RNS Number:6469H
Irish Life & Permanent PLC
18 February 2003


 Irish Life & Permanent plc - Achieved Profits/Embedded Value Reporting Update


              Adoption of ABI's SORP on Achieved Profits reporting


 1. Background

    Irish Life & Permanent plc accounts for the results of its life assurance
    activities on an embedded value (or achieved profits) basis. The Association
    of British Insurers' statement of recommended practice ("SORP") for
    financial reporting on this basis came into force in 2002. In line with best
    practice Irish Life & Permanent propose to adopt the SORP in respect of its
    life assurance activities for the purposes of its 2002 financial statements.

    The adoption of the SORP will not impact the overall profit after tax figure
    reported for the group's life operations but does require presentational
    changes as well as additional disclosures. Financial reporting under the
    SORP focuses on profit before tax and significantly on the contribution to
    profit before the impact of short-term fluctuations in investment markets.

    The SORP will require a restatement of the reported 2001 results albeit the
    reported net profit from life assurance after tax will remain unchanged.
    There will be no change in the primary financial statements and the
    accounting for banking and other activities is unchanged.

 2. Required Presentational Changes

    Reporting of pre-tax profits

    To date IL&P has calculated and disclosed the embedded value (EV) profits of
    its life assurance activities on an after tax basis and disclosed the
    components of the EV profit on an after tax basis. The SORP requires that
    total profit and the components of profit be calculated and disclosed gross
    of tax. Profits should be grossed-up at the effective tax rate.

    For the new business component of earnings the tax rate utilised on Irish
    business will be 12.5% being the standard corporation tax rate and the
    effective rate at which new business profits will be taxed going forward.
    All other components of life assurance profits will be grossed up at the
    effective tax rate for the period.

    New Business Contribution

    The SORP defines the value of new business as the contribution to the
    profits of the accounting period from new business written in the period.
    The new business contribution on this definition includes the profit
    calculated at the point of sale as heretofore plus other items, principally
    the unwind of the discount rate on the profit to the end of the accounting
    period less the interest cost of new business strain from the sale over the
    same period. Previously IL&P would have treated the latter items as part of
    in-force and investment earnings.

    The impact of the change in the basis of calculation is to increase reported
    new business earnings with a corresponding reduction in earnings from the
    in-force book.

    Investment Return

    The SORP distinguishes between the expected investment return on assets
    backing the long-term life assurance business and the shareholders net worth
    in the life business, and the actual return which may be more or less than
    that expected due to short term fluctuations in investment returns.

    In terms of presentation, variances resulting from the disparity between
    expected and actual investment returns, such as the unit-linked management
    fee variances, will be included under the heading "Short term fluctuations
    in investment returns". This is a below the line item, i.e. a deduction
    from, or addition to, the total contribution for the period.

    The approach which IL&P is proposing to adopt is to calculate the expected
    investment return using the embedded value assumed long term investment
    return for equities and property combined with actual earnings on short-term
    cash holdings.

    Other Operating Income

    The principal items included under this heading are earnings from the
    subsidiary companies Cornmarket Financial Group and Irish Progressive
    Services International (IPSI). These companies are engaged in the provision
    of brokerage and third party administration services respectively. The
    earnings of these subsidiaries, which are not accounted for on an embedded
    value basis, have previously been included in investment earnings.

    Assumption changes

    Under the SORP any variances arising from changes in embedded value
    operating assumptions are identified separately and disclosed as a separate
    line item in arriving at the total contribution for the period. The
    principal assumptions here would include persistency (how long the business
    will stay on the books), risk (mortality and morbidity experience) and
    maintenance or renewal expense levels.

    The effect of changes in assumptions relating to changes in extraneous
    economic variables (i.e. interest rates and inflation rates), including
    associated changes to valuation bases, will continue to be shown as a
    separate item but below the total contribution line. However the SORP
    requires that changes to interest rates and other economic assumptions which
    are not due to extraneous economic factors, for example a change in the risk
    element of the discount rate, be included with other operating assumption
    changes.


 3. Presentation of Life Assurance Earnings

    To illustrate the impact of changes under the SORP, restated life assurance
    earnings for the Irish and UK businesses for 2001 are set out below. This
    chart shows the adjustments as between the different components of earnings,
    the tax gross-ups and the reclassification of earnings. The overall post tax
    result remains unchanged at Euro138.0m but there are significant movements as
    between the various line items.


