Life 19.5 20.6 2.9 3.1
Investment (ILIM) 5.9 11.4 0.6 1.1
Total 13.9 18.1 1.7 2.4
The reduction in life APE margins reflects the high volume of pensions and
investment new business sales which led to a less favourable product mix. In
addition the increase in the opening risk discount rate from 6.5% to 7.4% had a
negative impact on reported margins for the first half 2007. The reduction in
investment margins is mainly as a consequence of a high number of large ticket
low margin sales being achieved in first half 2007.
When calculated on the basis of present value of new business premiums ("PVNBP")
margins including ILIM were 1.7% in the first half 2007 (full year 2006: 2.4%).
The consolidated internal rate of return achieved on life new business sales was
13.6% which compares to 12.1% achieved in the full year 2006.
Capital and Liquidity
In the first half 2007 the group raised Euro200m of Tier 2 debt in the life
company. The proceeds of this issue, which was well supported by the market,
was used to fund a Euro230m dividend from the life company to the bank. The issue
served to rebalance the group's debt capital as between the life company and the
bank.
The group's capital position remained strong at 30 June 2007. In the bank the
Tier 1 and total capital ratios were 11.2% (31 December 2006: 10.4%) while 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 2006
1.8 times).
During first half 2007 the Irish Financial Services Regulatory Authority changed
the regulations governing liquidity requirements in the Irish banking system.
Previously Irish banks were required to meet a minimum 25% liquidity ratio.
Under the new protocol required liquidity holdings are based upon various cash
flow stress tests. As a consequence of the implementation of the new protocol
the liquidity ratio within the group's banking business at 30 June 2007 was 15%
compared to 26% at 31 December 2006. All of the bank's liquid assets are held
in sovereign debt or with good quality bank counterparties. In the life company
shareholder assets are principally invested in cash.
Dividend
The directors have declared an interim dividend of 22.5 cent per share for the
first six months of 2007. This compares to an interim dividend paid in 2006 of
20.1 cent per share. The dividend will be paid on 14 November 2007 to
shareholders on the register as at 5 October 2007. The ex dividend date is 3
October 2007.
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 Basis interim financial information
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 principles of IFRS issued by the IASB and adopted by the EU which
were effective at 30 June 2007.
IFRS 4 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 as a whole. 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 methodology produces an
Embedded Value (EV) as a measure of the consolidated value of shareholders'
interests in the business covered by the EEV Principles. The EV basis interim
financial information extends these principles to investment contracts written
in the life assurance business.
For all business other than "covered business", the EV interim financial
information incorporates the same values and earnings included in the statutory
interim financial information, determined using the IFRS bases. The EV interim
financial information also reclassifies and summarises the information included
in the interim statutory financial information and restates assets in respect of
own shares consistent with the recognition of policyholders' liabilities.
The Directors acknowledge their responsibility for the preparation of the
supplementary EV basis information.
The methodology applied to produce the EV basis for the period to 30 June 2007
is consistent with the methodology used to produce the EV information for the
year ended 31 December 2006.
Covered Business
The EEV Principles are applied to value "covered business" as defined by the
Principles. This includes individual and group life assurance and investment
contracts, pensions and annuity business written in Irish Life Assurance plc and
Irish Life International, and the investment management business written in
Irish Life Investment Managers Limited.
All business other than the covered business is included in the EV Basis interim
financial information on the same basis as that applied to the business in the
statutory interim financial information.
In the EV interim financial information, the same valuation approach is applied
to both insurance and investment contracts within the covered business.
Embedded Value
Embedded Value (EV) is the present value of shareholders' interests in the
earnings distributable from assets allocated to the covered business after
sufficient allowance is made according to the EEV Principles for the aggregate
risks in the covered business. The EV consists of the following components:
- free surplus allocated to the covered business
- required capital, less the cost of holding required capital
- present value of future shareholder cash flows from in-force covered
business (PVIF), including an appropriate deduction for the time value of
financial options and guarantees.
The value of future new business is excluded from the EV.
The cost of holding required capital is defined as the difference between the
amount of the required capital and the present value of future releases,
allowing for future investment returns, of that capital.
Basis of Preparation - EV Basis interim financial information (continued)
Free Surplus and Required Capital
Free surplus is defined as the market value of assets in the covered business
less supervisory liabilities less required capital. It is the market value of
any capital and surplus allocated to, but not required to support, the in-force
covered business at the valuation date.
The level of required capital reflects the amount of assets attributed to the
covered business in excess of that required to back regulatory liabilities whose
distribution to shareholders is restricted. The EEV Principles require this
level to be at least the level of solvency capital at which the local
supervisory authority is empowered to take action and any further amount that
may be encumbered by local supervisory restrictions. In light of this the
Directors have set the level of required capital to be 150% of the regulatory
minimum solvency margin requirement at the valuation date, including the
additional margin required under the Solvency 1 rules. The Directors consider
this to be a conservative level of capital to manage the covered business,
allowing for the supervisory basis for calculating liabilities, the insurance
and operational risks inherent in the underlying products and the methods used
to value financial options and guarantees included in those products.
New Business
New business premiums reflect income arising from the sale of new contracts
during the reporting period. Increases to premiums that are generated by
policyholders at their discretion are included in new business as they occur.
Increases to renewal premiums on group pension contracts are treated as new
business premiums.
The new business contribution is the present value of future shareholder
cashflows arising from the new business premiums written in the period less a
deduction if relevant for the time value of financial options and guarantees.
The contribution makes full allowance for the associated amount of required
capital and includes the value of expected renewals on new contracts.
The EEV Principles require a measure of the present value of future new business
premiums (PVNBP) to be calculated and expressed at the point of sale. The PVNBP
is equivalent to the total single premiums plus the discounted value of regular
premiums expected to be received over the term of the contracts using the same
economic and operating assumptions used for calculating the new business
contribution. The new business margin reported under EEV is defined as the
ratio of the new business contribution to PVNBP.
Projection Assumptions
Projections of future shareholder cash flows expected to emerge from covered
business are determined using realistic assumptions for each component of cash
flow and for each policy group. Future economic and investment return
assumptions are based on period end conditions. The assumed discount and
inflation rates are consistent with the investment return assumptions.
The assumptions for demographic elements, including mortality, morbidity,
persistency and expense experiences, reflect recent operating experiences and
are reviewed annually. Allowance is made for future improvements in annuitant
mortality based on experience and externally published data. Favourable changes
in operating experience are not anticipated until the improvement in experience
has been observed.
