final results 2010/media/files/i/irish-life-and-permanent/...page 2 2010 final results forward...

1PAGE

2010 FINAL RESULTS

FINAL RESULTS

2010:

2PAGE

2010 FINAL RESULTS

Forward looking statement

A number of statements we make in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change.

Irish Life & Permanent undertakes no obligation to update the forward-looking statements contained in this presentation. Forward-looking statements made in this presentation relate only to events as of the date on which they are made.

3PAGE

2010 FINAL RESULTS

Index

SECTION: PAGE:Business reviewReview of life business 05Review of banking business 11Strategic agenda & Summary 18

Financial ReviewGroup earnings 21Funding 26Arrears 27Loan impairments 29Capital 31Outlook 33

Additional information 34

4PAGE

2010 FINAL RESULTS

LIFE PERFORMANCE RECOVERY

BANK MANAGING KEY CHALLENGES

OVERALL RESULTS IN-LINE WITH 2009

Business Review

Life* profits recover

Impairments rise in bank

Overall result -€197m

Operating profit 57%

Business retention improving

Net interest income improved**

Retail deposits strong

Impairments increase

STRATEGY Making progress* Life & Fund Management

** Excl. ELG charge

KEVIN MURPHY: GROUP CHIEF EXECUTIVE

5PAGE

2010 FINAL RESULTS

Profitability - recovery

Retention - improvement

Sales – ahead

Life & Fund Management Business


6PAGE

2010 FINAL RESULTS

New business earnings

Margins flat

Reduced pension sales offset by strong investment inflows

In-force earnings

Strong risk profits

Lower persistency variance

Life: Recovery in Profitability

2010

New business

In-force

Operating profit

€m

52

108

160

▲%

+2

+112

+57


7PAGE

2010 FINAL RESULTS

RetailLapses peaked Q1 2009Significant improvement during yearBudget impact on Q4 performanceActions on:

Seller / distribution remunerationProduct features / flexibilityMIS and activity management

CorporatePolicy lapses peaked in H2 2009Trends improving through year end 2010

Life: Retention Improved

Retail: Returning to long term lapse assumptions

Lapses v LTA

Quarter 1

Quarter 2

Quarter 3

Quarter 4

FY

2010

134%

123%

100%

129%

121%

2009

192%

159%

139%

147%

159%


Change

+58%

+36%

+39%

+21%

+38%

8PAGE

2010 FINAL RESULTS

Life: Sales Recovery

2009 2010 2011 2012

RETAIL DECLINE STABLE RECOVERY GROWTH

CORPORATE DECLINE DECLINE STABLE RECOVERY

ILIM GROWTH GROWTH GROWTH GROWTH

Bottom of cycle

Retail LifeSharp declines in 2008 & 2009 but stabilised in 2010Demand driven by strong consumer confidence and by improvement in equity markets

Corporate LifeDeclines in 2009 & 2010Resumption of salary and employment growth required to drive sales

ILIM – benefiting fromStrong track record Sector consolidation


9PAGE

2010 FINAL RESULTS

Life: Sales Ahead

Overall sales 6%

Single premium life sales 1%Investment bonds 20% Pension 5%

Annual premium life sales 20%Low salary growth and recruitmentSME cash-flow weak

ILIM continues to outperformInflows to €2.5bn

2010

Retail

Corporate

ILIM & ILI

Total

€m

146

137

289

572

▲%

(8)

(16)

+34

+6

* APE basis


10PAGE

2010 FINAL RESULTS

>>>

>>>

>>>PROFITABILITY:

RETENTION: Back to normal variances

SALES:

Life: Outlook

Recovery in line with expectations

Sustained recovery


11PAGE

2010 FINAL RESULTS

Funding – responding to debt crisis

Impairments – increased provisions

Profitability – pricing and cost cutting actions

Strategy – sector restructure

Banking Business


12PAGE

2010 FINAL RESULTS

Bank: Funding 2010

Retail deposit growth via branches and broker distribution

Corporate depositsOutflows similar to H1 2010Impacted by Sovereign and bank downgrades

€5bn term debt issuance to end Aug.