                                                            ROI/UK Life Assurance 2001 Earnings (Unaudited)

                                          As Previously         Change arising       Revised       Tax    Pre Tax Profit
                                               Reported              from SORP      Post tax   Gross Up                 
                                                                                         
                                                    Eurom                      Eurom         Eurom         Eurom               Eurom  

  Contribution from new                            48.2                     4.7       52.9        7.5             60.4
  business                                                                                                            

  Contribution from existing                       
  business                                         

  Unwind of discount rate                          86.8                   (6.0)       80.8        2.3             83.1

  Experience variances                             32.8                  (10.0)       22.8        1.1             23.9  

  Unit Linked Management fee                     (29.5)                    29.5          -          -                -  
  variance                                                                                                            

  Operating assumption changes                        -                    15.6       15.6        0.5             16.1  
                                                              

  Expected investment returns                       1.6                   (0.1)        1.5        0.2              1.7  
                                                               

  Other Income                                        -                     8.0        8.0        2.0             10.0


  Contribution                                    139.9                    41.7      181.6       13.6            195.2

  Short-term fluctuations in                                                                                          
  investment returns                                0.0                  (41.7)     (41.7)      (1.3)           (43.0) 

  Effect of changes in                            
  economic assumptions                            (1.9)                       -      (1.9)      (0.1)            (2.0)  
                                                  

  Profit Before Taxation                         138.0                    ( -)      138.0       12.2             150.2

  Taxation                                                                                                     (12.2) 

  Profit after Taxation                                                                                         138.0 

            


    The increased contribution from new business of Euro4.7m reflects a transfer
    from the unwind of the risk discount rate, less the interest cost of funding
    new business in the year. The reduction in the experience variances
    principally reflects amounts now disclosed separately under operating
    assumption changes. The unit linked management fee variance of Euro29.5m drops
    below the contribution line into short term fluctuations in investment
    returns which also now includes the shortfall of actual investment returns
    (on shareholders' net worth) against expected returns.




 4. Presentation of Total Earnings

    The move to reporting pre-tax life earnings means it is now more appropriate
    to present and analyse all earnings before tax. Total earnings for 2001 are
    restated below both for the tax gross-up and to identify the items making up
    the total contribution and the "below the line" deductions to arrive at
    total profit before tax.

Restatement (unaudited) of Total 2001 Earnings                                                                      

  Contribution before:                                                                                                

  short term investment fluctuations, goodwill                                                                        

  amortisation and other credits/charges                                                                              
                                                                                          Pre-tax     Tax      Post Tax
                                                                                            Eurom        Eurom          Eurom
                                                          ROI                                                         
                                                                        Banking & Other      70.5    (10.9)       59.6
                                                                             Activities                               
                                                                         Life Assurance     174.4    (10.7)      163.7
                                                                             Activities                               
                                                                       Other Investment     15.2     (1.4)       13.8 
                                                                               Earnings                               
                                                                                            260.1    (23.0)      237.1
                                                           UK                                                         
                                                                        Banking & Other      20.6     (6.0)       14.6
                                                                             Activities                               
                                                                         Life Assurance     20.8     (2.9)       17.9 
                                                                             Activities                               
                                                                                             41.4     (8.9)       32.5
                                                           US                                                         
                                                                         Life Assurance   (37.9)       8.5     (29.4) 
                                                                             Activities                               
 
  Group Contribution                                                                        263.6    (23.4)      240.2

  Share of associated company                                                                6.8     (1.2)        5.6 

  Total Contribution (Group & Associate)                                                    270.4    (24.6)      245.8

  Short term investment fluctuations                                                                                  
                                                                         Life assurance    (43.3)       1.4     (41.9)
                                                                             activities                               
                                                                    Share of associated    (14.0)       0.3     (13.7)
                                                                                company                               
  Goodwill amortisation                                                                    (14.8)         -     (14.8)
  Effect of economic assumptions changes on life assurance activities                       (6.2)       1.0      (5.2)
  Other credits/charges                                                                                               
                                                                  Restructuring charges    (63.0)      11.7     (51.3)
                                                  Loss on the disposal of US businesses   (50.0)    (19.5)     (69.5) 

  Total Profit                                                 before minority interest      79.1    (29.7)       49.4

  Previously reported profits                                                                79.1    (29.7)       49.4  

                                     
    At the post tax level there is no change to the disclosure from the previous
    presentation.

 5. Additional Disclosures

The SORP also requires some additional disclosures regarding assumptions and
methodology as well as an analysis of the sensitivity of the value of new
business and the value of in-force to changes in key economic assumptions. This
information will be provided as part of the 2002 annual report.


Contact Details:

Barry Walsh           +353 1 7042678

David McCarthy      +353 1 8563050



                                     NOTE:

        Irish Life & Permanent plc will announce its preliminary results

                           for 2002 on March 5th 2003


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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