All costs relating to the covered business are allocated to that business. The
expense assumptions used for the projections therefore include the full cost of
servicing the business. The costs include future depreciation charges in
respect of certain property and equipment included in the free surplus. Certain
group costs allocated to the life company are not included within the cash flow
projections and are accounted for on an annual basis in the other group results.
Basis of Preparation - EV Basis interim financial information (continued)
Risk Discount Rate
The risk discount rate is a combination of a base risk-free rate and a risk
margin, which reflects the residual risks inherent in the covered business,
after taking account of prudential margins in the supervisory liabilities, the
required capital and the specific allowance for financial options and
guarantees.
The Group has adopted a bottom-up approach to the determination of the risk
discount rate. Each element of risk is assessed in turn and a cost is reflected
as an addition to the base risk-free discount rate. The risk discount rate
derived in this way reflects the risk of volatility associated with the cash
flows in the embedded value model.
The key assumptions are set out in note 13.
The market risk margin neutralises the effect of assuming future investment
returns in excess of the base risk-free rate.
The non-market risk margin is based on an estimate of the impact of each of the
following risks - mismatch risk, credit risk, demographic risks including
mortality, morbidity, persistency and expense risks, operational risk and
liquidity risk.
An allowance is made for the diversification effect in that each of the risks is
not expected to occur simultaneously. Financial options and guarantees are
explicitly valued using a market-consistent approach and no further risk
allowance is included for these in the risk discount rate. The non-market risk
margin was determined by the Directors following a review of the estimates
emerging from the above exercise.
Financial Options and Guarantees
Under the EEV Principles an allowance for the time value of financial options
and guarantees ("FOG") is required where a financial option exists which is
exercisable at the discretion of the policyholder. The time value of an option
reflects the additional value inherent in the option due to the potential for
the option to increase in value prior to its expiry date, usually due to
movements in the market value of assets. The value of an option based on market
conditions at the date of the valuation is referred to as the intrinsic value.
Allowance is made for the intrinsic value of FOGs in the supervisory liabilities
and the cost is reflected in the PVIF. An explicit deduction is made to the
PVIF to allow for the impact of future variability of investment returns on the
cost of FOGs (time value). The time value of FOGs is calculated using
stochastic models calibrated on a market consistent basis.
The main financial options and guarantees and the assumptions used to value them
are described in note 13.
Service Companies
All services relating to the covered business are charged on a cost recovery
basis.
Tax
The projections include on a discounted basis all tax that is expected to be
paid under covered business under current legislation, including tax that would
arise if surplus assets within the covered business were eventually to be
distributed.
Basis of Preparation - EV Basis Interim financial information (continued)
Analysis of Profit
The profit from the covered business is analysed into three main components:
* New business contribution
The contribution from new business written in the period is calculated as at the
point of sale using assumptions applicable at the start of the period. This is
then rolled forward to the end of the financial period using the risk discount
rate applicable at the start of the reporting period.
* Profit from existing in-force business
The profit from existing business is calculated using opening assumptions and
comprises:
- Interest at the risk discount rate on the value of in-force business
allowing for the timing of cash-flows ("expected return");
- Experience variances: when calculating embedded values it is necessary to
make assumptions regarding future experiences including persistency (how long
policies will stay in force), risk (mortality and morbidity), future expenses
and taxation. Actual experience may differ from these assumptions. The
impact of the difference between actual and assumed experience for the period
is reported as experience variances;
- Operating assumption changes: the assumptions on which embedded values are
calculated are reviewed regularly. Where it is considered appropriate in the
light of current or expected experience to change any assumptions regarding
expected future experience, the impact on total value of in-force business of
any such change is reported as an "operating assumption change".
* Expected investment return
The expected investment earnings on the net assets attributable to shareholders
are calculated using the future investment return assumed at the start of the
period.
Two further items make up the total profit arising from the covered business:
* Short term investment fluctuations
This is the impact on the EV of differences between the actual investment return
and the expected investment return assumptions assumed at the start of the
period.
* Effect of economic assumption changes
This is the impact on the EV of changes in external economic conditions
including the effect changes in interest rates have on risk discount rates and
future investment return assumptions.
Consolidated Interim Income Statement - Embedded Value Basis (Unaudited)
Six months to 30 June 2007
Notes 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Operating profit
Insurance & investment business 194 134 274
Banking 111 90 202
Other (1) (1) (2)
304 223 474
Share of associate / joint venture 17 19 55
Operating profit before tax 1 321 242 529
Short-term investment fluctuations 21 1 101
Effect of economic assumption changes (11) (29) (38)
Property income attributable to minority interests 7 - -
Other non operational costs (3) - -
Profit before tax 335 214 592
Taxation 3 (36) (11) (28)
Profit for the period 299 203 564
Attributable to
Equityholders 289 202 561
Minority interests in subsidiaries 3 1 3
Minority interests in property unit trusts 6 7 - -
299 203 564
Earnings per share including own shares held for
the benefit of life assurance policyholders (cent) 11 105.0 74.0 204.9
Operating earnings per share including own shares
held for the benefit of life assurance
policyholders (cent) 11 102.8 81.3 177.9
Consolidated Interim Balance Sheet - Embedded Value Basis (Unaudited)
As at 30 June 2007
Notes 30 June 30 June 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Assets
Cash and other receivables 495 466 380
Investments 32,532 25,759 29,192
Loans and receivables to banks 4,041 6,439 8,429
Loans and receivables to customers 9 36,724 29,907 33,732
Interest in associated undertaking / joint
venture 173 157 174
Reinsurance assets 1,950 1,927 1,991
Shareholder value of in-force business 1,500 1,182 1,354
Net post retirement benefit asset 79 71 73
Goodwill and intangible assets 257 264 261
Property and equipment 495 421 486
Other debtors and prepayments 730 511 543
Total assets 78,976 67,104 76,615
Liabilities
Customer accounts 14,429 12,833 13,643
Deposits by banks 2,018 3,800 5,526
Debt securities in issue 20,233 15,747 18,432
Non-recourse funding 3,534 4,159 3,813
Derivative liabilities 894 350 610
Insurance contract liabilities 4,057 3,905 4,073
Investment contract liabilities 27,350 21,211 24,693
Outstanding insurance and investment claims 139 127 124