Funding ratiosDec 10 Dec 09

Stable 52% 48%LTD 249% 246%

Addition of €3.6bn INBS depositsOn pro-forma basis would improve stable funding and LTD ratio to c. 60% & 200% (Dec 2010)

Retail deposits

Corporate deposits


Deposit Mix - Dec 2010

13PAGE

2010 FINAL RESULTS

Bank: PLAR 2011 & Funding Strategy

Prudential Liquidity Assessment Review (PLAR)

To be completed by end March

Target ratios to be achieved by 2013

Deposit funding dominant

Reduced loan to deposit ratio target

Limited wholesale funding component

De-leveraging actions

Contraction in loan book

Sale of equity tranches of securitisations

Sale / transfer of non-core assets


14PAGE

2010 FINAL RESULTS

Bank: Loan Book

Loan book 3% in 2010, constant currency basis

Gross new lending €615m in 2010

Low level of redemptions impacting level of new lending

UK book closed to new business

Total Loan Book* €37.6bn (Dec 2009: €38.9bn)

Loan Balances


* Before impairment provisions

15PAGE

2010 FINAL RESULTS

PTSB ROI Residential Mortgage Arrears Cases

Bank: Loan Arrears


Reductions in ROI consumer finance and UK residential arrears

ROI residential arrears cases continuing to rise

> 90 days: up 67%<90 days: up 18%<90 days: flat in H2

Impairment provisions at €420m, 12% on 2009 driven by decline in

property values

16PAGE

2010 FINAL RESULTS

Margins

Margin higher for 2010

SVR increases

Government guarantee

Costs

Continuing cost reductions

Voluntary redundancy programme in Q1 2011

280 FTEs staff

Cost €45m

Annualised saving of €31m

Bank: Profitability - Margins & Costs


17PAGE

2010 FINAL RESULTS

Back to basics

Deposit driven business

Lean operation with high level of automation

Transactions + approvals

On-line service

Sales focused branch distribution model supported by:

Customer analytics

2013 Targets

Net interest margin > 100bps

Impairment charge normalised

Substantially deposit funded – LTD of < 130%

ROE > 10%

Bank: Outlook


18PAGE

2010 FINAL RESULTS

Strategic Agenda

PCAR / PLAR

Consolidation

INBS + Anglo deposits

EBS

Irish Life International


19PAGE

2010 FINAL RESULTS

Summary

LIFE - STRONG PROFIT GROWTH

BANKING - MANAGING KEY CHALLENGES

STRATEGY - MAKING PROGRESS


20PAGE

2010 FINAL RESULTS

Earnings

Funding

Credit quality & impairment provisions

Capital

Outlook

Financial Review

DAVID MCCARTHY: GROUP FINANCE DIRECTOR

21PAGE

2010 FINAL RESULTS

Operating profit flat on 2009

Life business continuing to recover

Bank continuing to suffer from worsening economic conditions with higher funding costs and increased impairment provisions

Life embedded value changes:

Improved equity and property markets compared to large hits in 2009

Impact of lower gilt yields on financial options & guarantees and future investment returns

Cost of VIF financing deal

Group Earnings

Operating (loss) / profit

• Life

• Banking

• Associate / other

Operating (loss)

Life embedded value:

• Investment fluctuations

• Economic assumptions

• VIF financing cost

• Other

(Loss) before tax

2009

€m

102

(270)

(28)

(196)

(68)

(38)

-

(17)

(319)

2010

€m

160

(364)

7

(197)

49

(51)

(22)

(16)

(237)

Change

%

57

(35)

(1)

26* Embedded value basis


22PAGE

2010 FINAL RESULTS

Life new business volumes 8%, offset by strong sales in ILIM

Overall sales 6%

Life (excl. ILIM) new business margin:

APE: 11.5% (FY 09: 11.4%)

Significant improvement in in-force earnings

Very strong risk experience

Improved persistency

Life Earnings

New business

Total expected return

Experience variances

Assumption changes

In-force

Operating profit

Taxation

Profit after tax

2009€m

51

122

(70)(1)

51

102

(12)

90

2010€m

52

13118

(41)

108

160

(17)

