IPM Irish Life&P.Gp

 

TIDMIPM TIDM74SV 
 
RNS Number : 3022W 
Irish Life & Permanent Grp HldgsPLC 
17 November 2010 
 

 
Irish Life & Permanent Group Holdings plc 
 
Interim Management Statement 
 
7.00am Wed 17 November 2010 
 
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 9.00am 
today, the details of which are set out at the end of this statement. 
 
 
Group Overview 
 
The continued weakness in domestic demand and the disruption in debt markets 
have made for challenging operating conditions for the Group's businesses. 
 
The Irish economy is recovering but more slowly than expected in 2010. The very 
strong performance of the export sector - both multi-national and domestic 
companies - has been offset by weakness in consumer confidence and by the effect 
of fiscal tightening. However unemployment is showing evidence of stabilising 
and, while house prices continue to fall, the pace of decline has slowed 
considerably. 
 
Nonetheless the recovery in the life and investment business is well established 
and the banking business continues to progress its key priorities for funding, 
impairments and profitability. Overall we expect operating earnings* for the 
year to be significantly better than 2009. 
 
 
Life & Pensions 
 
New business 
Total life and investment sales for the year are expected to be ahead of 2009. 
Given the expected overall sales mix the value of new business for the full year 
is expected to be similar to 2009. 
 
While the Retail and Corporate divisions of Irish Life Assurance are both 
experiencing weaker demand, ILIM continues to record strong institutional 
inflows. The weaker life sales are reflected in the fall-off in recurring 
premium sales which are down by almost a quarter. In Retail this is due to 
reduced household disposable incomes and SME cash flows while the reduction in 
Corporate recurring premiums sales reflects the impact of salary reductions and 
lower numbers employed in corporate pension schemes. 
 
In-force 
The persistency experience in the Retail in-force book improved through the year 
and is expected to be in line within the provision provided in 2009. However 
whether the long term persistency assumption will be achieved for the full year 
will be sensitive to the final quarter experience and the impact of Budget 
measures in 2010 and into the future. 
 
In the Corporate book the adverse persistency experience continued into the 
second half of the year and a change in assumptions will, as indicated at the 
Interim results, be required at year end. On the other hand Corporate risk 
experience (mainly morbidity) continued to be strongly positive. 
In-force operating earnings for 2010 are expected to be well ahead of the prior 
year with overall experience variances positive (versus a negative of EUR70m in 
2009) and negative persistency assumption changes being somewhat mitigated by 
positive changes to risk assumptions. Combined experience variances and 
assumption changes are expected to be circa EUR10m negative. 
 
Short term investment fluctuations 
The estimated impact of short-term investment fluctuations on the life business 
embedded value year to date is broadly neutral. The positive variance from unit 
fund growth ahead of embedded value assumptions is offset by property valuation 
reductions. 
 
Shareholder liquidity support for unit-linked property funds was unwound earlier 
this year with the disposal of some EUR50m of Irish commercial property. In regard 
to overseas property commitments the arbitration process has ruled that we must 
conclude the Luxemburg property transaction while we have successfully unwound 
the 2012 Belgium property commitment. 
 
Banking 
 
Funding 
The priority for the Group's banking business has been to improve its funding 
mix, in particular to grow its core stable funding, comprising retail deposits 
and long term funding. Good progress is being made on this objective but clearly 
has been disrupted by current debt market conditions. 
 
Retail deposits continue to record good growth through the second half of the 
year with inflows expected to be at a similar level as the first half at between 
EUR700m and EUR800m. Corporate deposits reduced from EUR5.4bn to EUR4.8bn in the third 
quarter but have been stable since the end of September, and are expected to 
remain so being almost all sourced domestically. 
 
The good progress made in the first half of the year in refinancing long term 
debt has been impacted by the deterioration in debt markets from May. Of the 
total term debt refinancing requirement of EUR6.4bn for the year EUR4.8bn has been 
refinanced by first half issuance under the ELG and an amount of EUR0.5bn in the 
third quarter by way of a sale of Irish originated mortgage assets. 
 
ECB drawings are currently EUR11.7bn reflecting the deferral of the planned term 
issuance. Our current focus is to raise un-guaranteed term funding using our UK 
residential mortgage assets as security. These bilateral long-term repo 
transactions would reduce ECB funding. The market value of unencumbered ECB 
eligible securities is currently EUR5.5bn and will be added to as further loan 
pools are securitised. 
 
Term debt maturities in 2011 are less than EUR2bn. 
 
Net interest income 
Net interest income - before the cost of the guarantee - is expected to be ahead 
of target given the mix of funding in the second half of the year. Guarantee 
costs are expected to be in line with previous guidance. 
 
 
 
Credit quality 
Early arrears cases (under 90 days) in the residential loan book have levelled 
off since May, evidence that the position is stabilising in line with the trend 
in unemployment. However arrears cases (over 90 days) in the Irish residential 
and commercial mortgage books continue to rise. 
 
Arrears in consumer finance continue to decline in both the over 90 days and 
under 90 days categories. 
 
The UK mortgage book is performing in line with expectations and its arrears 
experience continues to out-perform the UK buy-to-let sector overall. 
 
Current estimates for full year impairment provisions for the bank are circa 10 
-15% below the 2009 level. 
 
 
Group 
 
Costs 
The Group continues to focus on reducing its cost base. Operating costs in the 
Retail and Corporate Life divisions will reduce by a further 6% in 2010, down 
almost 20% from peak. Bank operating costs - before restructuring costs - are 
expected to fall by 4% this year following the 10% reduction in 2009. 
 
Earnings 
In line with the result at the half year life operating profits* are expected to 
make a strong recovery for the year as a whole increasing in the order of 70%. 
The banking business result is expected to be broadly in line with the prior 
year absent any material developments. 
 
Capital 
The bank completed its PCAR assessment in September and its expected end year 
capital position will be in line with the projections included in that exercise. 
 
The solvency position of Irish Life Assurance strengthened further in the third 
quarter. It has now completed the raising of loan capital of EUR100m, secured on 
the in-force book, and will also be implementing changes in the statutory 
reserving basis the effect of which will release circa EUR50m of additional 
capital at the year end. 
 
Corporate Activity 
The Group has been selected for the final stage of the auction process for EBS 
Building Society. Final offers have to be made before year end. 
 
 
* Embedded Value basis 
 
 
 
 
 
 
Conference Call & Contact Details 
 
Kevin Murphy, Group CEO and David McCarthy, Group Finance Director, will host a 
conference call for analysts at 9.00am on Wednesday 17 November 2010. 
To join the conference call, please dial in to the relevant number below 10 
minutes before and ask for the Irish Life & Permanent call 
Ireland             (01) 247 7824 
UK                   (0) 20 7075 6551 
Other               +353 1 247 7824 
 
Pass code:      282009# 
 
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 24 November 2010. The telephone numbers 
and access code are: 
 
Ireland             (01) 431 1246 
UK                   (0) 20 3364 5943 
US                   1866 286 6997 
Other               +353 1 431 1246 
 
Pass code:      267370# 
 
 
Contact details 
 
David McCarthy, Finance Director                 Barry Walsh, Head of Investor 
Relations 
Tel: +353 1 856 3050                                      Tel: +353 1 704 2678 
 
Orla Brannigan, Investor Relations                 Ray Gordon, Gordon MRM 
Tel: +353 1 704 1345                                      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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