Net post retirement benefit liability 165 157 159
Deferred taxation 84 28 77
Other liabilities and accruals 900 598 824
Subordinated liabilities 1,650 1,326 1,391
Total liabilities 75,453 64,241 73,365
Equity
Share capital 88 88 88
Share premium 123 108 116
Retained earnings 2,949 2,511 2,796
Capital reserves 279 219 277
Own shares held for the benefit of life assurance
policyholders (88) (76) (78)
Shareholders' equity 5 3,351 2,850 3,199
Minority interests 6 172 13 51
Total equity 3,523 2,863 3,250
Total liabilities and equity 78,976 67,104 76,615
Consolidated Interim Statement of Recognised Income and Expense - Embedded Value
Basis (Unaudited)
Six months to 30 June 2007
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Revaluation of property and equipment - - 44
Share of associate revaluation reserve - - 7
Change in value of available for sale financial assets (3) 1 2
Deferred tax - - (8)
Net amount recognised directly in equity (3) 1 45
Profit for the period 299 203 564
Total recognised income and expense for the
period 296 204 609
Attributable to
Equityholders 286 203 605
Minority interests in subsidiaries 3 1 4
Minority interests in Property Unit Trusts 7 - -
296 204 609
Consolidated Interim Reconciliation of Shareholders' Equity - Embedded Value Basis
Six months to 30 June 2007
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Shareholders' equity at start of period 3,199 2,728 2,728
Income and expenses attributable to
equityholders 286 203 605
Movement in cost of own shares held for the
benefit of life assurance policyholders (10) - (2)
Dividends paid (132) (117) (173)
Issue of share capital 7 35 43
Change in share based payment reserves 1 1 2
Purchase of treasury shares for long term
incentive plan - - (4)
Shareholders' equity at end of period 3,351 2,850 3,199
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
1. Operating Profit before tax
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Insurance & investment business
New business contribution 82 65 128
Profit from existing business
- Expected return 59 46 89
- Experience variances 21 8 14
- Operating assumption changes 16 5 17
Expected investment return 16 10 26
Operating profit before tax 194 134 274
Banking
Net interest income 241 199 429
Non-interest income 22 23 45
Trading income 5 6 12
268 228 486
Administrative expenses including depreciation (150) (134) (273)
Impairment losses on loans and receivables (8) (7) (14)
110 87 199
Investment return 1 3 3
Operating profit before tax 111 90 202
Other activities
Non-interest income 33 29 56
Administrative expenses including
depreciation (34) (30) (58)
Operating loss before tax (1) (1) (2)
Share of associate / joint venture 17 19 55
Total operating profit before tax 321 242 529
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
2. Life and investment new business
Life business 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Present value of new business premiums
(PVNBP)
Single premium 1,423 911 2,034
Regular premium 208 158 312
Regular premium capitalisation factor 4.5 4.8 4.6
PVNBP 2,357 1,674 3,482
Annual Premium Equivalent (APE) 350 249 516
New business contribution 68 55 106
New business margin
PVNBP 2.9% 3.3% 3.1%
APE 19.5% 21.8% 20.6%
ILIM
Present value of new business premiums
(PVNBP) 2,443 1,089 1,901
Annual Premium Equivalent (APE) 244 109 190
New business contribution 14 10 22
New business margin
PVNBP 0.6% 1.0% 1.1%
APE 5.9% 9.6% 11.4%
Total new business
Present value of new business premiums
(PVNBP) 4,800 2,763 5,383
Annual Premium Equivalent (APE) 594 358 706
New business contribution 82 65 128
New business margin
PVNBP 1.7% 2.3% 2.4%
APE 13.9% 18.1% 18.1%
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
3. Taxation 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Life operations
Operating profit (17) (10) (13)
Short term investment fluctuations 2 (1) 15
Effect of economic assumption changes - 10 (1)
(15) (1) 1
Banking operating profit (20) (10) (30)
Other operations (1) - 1
(36) (11) (28)
4. Analysis of profit after tax
6 months to 30 June 2007
Gross Eurom Tax Eurom Net Eurom
Operating profit
Insurance and investment business 194 (17) 177
Banking 111 (20) 91
Other (1) (1) (2)
Share of associate / joint venture 17 - 17
321 (38) 283
Short term investment fluctuations 21 2 23
Effect of economic assumption changes (11) - (11)
Property income attributable to minority
interests 7 - 7
Other non operational costs (3) - (3)
335 (36) 299
6 months to 30 June 2006
Gross Eurom Tax Eurom Net Eurom
Operating profit
Insurance and investment business 134 (10) 124
Banking 90 (10) 80
Other (1) - (1)
Share of associate / joint venture 19 - 19
242 (20) 222
Short term investment fluctuations 1 (1) -
Effect of economic assumption changes (29) 10 (19)
214 (11) 203
12 months to 31 December 2006
Gross Eurom Tax Eurom Net Eurom
Operating profit
Insurance and investment business 274 (13) 261
Banking 202 (30) 172
Other (2) 1 (1)
Share of associate / joint venture 55 - 55
529 (42) 487
Short term investment fluctuations 101 15 116
Effect of economic assumption changes (38) (1) (39)
592 (28) 564
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
5. Shareholders' Equity
30 June 30 June 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Insurance and investment business 2,060 1,883 2,101
Banking 976 659 775
Other activities 42 42 36
Associate undertaking / joint venture 173 157 174
Goodwill 207 198 207
Minority interest share of Property Unit Trust assets 153 - 35
3,611 2,939 3,328
Minority interest (19) (13) (16)
Minority interest share of Property Unit Trusts (153) - (35)
Deduction in respect of own shares held for the (88) (76) (78)
benefit of life assurance policyholders
Shareholders' equity 3,351 2,850 3,199
Insurance and investment assets are analysed as follows
30 June 30 June 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Property 219 159 163
Equities 13 10 13
Debt securities 23 4 29
Deposits 423 571 566
Other assets and liabilities 82 (43) (24)
Subordinated debt (200) - -
560 701 747
Shareholders' value of in-force business 1,500 1,182 1,354
2,060 1,883 2,101
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
5. Shareholders' Equity (continued)
Analysis of movement in shareholders' equity attributable to insurance and investment business
6 months to 30 June 2007
Net Worth VIF Total
Eurom Eurom Eurom
Shareholders' equity as at 1 January 2007 747 1,354 2,101
Operating profit after tax 46 131 177
Short term investment fluctuations 3 20 23
Effect of economic assumption changes (6) (5) (11)
Capital movements (230) - (230)
Shareholders' equity as at 30 June 2007 560 1,500 2,060
6 months to 30 June 2006
Net Worth VIF Total
Eurom Eurom Eurom
Shareholders' equity as at 1 January 2006 750 1,103 1,853
Operating profit after tax 18 106 124
Short term investment fluctuations 9 (9) -
Effect of economic assumption changes (1) (18) (19)
Capital movements (75) - (75)
Shareholders' equity as at 30 June 2006 701 1,182 1,883
12 months to 31 December 2006
Net Worth VIF Total
Eurom Eurom Eurom
Shareholders' equity as at 1 January 2006 750 1,103 1,853
Operating profit after tax 40 221 261
Short term investment fluctuations 53 63 116
Effect of economic assumption changes (6) (33) (39)
Capital movements (90) - (90)
Shareholders' equity as at 31 December 2006 747 1,354 2,101
The shareholders' equity as at 30 June 2007 includes required capital
of Euro588m (30 June 2006: Euro544m, 31 December 2006: Euro560m) within the
net worth. The shareholders' value of in-force is net of a deduction of
Euro118m (30 June 2006: Euro119m, 31 December 2006: Euro120m) in respect of the
cost of maintaining the required capital and net of a deduction of Euro13m
(30 June 2006: Euro32m, 31 December 2006: Euro28m) in respect of the time
value of financial option and guarantee costs.
