IPM Irish Life&P.Gp

 

TIDMIPM 
 
RNS Number : 2998S 
Irish Life & Permanent PLC 
15 May 2009 
 

Irish Life & Permanent plc Interim Management Statement 
Fri 15th May 2009, 7.00am 
 
 
Irish Life & Permanent plc (IL&P) issued the following update on the group's 
business. A conference call for analysts will be hosted by management at 9.30am 
today, the details of which are set out at the end of this statement. 
 
 
The Group's Annual General Meeting takes place today at 11.30am in the RDS in 
Dublin. 
 
 
Group Overview 
 
 
The year to date has seen a further deterioration in economic conditions and a 
more difficult environment for the Group's businesses. Unemployment and 
reductions in disposable income have weakened household and SME cash flows and 
falling asset values have severely dented investor confidence. 
 
 
There are however positive signs that the adjustments necessary for economic 
recovery in Ireland are taking place - in labour competitiveness, in the housing 
market, in consumer prices and in the public finances. 
 
 
The Group's life and pensions business continues to lead the market - albeit 
against a background of falling sales - as does ILIM with a strong performance 
year to date. In the Group's banking business liquidity remains difficult, 
although improving in recent weeks, while rising unemployment is resulting in 
further increases in arrears and impairment provisioning. 
 
 
Life & Pensions 
 
 
New business 
Sales in Irish Life Assurance for the first quarter fell by 41% versus the 
market, which was down 47%, giving a further market share gain of 5%. Retail 
investment and savings business is showing the largest decrease as available 
cash is being placed on deposit while protection business is performing 
relatively well despite the significant decline in mortgage related business. 
Individual pension business is suffering from tighter cash flows and reduced 
business profitability but corporate pension business, while impacted by reduced 
employment and incomes, continues to be more resilient. 
 
 
In-force 
Persistency experience for the first quarter was EUR20m negative against 
assumptions and greater than expected. While the adverse persistency in 2008 was 
principally market related the experience in 2009 reflects the impact of tighter 
personal and business cashflows and affordability. And while a range of actions 
are being taken to provide customers with alternative options the depth of the 
recession which we are now experiencing is expected to result in the 
continuation of the current trends for the remainder of the year and into early 
next year. Accordingly the negative variances and assumption changes for 
persistency for the year are expected to be ahead of previous guidance. 
 
 
 
 
Embedded value 
The embedded value of the Group's life business was EUR1.65bn as of Dec 31st 
2008. Investment market movements since then would have resulted in short term 
investment fluctuations impact of circa EUR50m negative. Rising interest rates 
since the year end - based on Irish government medium term gilt rates - would 
have a negative impact on economic assumptions in the order of EUR20m negative. 
 
 
 
 
Banking 
 
 
Lending 
Lending demand in permanent tsb's core lending franchises - home mortgages and 
consumer finance - continues to be weak and is expected to remain so for the 
full year. New residential mortgage lending is currently circa 20% of 2008 
levels. Redemption rates across the loan portfolio are exceptionally low. 
Overall the bank's loan book is expected to decline modestly through 2009. 
 
 
Funding 
Liquidity conditions in the first quarter were difficult as the Irish banking 
sector experienced overseas commercial deposit outflows. Offsetting these 
developments, the bank continues to successfully grow its retail deposits and 
has expanded its pool of collateralised mortgage loans to allow additional 
drawings under the ECB "repo" facilities. 
 
 
In recent weeks there has been evidence of easing in liquidity conditions with 
confidence returning and short term debt markets reopening. Following a 
successful EUR1bn issue in February the Group this week raised a further EUR1bn of 
senior debt, with a maturity of September 2010, under the government guarantee 
scheme. 
 
 
Margins 
Wholesale and deposit funding costs continue to be elevated while falling base 
rates have reduced liability margins. These trends are partially offset by the 
lower cost of ECB funding. Given the volatility in markets, guidance for the 
bank's net interest margin remains in the range of 90 to 100 basis points. 
 
 
Credit quality 
Arrears have increased across all loan portfolios since the start of the year as 
the Irish economy has slowed further and unemployment increased. 
 