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
5. Shareholders' Equity (continued)
Analysis of insurance and investment operating profit after tax
6 months to 30 June 2007
Net Worth VIF Total
Eurom Eurom Eurom
New business contribution (101) 171 70
Profit from existing business
- Expected return 119 (63) 56
- Experience variances 17 6 23
- Operating assumption changes (3) 17 14
- Expected investment return 14 - 14
Operating profit after tax 46 131 177
6 months to 30 June 2006
Net Worth VIF Total
Eurom Eurom Eurom
New business contribution (76) 130 54
Profit from existing business
- Expected return 89 (45) 44
- Experience variances (4) 16 12
- Operating assumption changes - 5 5
- Expected investment return 9 - 9
Operating profit after tax 18 106 124
12 months to 31 December 2006
Net Worth VIF Total
Eurom Eurom Eurom
New business contribution (164) 271 107
Profit from existing business
- Expected return 185 (98) 87
- Experience variances (3) 18 15
- Operating assumption changes (1) 30 29
- Expected investment return 23 - 23
Operating profit after tax 40 221 261
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
6. Minority Interests 2007 2006 2006
Eurom Eurom Eurom
Minority interests in subsidiaries
Opening Balance 16 12 12
Total recognised income and expense 3 1 4
Closing Balance 19 13 16
Minority interests in property unit trusts
(third party interests in property investment unit
trusts which are consolidated in the Group's results)
Opening Balance 35 - -
Total recognised income and expense 7 - -
Investment in trusts 111 - 35
Closing Balance 153 - 35
Total minority interests 172 13 51
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
7. Management expenses
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Administrative expenses 267 242 497
Depreciation 13 13 28
Software amortisation 9 8 15
289 263 540
Analysed as follows:
Banking operations
Operational 150 134 273
Life and investment operations
Administrative 102 99 209
Other operations (includes corporate costs) 34 30 58
Other non operational costs 3 - -
289 263 540
8. Provision for impairment of loans and receivables
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
At start of the period 57 52 52
Charged against income statement 8 7 14
Amounts written off (4) (4) (10)
Reinstatement of amounts previously written off - - 1
At end of the period 61 55 57
At end of period
Specific 38 35 36
Collective 23 20 21
61 55 57
9. Loans and receivables to customers
30 June 30 June 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Residential mortgage loans 32,650 26,366 29,986
Commercial mortgage loans 2,108 1,666 1,862
Finance lease, instalment finance and term loans 2,224 1,924 1,977
36,982 29,956 33,825
Money market funds 164 152 161
Deferred fees, discounts and fair value adjustments 112 157 171
37,258 30,265 34,157
Provision for impairment of loans and receivables (61) (55) (57)
Inter-group loans and receivables (473) (303) (368)
36,724 29,907 33,732
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
10. Funds Under Management
30 June 30 June 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Funds managed on behalf of unit-linked policyholders 28,206 21,710 25,269
Funds managed on behalf of non-linked policyholders 2,412 2,341 2,384
30,618 24,051 27,653
Off-balance sheet funds 5,346 4,094 4,182
35,964 28,145 31,835
11. 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
2007 2006 2006
Weighted average ordinary shares in issue and
ranking for dividend excluding treasury shares
and own shares held for the benefit of life
assurance policyholders 267,495,053 265,218,470 266,144,143
Weighted average ordinary shares held for the
benefit of life assurance policyholders 7,786,235 7,823,913 7,677,528
Weighted average ordinary shares in issue and
ranking for dividend including own shares held
for the benefit of life assurance policyholders 275,281,288 273,042,383 273,821,671
Profit for the period attributable to equityholders Euro289m Euro202m Euro561m
EPS including own shares held for the benefit
of life assurance policyholders 105 cent 74 cent 204.9 cent
Operating profit (before minority interest)
after tax for the period Euro283m Euro222m Euro487m
Operating EPS including own shares held for the
benefit of life assurance policyholders 102.8 cent 81.3 cent 177.9 cent
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
12 Reconciliation of shareholders' equity on Statutory basis to EV basis
30 June 2007
Net worth VIF Total
Eurom Eurom Eurom
Statutory shareholders' equity excluding minority
interest as at 30 June 2007 1,781 696 2,477
Change insurance shareholder value of in-force to
post tax basis 118 (118) -
Shareholder value of in-force on investment contracts - 912 912
Changes in presentation of cost of FOGs 16 (16)
Deferred front end fees on investment contracts 140 - 140
Deferred acquisition costs on investment contracts (226) - (226)
Restatement of investment liabilities to regulatory basis (36) - (36)
Unwind own shares statutory adjustment 63 - 63
Change in the basis of deferred tax provisioning (1) 22 21
EV basis shareholders' equity excluding minority
interest as at 30 June 2007 1,855 1,496 3,351
30 June 2006
Net worth VIF Total
Eurom Eurom Eurom
Statutory shareholders' equity excluding minority
interest as at 30 June 2006 1,551 600 2,151
Change insurance shareholder value of in-force to
post tax basis 99 (99) -
Shareholder value of in-force on investment contracts - 710 710
Changes in presentation of cost of FOGs 24 (24) -
Deferred front end fees on investment contracts 143 - 143
Deferred acquisition costs on investment contracts (179) - (179)
Restatement of investment liabilities to regulatory basis (49) - (49)
Unwind own shares statutory adjustment 66 - 66
Change in the basis of deferred tax provisioning 5 (8) (3)
Deferred tax on above adjustments 11 - 11
EV basis shareholders' equity excluding minority
interest as at 30 June 2006 1,671 1,179 2,850
31 December 2006
Net worth VIF Total
Eurom Eurom Eurom
Statutory shareholders' equity excluding minority
interest as at 31 December 2006 1,722 663 2,385
Change insurance shareholder value of in-force to
post tax basis 118 (118) -
Shareholder value of in-force on investment contracts - 808 808
Changes in presentation of cost of FOGs 20 (20) -
Deferred front end fees on investment contracts 142 - 142
Deferred acquisition costs on investment contracts (203) - (203)
Restatement of investment liabilities to regulatory basis (39) - (39)
Unwind own shares statutory adjustment 81 - 81
Change in the basis of deferred tax provisioning 5 18 23
Deferred tax on above adjustments 2 - 2
EV basis shareholders' equity excluding minority
interest as at 31 December 2006 1,848 1,351 3,199
All of the above adjustments relate to the application of IFRS 4 including
the tax implications with the exception of the own share adjustment. The
own share statutory adjustment reverses the mis-match which arises under
IFRS where own shares held on behalf of policyholders are required to be
marked-to-market in policyholder liabilities but the matching assets are
not permitted to be marked-to-market.
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
13. 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 risk free rate of
return used for the risk discount rate is based on the yield available for the effective duration
of the future cash-flows underlying the PVIF. The corresponding return on equities and property is
equal to the risk free rate 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 30 June 31 December
2007 2006 2006
Equity risk premium 3.0% 3.0% 3.0%
Property risk premium 2.0% 2.0% 2.0%
Risk free rate 4.6% 4.0% 3.9%
Investment return
- Fixed interest 4.0% - 5.7% 3.1% - 4.4% 3.5% - 4.6%
- Equities 7.6% 7.0% 6.9%
- Property 6.6% 6.0% 5.9%
Risk margin 3.4% 3.3% 3.5%
Risk discount rate 8.0% 7.3% 7.4%
Expense inflation 4.4% 3.9% 4.1%
Other assumptions
The assumed future mortality and morbidity assumptions are based on published tables of rates,
adjusted by analyses of recent operating experience. Persistency assumptions are set by reference
to 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. Deferred tax on the
release of the retained surplus in the Life Business is allowed for in the PVIF calculations.
EV 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 time value of 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.
Notes to the 2007 EV basis interim financial information
Six months to 30 June 2007
13. EV Assumptions (cont.)
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.
Statistics relating to the model are set out in the following table:
30 June 2007 10-Year Return 20-Year Return
Mean1 StDev2 Mean StDev
European Assets (euro)
Bonds 4.7% 1.8% 4.8% 4.0%
Equities, Property 4.7% 20.5% 4.8% 20.6%
UK Assets (Sterling)
Bonds 5.5% 2.3% 5.0% 5.0%
Equities 5.5% 18.3% 5.0% 19.3%
30 June 2006 10-Year Return 20-Year Return
Mean1 StDev2 Mean StDev
European Assets (euro)
Bonds 4.1% 1.8% 4.4% 4.1%
Equities, Property 4.1% 22.2% 4.4% 23.0%
UK Assets (Sterling)
Bonds 4.7% 2.4% 4.5% 5.2%
Equities 4.7% 20.3% 4.5% 21.5%
31 December 2006
10-Year Return 20-Year Return
Mean1 StDev2 Mean StDev
European Assets (euro)
Bonds 4.0% 1.8% 4.13% 4.0%
Equities, Property 4.0% 18.7% 4.13% 19.1%
UK Assets (Sterling)
Bonds 4.75% 2.2% 4.35% 4.7%
Equities 4.75% 17.5% 4.35% 18.7%
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.
14. The EV basis interim financial information (which is unaudited) was
approved by the Board of Directors on 28 August 2007.
Independent review report to Irish Life & Permanent plc
Introduction
We have been engaged by the Company to review the Embedded Value ("EV") basis
interim financial information for the six months ended 30 June 2007 set out on
pages 10 to 27. The EV basis interim financial information has been prepared in
accordance with the European Embedded Value ("EEV") Principles issued in May
2004 by the CFO Forum using the methodology and assumptions set out on pages 10
to 13. The EV basis interim financial information should be read in conjunction
with the Company's interim IFRS financial information which is set out on pages
31 to 40.
We have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the EV basis interim 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 EV basis interim financial information
contained therein, is the responsibility of and has been approved by the
directors. The directors have accepted responsibility for preparing the EV basis
interim financial information in accordance with the EEV Principles and for
determining the assumptions used in the application of those principles.
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 management and applying analytical procedures to the EV
basis interim 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 International Standards on
Auditing (UK & Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly, we do not express an audit opinion on the EV basis
interim financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the EV basis interim financial information as presented for
the six months ended 30 June 2007.
KPMG
Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
28 August 2007
Statutory Basis
Commentary on Statutory Results
Statutory profits after tax, attributable to equityholders, on continuing
activities for the six months to June 2007 are Euro222m, an increase of 71% on the
June 2006 return of Euro130m. The after tax profit on continuing operations
reflects strong new business growth in the life businesses combined with growth
in net interest margin in the bank.
The EV information set out on pages 4 to 27 employs the embedded value
methodology for all of the group's insurance and investment business. The
statutory results use embedded value for insurance contracts only, with
investment contracts being accounted under IFRS. Banking and other businesses
are accounted for under the same basis in both statutory and EV results.
In the banking business total loan balances outstanding increased 9% to Euro36.7bln
(Dec 2006: Euro33.7bln) with total new loans issued of Euro6.3bln in the six month to
June 2007 (June 2006: Euro6.4bln). An analysis of banking profits is included on
page 5 of this report.
The first half of 2007 outcome includes gains of Euro17m in respect of the fall in
the value of Irish Life & Permanent shares held for the benefit of
policyholders. This reflects the fall in value of Irish Life & Permanent shares
during the period which reduces policyholder liabilities but under IFRS the
corresponding fall in the value of the assets is not recognised. The amount in
corresponding period in 2006 was a charge of Euro11m as there was an increase in
the value of the share in the period.
The first half of 2007 includes a charge of Euro0m (2006: Euro5m) in respect of the
uplift in the value of owner occupied buildings held for the benefit of
policyholders. These uplifts increase policyholder liabilities but under IFRS
the corresponding increase in the asset is not recognised in the income
statement.
The statutory basis profits include the effects of economic variances on the
insurance business. These were negative Euro19m in the six months to June 2007
compared to a negative return of Euro21m in the corresponding period in 2006, a
positive change of Euro2m.