 
In the Irish residential mortgage book, where actual losses / impairments are 
minimal as yet, the rising arrears will result in higher levels of incurred but 
not reported (IBNR) provisions in 2009 based on modelled outcomes. 
Non-performing loan cases (over 90 days in arrears or impaired) were 2.6% at the 
end of March, up from 2% at December 2008. 
 
 
Experience in the motor and consumer finance books shows arrears quickly 
translating into losses which are expected to peak in 2009 reflecting the short 
term duration of the book. 
 
 
In the bank's UK residential mortgage book arrears increased in the first two 
months of 2009, levelled off in March and fell in April, and the underlying 
trends are encouraging. Non-performing loan cases were 4.2% at the end of March, 
up from 3.0% at December 2008. The extent and speed of UK interest rate 
reductions have been a critical factor in driving the improvement in arrears 
experience. It may be that the corner has turned for UK arrears and that 
provisioning will peak in 2009. 
Cumulative impairment provisions on the banks loan book for the three years to 
2011 are currently estimated to be in the order of 160 bps - at the upper end of 
previous guidance. 
 
 
Group 
 
 
Costs 
A range of cost reduction initiatives have been, and are being, taken across the 
group in response to the reduced levels of business and associated margin 
pressures. Underlying operating costs in the bank and life businesses are 
expected to decrease by 5% to 7% in 2009. Exceptional costs will however arise 
at both divisional and group level in the year. 
 
 
Capital 
The group remains well capitalised and has received strong expressions of 
interest for a planned securitisation of part of its life in-force business 
later in the year. 
 
 
Holding company 
Given the challenging environment for the banking sector in Ireland, and the 
significant changes taking place, the Group is conscious of the need to maintain 
maximum flexibility. To that end the Chairman, Ms Gillian Bowler is announcing 
at today's AGM that it is proposed to seek shareholder approval, in the coming 
months, to create a new holding company for the IL&P Group. This step will 
provide the Group with greater flexibility going forward. 
 
 
 
 
Conference Call & Contact Details 
 
 
Kevin Murphy, Senior Executive Director & Acting CEO and David McCarthy, Group 
Finance Director, will host a conference call for analysts at 9.30am on Fri 15 
May. 
 
 
To join the conference call, please dial in to the relevant number below 5 
minutes before and ask for the Irish Life & Permanent call 
Ireland(01) 247 5352 
UK(0) 20 8609 0205 
Other+353 1 247 5352 
 
 
Pass code:     634324# 
 
 
The conference call will also be available via the LIVE<GO> service on Bloomberg 
and Thomson Reuters www.streetevents.com. 
 
 
Conference Call Replay 
Replay facility available until midnight 22 May 2009. The telephone numbers and 
access code are: 
 
 
Ireland    (01) 447 5559 
UK         (0) 20 8609 0289 
US         703 621 9126 
Other    +353 1 447 5559 
 
 
Pass code: 263194# 
 
 
Contact details 
 
 
David McCarthy, Finance Director 
Tel: +353 1 856 3050 
 
 
Barry Walsh, Head of Investor Relations 
Tel: +353 1 704 2678 
 
 
Orla Brannigan, Investor Relations 
Tel: +353 1 704 1345 
 
 
Ray Gordon, Gordon MRM 
Tel: +353 1 665 0450 
 
 
 
 
 
 
 
 
Disclaimer - Forward Looking Statements 
This document may contain forward-looking statements with respect to certain 
plans and current goals and expectations relating to the future financial 
condition, business performance and results of the Irish Life & Permanent group. 
By their nature, all forward-looking statements involve risk and uncertainty 
because they relate to future events and circumstances that are beyond the 
control of the Irish Life & Permanent group including, amongst other things, 
Irish domestic and global economic and business conditions, market related risks 
such as fluctuations in interest rates and exchange rates, inflation, deflation, 
the impact of competition, changes in customer preferences, risks concerning 
borrower credit quality, delays in implementing proposals, the timing, impact 
and other uncertainties of future acquisitions or other combinations within 
relevant industries, the policies and actions of regulatory authorities, the 
impact of tax or other legislation and other regulations in the jurisdictions in 
which the Irish Life & Permanent group and its affiliates operate. As a result, 
the Irish Life & Permanent group's actual future financial conditions, business 
performance and results may differ materially from the plans, goals, and 
expectations expressed or implied in these forward-looking statements. 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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