In the life business new business written (including fund flows into ILIM) on an
APE basis increased by 66% to Euro594m (June 2006: Euro358m). Gross inflows into ILIM
to June 2007 were Euro2.4bln compared to Euro1.1bln to June 2006. The group enjoyed
significant growth in new business on both insurance and investment contracts
which is reflected in the 26% growth in premiums on insurance contracts from
Euro325m in June 2006 to Euro410m in June 2007. The new business resulted in a
negative new business contribution of Euro3m in the reported June 2007 statutory
profits, compared to a negative contribution of Euro12m in June 2006. Under IFRS
the fixed cost of acquiring investment contract new business is recognised in
the year of acquisition whilst profit flows are recognised over the life of the
contract.
The change in insurance contract liabilities shows a reduction in liabilities of
Euro16m compared to Euro150m to June 2006. This is mainly due to an increase in
annuity sales in 2007 compared to 2006 and the relative movements in medium to
long-term Euro interest rates which is compensated by a corresponding reduction
in the investment return. The change in investment contract liabilities has
increased from Euro327m in June 2006 to Euro1,223m in June 2007 due to higher market
growth in 2007 compared to 2006 offset by a Euro8m reduction in the time value of
investment financial option and guarantee costs. The liability investment return
effects above are reflected in the increase in the investment return which was
Euro1,299m in June 2007 compared to Euro257m in June 2006. The investment return
includes Euro7m in respect of minority interests in the market growth of property
unit trusts held by the life company.
Administrative expenses increased 10% to Euro267m in June 2007 from Euro242m in June
2006. This principally reflects the increase in costs associated with the
buoyant new business issued. Expenses in 2007 include a Euro3m contribution to the
Government Social Finance Initiative.
The post-tax profits achieved in Allianz, (a general insurance business in which
the group has a 30% interest) to June 2007, were Euro18m, compared to Euro19m in June
2006 where lower underwriting profits were offset by the profit from the sale of
the businesses head office and higher investment returns.
Under IFRS the effective tax rate is distorted by the inclusion of additional
tax paid by policyholders. The tax charge to June 2007 was Euro35m compared to Euro25m
to June 2006.
Basis of Preparation - Statutory interim financial information
The unaudited 2007 statutory interim financial information on pages 31 to 40 has
been prepared using the accounting policies adopted by the group in its last set
of consolidated financial statements. The interim results are prepared in
accordance with the recognition and measurement principles of the IFRS issued by
the International Accounting Standards Board and adopted by the EU which apply
at 30 June 2007.
IFRS 4 brought into force phase 1 of the IASB's 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 as a whole.
The statutory 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 10 to 27 extends these principles to investment contracts
written in the life assurance business.
The 2007 statutory interim financial information has been prepared on a
consistent basis with 31 December 2006 financial statements and 30 June 2006
interim financial information using the same accounting policies and methods of
computation.
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.
Consolidated Interim Income Statement - Statutory Basis (Unaudited)
Six months to 30 June 2007
Notes 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Interest receivable 2 1,105 635 1,602
Interest payable 3 (878) (442) (1,193)
227 193 409
Fees and commission income 4 42 35 78
Fees and commission expenses 5 (61) (51) (97)
Trading income 5 6 12
Premiums on insurance contracts 410 325 584
Reinsurers' share of premiums on insurance
contracts (113) (99) (204)
Investment return 1,299 257 2,813
Fees from investment contracts and fund management 131 128 247
Change in shareholders' value of in-force business 32 54 117
Operating income 1,972 848 3,959
Claims on insurance contracts (227) (211) (410)
Reinsurers' share of claims on insurance contracts 64 62 117
Change in insurance contract liabilities 16 150 9
Change in reinsurers' share of insurance contracts
liabilities (36) (100) (35)
Change in investment contract liabilities (1,223) (2,672) (327)
Administrative expenses (267) (242) (497)
Depreciation and amortisation
Property and equipment (13) (13) (28)
Intangible assets - software (9) (8) (15)
Investment expenses (21) (15) (28)
Provision for impairment losses on loans and
receivables (8) (7) (14)
Operating expenses (1,724) (711) (3,573)
Operating profit 248 137 386
Share of profits of associated undertaking / joint
venture 17 19 55
Profit before taxation 265 156 441
Taxation (35) (25) (80)
Profit for the period 230 131 361
Attributable to
Equityholders 222 130 358
Minority interests 9 8 1 3
230 131 361
Earnings per share Cent Cent Cent
Basic 7 83.0 49.0 134.5
Diluted 7 82.0 48.4 132.9
Consolidated Interim Balance Sheet - Statutory Basis (Unaudited)
As at 30 June 2007
Notes 30 June 30 June 31 Dec
2007 2006 2006
Assets
Cash and balances with central banks 256 204 228
Items in course of collection 239 262 152
Financial assets
- Debt securities 9,644 9,119 9,051
- Equity shares and units in unit trusts 17,900 13,523 15,985
- Derivative assets 1,338 452 816
- Loans and receivables to customers 6 36,724 29,907 33,732
- Loans and receivables to banks 4,041 6,439 8,429
Investment properties 3,650 2,665 3,340
Reinsurance assets 1,950 1,927 1,991
Prepayments and accrued income 350 394 358
Interest in associated undertaking / joint venture 173 157 174
Property and equipment 495 421 486
Shareholder value of in-force business 696 600 663
Goodwill and intangible assets 257 264 261
Deferred acquisition costs 236 186 212
Net post retirement benefit asset 79 71 73
Other assets 380 117 185
Total assets 78,408 66,708 76,136
Liabilities
Financial liabilities
- Deposits by banks 2,018 3,800 5,526
- Customer accounts 14,429 12,833 13,643
- Debt securities in issue 20,233 15,747 18,432
- Non-recourse funding - securitised assets 3,534 4,159 3,813
- Derivative liabilities 894 350 610
- Investment contract liabilities 27,398 21,236 24,762
Insurance contract liabilities 4,057 3,905 4,073
Outstanding insurance and investment claims 139 127 124
Accruals and deferred income 436 322 379
Other liabilities 428 244 435
Current tax liabilities 36 31 10
Deferred tax liabilities 201 161 199
Net post retirement benefit liability 165 157 159
Deferred front end fees 147 150 148
Subordinated liabilities 1,650 1,326 1,391
Total liabilities 75,765 64,548 73,704
Equity
Share capital 10 88 88 88
Share premium 10 123 108 116
Retained earnings 10 1,987 1,736 1,904
Other reserves 10 279 219 277
Equity excluding minority interest 2,477 2,151 2,385
Minority interests 9 166 9 47
Total equity including minority interest 2,643 2,160 2,432
Total liabilities and equity 78,408 66,708 76,136
Consolidated Interim Statement of Recognised Income and Expense - Statutory Basis
(Unaudited)
Six months to 30 June 2007
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Notes Eurom Eurom Eurom
Revaluation of property & equipment 10 6 19 82
Share of associate revaluation reserve - 7
Change in value of available for sale financial
assets 10 (3) 1 2
Deferred tax (1) - (12)
Net amount recognised directly in equity 2 20 79
Profit for the period 230 131 361
Total recognised income and expense for the period 232 151 440
Attributable to:
Equityholders 224 150 436
Minority interest 9 8 1 4
Total recognised income and expense for the period 232 151 440
Condensed Consolidated Interim Statutory Cashflow Statement (Unaudited)
Six months to 30 June 2007
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Net cashflows from operating activities (830) 495 938
Investing activities
Purchase of property and equipment (20) (14) (34)
Sale of property and equipment 4 3 6
Purchase of intangible assets (6) (5) (9)
Purchase of subsidiary undertaking - (3) (3)
Investment in joint venture (1) - (1)
Dividends received from associated undertaking 19 29 56
Net cashflows from investing activities (4) 10 15
Financing activities
Issue of ordinary share capital 7 35 43
Purchase of treasury shares for long term incentive plan - - (4)
Issue of new subordinated liabilities 307 - 51
Interest paid on subordinated liabilities (50) (44) (70)
Equity dividends paid (132) (117) (173)
Net cashflows from financing activities 132 (126) (153)
(Decrease) / increase in cash and cash equivalents (702) 379 800
Analysis of changes in cash and cash equivalents
Cash and cash equivalents at 1 January 1,356 556 556
Net cashflow before effect of exchange translation
adjustments (702) 379 800
Cash and cash equivalents at end of period 654 935 1,356
Notes to the 2007 Interim Statement - Statutory basis
Six months to 30 June 2007
1. Segmental Information
Segmental information is presented in respect of the group's business segments based on the group's management
reporting and internal structure. The group comprises the following main business segments:
Banking Retail banking services including current accounts, residential
mortgages and other loans.
Insurance and investment Long term savings products including pensions to both individuals and
group schemes.
General insurance Property and casualty insurance carried out through the group's
associate company Allianz-Irish Life Holdings Plc.
Other This includes a number of small business units including third party
life assurance administration, insurance brokerage and corporate costs
which are not attributable to any business unit.
The segmental results are as follows
6 months to 30 June 2007 Insurance & General
Banking investment insurance Other Eliminations 1 Total
Net interest receivable - external 248 (22) - - 1 227
- inter segmental (7) - - - 7 -
Other non-interest income - external 27 (57) - 16 - (14)
- inter segmental - (6) - 6 - -
Premiums on insurance contracts, net of
reinsurance - 297 - - - 297
Investment return 1 1,306 - - (8) 1,299
Fees from investment contracts and fund
management - 120 - 11 - 131
Change in shareholders' value of
in-force business - 32 - - - 32
Operating income 269 1,670 - 33 - 1,972
Claims on insurance contracts, net of
reinsurance - (163) - - - (163)
Change in insurance / investment
contract liabilities - (1,243) - - - (1,243)
Administrative expenses (139) (92) - (36) - (267)
Depreciation and amortisation (11) (10) - (1) - (22)
Investment expenses - (21) - - - (21)
Provision for impairment losses on
loans and receivables (8) - - - - (8)
Operating expenses (158) (1,529) - (37) - (1,724)
Operating profit 111 141 - (4) - 248
Share of profits of associated
undertaking / joint venture (1) - 18 - - 17
Taxation (20) (14) - (1) - (35)
Profit for the period 90 127 18 (5) - 230
Notes to the 2007 Interim Statement - Statutory basis
Six months to 30 June 2007
1. Segmental information (continued)
6 months to 30 June 2006 Insurance & General
Banking investment insurance Other Eliminations Total
1
Net interest receivable - external 204 (11) - - - 193
- inter segmental (5) - - - 5 -
Other non-interest income - external 29 (49) - 10 - (10)
- inter segmental - (8) - 8 - -
Premiums on insurance contracts,
net of reinsurance - 226 - - - 226
Investment return 3 259 - - (5) 257
Fees from investment contracts and
fund management - 117 - 11 - 128
Change in shareholders' value of
in-force business - 54 - - - 54
Operating income 231 588 - 29 - 848
Claims on insurance contracts, net
of reinsurance - (149) - - - (149)
Change in insurance / investment
contract liabilities - (277) - - - (277)
Administrative expenses (124) (88) - (30) - (242)
Depreciation and amortisation (10) (11) - - - (21)
Investment expenses - (15) - - - (15)
Provision for impairment losses on
loans and receivables (7) - - - - (7)
Operating expenses (141) (540) - (30) - (711)
Operating profit 90 48 - (1) - 137
Share of profits of associated
undertaking / joint venture - - 19 - - 19
Taxation (10) (15) - - - (25)
Profit for the period 80 33 19 (1) - 131
12 months to 31 December 2006 Insurance & General
Banking investment insurance Other Eliminations1 Total
Net interest receivable - external 435 (26) - - - 409
- inter segmental (6) - - - 6 -
Other non-interest income - external 57 (91) - 27 - (7)
- inter segmental - (10) - 10 - -
Premiums on insurance contracts,
net of reinsurance - 380 - - - 380
Investment return 3 2,816 - - (6) 2,813
Fees from investment contracts and
fund management - 228 - 19 - 247
Change in shareholders' value of
in-force business - 117 - - - 117
Operating income 489 3,414 - 56 - 3,959
Claims on insurance contracts, net
of reinsurance - (293) - - - (293)
Change in insurance / investment
contract liabilities - (2,698) - - - (2,698)
Administrative expenses (253) (187) - (57) - (497)
Depreciation and amortisation (20) (22) - (1) - (43)
Investment expenses - (28) - - - (28)
Provision for impairment losses on
loans and receivables (14) - - - - (14)
Operating expenses (287) (3,228) - (58) - (3,573)
Operating profit 202 186 - (2) - 386
Share of profits of associated
undertaking / joint venture (1) - 56 - - 55
Taxation (29) (51) - - - (80)
Profit for the period 172 135 56 (2) - 361
1 Eliminations relate to inter segmental interest receivable and payable on
deposits and loans together with inter segmental commission payments and
receipts.
Notes to the 2007 Interim Statement - Statutory basis
Six months to 30 June 2007
6 months 6 months 12 months
2. Interest receivable to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Loans and receivables to customers 824 486 858
Loans and receivables to banks 160 70 482
Debt securities and other fixed income securities 71 37 184
Lease and instalment finance 50 42 78
1,105 635 1,602
6 months 6 months 12 months
3. Interest payable to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Interest on deposits by other banks and customer accounts 385 111 344
Interest on debt securities in issue 454 300 779
Interest on subordinated debt 39 31 70
878 442 1,193
6 months 6 months 12 months
4. Fees and commission income to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Fees and commission earned on banking services 26 25 51
Commission earned on insurance and investment contracts 16 10 27
42 35 78
6 months 6 months 12 months
5. Fees and commission expenses to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Fees and commission payable on banking services 4 3 6
Commission payable on life and investment contracts 81 52 121
Deferral of acquisition costs on investment contracts (43) (27) (69)
Amortisation of deferred acquisition costs on investment
contracts 19 23 39
61 51 97
6 months 6 months 12 months
6. Loans and receivables to customers to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Residential mortgage loans 32,754 26,632 30,154
Commercial mortgage loans * 1,631 1,245 1,490
Finance leases 1,609 1,353 1,392
Term loans 566 525 535
Money market funds 164 152 161
36,724 29,907 33,732
*Commercial mortgage loans exclude loans of Euro473m (June 2006 Euro303m; December 2006:Euro368m) to the
group's life assurance operations for the benefit of unit-linked
policyholders.
There is no particular concentration of risk within these categories.
Notes to the 2007 Interim Statement - Statutory basis
Six months to 30 June 2007
7. Earnings per share 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
(a) Basic EPS
Weighted average ordinary shares in issue and
ranking for dividend excluding own shares held for
the benefit of life assurance policyholders and
treasury shares 267,495,053 265,218,470 266,144,143
Profit for the year attributable to equityholders Euro222m Euro130m Euro358m
EPS (cent) 83.0 49.0 134.5
(b) Fully diluted EPS
Weighted average of potential dilutive ordinary shares
arising from the group's share option schemes 3,374,954 3,365,278 3,175,396
Weighted average number of ordinary shares
excluding own shares held for the benefit of
policyholders used in the calculation of fully
diluted EPS 270,870,007 268,583,748 269,319,539
Fully diluted EPS (cent) 82.0 48.4 132.9
8. Dividends 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2007 2006 2006
Eurom Eurom Eurom
Dividends paid in the period
Final (relating to prior period) 132 117 117
Interim - - 56
Total 132 117 173
Cent Cent Cent
Dividends per share in the period
Final (relating to prior period) 47.9 42.8 42.8
Interim - - 20.1
Total 47.9 42.8 62.9
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
9 Minority Interests 2007 2006 2006
Eurom Eurom Eurom
Minority interests in subsidiaries
Opening Balance 12 8 8
Total recognised income and expense 1 1 4
Closing Balance 13 9 12
Minority interests in property unit trusts
(third party interests in property investment unit trusts which are consolidated in
the Group's results)
Opening Balance 35 - -
Total recognised income and expense 7 - -
Investment in trusts 111 - 35
Closing Balance 153 - 35
Total minority interests 166 9 47
Notes to the 2007 Interim Statement - Statutory basis
Six months to 30 June 2007
10 Reconciliation of movement in capital and reserves
6 months to 30 June 2007
Share Share Revaluation Available Other Retained Total Minority Total
capital premium reserve for sale capital earnings excluding interest including
reserve reserves minority minority
interest interest
As at start of period
(published) 88 116 260 1 16 1,904 2,385 12 2,397
Reclassification of
minority interest in
property unit trusts - - - - - - - 35 35
88 116 260 1 16 1,904 2,385 47 2,432
Issue of share capital - 7 - - - - 7 - 7
Profit for the period - - - - - 222 222 8 230
Revaluation gains
(net of tax) - - 4 - - 1 5 - 5
Change in value
of available for
sale financial assets - - - (3) - - (3) - (3)
Third party
investment in
property unit
trusts - - - - - - - 111 111
Change in own
shares at cost - - - - - (8) (8) - (8)
Purchase of
treasury shares - - - - - - - - -
Equity settled
transactions - - - - 1 - 1 - 1
Dividends - 1 - - - (132) (132) - (132)
As at end of
period 88 123 264 (2) 17 1,987 2,477 166 2,643
6 months to 30 June 2006
Share Share Revaluation Available Other Retained Total Minority Total
capital premium reserve for sale capital earnings excluding interest including
reserve reserves minority minority
interest interest
As at start of
period 87 74 189 (1) 15 1,711 2,075 8 2,083
Issue of share
capital 1 34 - - - - 35 - 35
Revaluation gains
(net of tax) - - - - - 130 130 1 131
Revaluation gains - - 19 - - - 19 - 19
Change in value of
available for sale
financial assets - - - 1 - - 1 - 1
Transfer between
reserves - - (5) - - 5 - - -
Change in own shares
at cost - - - - - 7 7 - 7
Purchase of treasury
shares - - - - - - - - -
Equity settled
transactions - - - - 1 - 1 - 1
Dividends - - - - - (117) (117) - (117)
As at end of period 88 108 203 - 16 1,736 2,151 9 2,160
12 months to 31 December 2006
Share Share Revaluation Available Other Retained Total Minority Total
capital premium reserve for sale capital earnings excluding interest including
reserve reserves minority minority
interest interest
As at start of
period 87 74 189 (1) 15 1,711 2,075 8 2,083
Issue of share
capital 1 42 - - - - 43 - 43
Profit for the
period - - - - - 358 358 3 361
Revaluation gains
(net of tax) - - 76 - - - 76 1 77
Change in value of
available for sale
financial assets - - - 2 - - 2 - 2
Transfer between
reserves - - (5) - (1) 6 - - -
Change in own shares
at cost - - - - - 6 6 - 6
Purchase of treasury
shares - - - - - (4) (4) - (4)
Equity settled
transactions - - - - 2 - 2 - 2
Dividends - - - - - (173) (173) - (173)
As at end of period 88 116 260 1 16 1,904 2,385 12 2,397
11 The Interim statutory financial information (which is unaudited) was approved by the Board of Directors on 28th
August 2007.
Independent review report to Irish Life & Permanent plc
Introduction
We have been engaged by the Company to review the International Financial
Reporting Standards ("IFRS") basis interim financial information for the six
months ended 30 June 2007 set out on pages 31 to 40. We have read the other
information contained in the Interim Report and considered whether it contains
any apparent misstatements or material inconsistencies with the interim
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 IFRS basis interim 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.
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 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 International Standards on
Auditing (UK & Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly, we do not express an audit opinion on the IFRS basis
interim financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the IFRS basis interim financial information as presented for
the six months ended 30 June 2007.
KPMG
Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
28 August 2007
--------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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