143

Change%

2

112

57

59


* Embedded value basis

23PAGE

2010 FINAL RESULTS

Experience Variances Assumption Changes

Persistency

Risk

Expenses / Other

Life Variances & Assumptions

Experience variances

Improved persistency but pensions business slower to recover

Very strong risk result in Corporate business due to positive income protection experience

Persistency assumption changes

Retail: remaining variances to normalise over next 3 years

Corporate: adjustment for higher lapse rates

2009

€m

(42)

9

32

(1)

2010

€m

(62)

16

5

(41)

2009

€m

(66)

23

(27)

(70)

2010

€m

(9)

35

(8)

18


24PAGE

2010 FINAL RESULTS

Net interest income

Other income*

Government guarantee

Invest. return / other

Expenses

Impairment provisions

Operating (loss)

Taxation

(Loss) after tax

2009

€m

375

41

(29)

6

393

(287)

106

(376)

(270)

24

(246)

2010

€m

402

39

(110)

(3)

328

(272)

56

(420)

(364)

47

(317)

Net interest income ahead given mix of funding

Net interest margin 86bps excluding cost of ELG scheme

Government guarantee in line with guidance

ELG €97m

CIFS €13m

Costs down 5%

Increased loan impairment provisions due to revised assumptions for house prices and lower commercial property valuations

Bank Earnings

* incl. trading income

Change

%

7

(17)

(35)


25PAGE

2010 FINAL RESULTS

Net Interest Margin

Competitive nature of deposit market continuing to have negative impact on margin

Significant ECB funding through H2 2010

Mortgage re-pricing includes two SVR rate changes in 2010

Book yield of c. 2.7% versus average cost of funds of c. 1.8% giving net margin currently of c. 90bps (indicative)

Cost of Funds

Customer accountsLong-termECBShort term

Cost%

2.12.11.02.41.8

Book%352632

7100

Asset Yields

ROI mortgagesUK mortgagesCommercial mortgagesConsumer financeTreasury

Yield%

2.72.13.27.42.42.7

Book%6117

53

14100

Net Interest Margin - Run-rateMargin MovementFY 2009Retail deposit funding

Wholesale funding

Asset re-pricing

Other

FY 2010

BPS83

(12)

(3)

24

(6)

86


26PAGE

2010 FINAL RESULTS

Funding

December 2010 - Total €43bn


€5bn term debt issuance in 2010

No access to senior unsecured markets from Aug 2010

Other funding secured via bi-lateral repo & ABS transactions

Deposits 6% yoy

Retail continue to grow 12%

Corporate outflows due to Sovereign and bank downgrades

Significant increased reliance on ECB due to closure of debt markets

No refinancing requirement of note until 2013

Addition of €3.6bn INBS deposits

27PAGE

2010 FINAL RESULTS

* Source: UK Council of Mortgage Lenders

>3 months, includes repossessions & receivers of rent cases

CHL Mortgage Arrears Cases

Arrears - UK Mortgages


BTL accounts for 94% of Capital Home Loans (CHL) portfolio

Closed for new business since early 2008

Arrears down 42% in Dec 2010 against peak in Q1 2009

CHL 3+ month arrears - 2.0% at Dec 2010

Industry average 3+ month arrears* -2.6% at Dec 2010

Average indexed LTV of 83%

Negative equity 23% of loan book

28PAGE

2010 FINAL RESULTS

49% increase in total arrears cases in 2010

> 90 days arrears cases increase 67% in 2010

Cases > 90 days in arrears 11,500 at Dec 2010 out of total portfolio of c. 178,000

< 90 days arrears cases up 18%, flat in H2 2010

Average home loan indexed LTV of 69% at Dec 2010

Negative equity 28% of total cases at Dec 2010

PTSB ROI Residential Mortgage Arrears Cases

Arrears - ROI Residential Mortgages


29PAGE

2010 FINAL RESULTS

Slower economic recovery

Higher level of impairments

House prices peak to trough decline

Model assumptions 40%

HPI at December 2010 38%

Assumption increased to 43%

Commercial property

Further valuation declines

Impacts performing and non-performing loans

Impairment Model


30PAGE

2010 FINAL RESULTS

ROI mortgages

UK mortgages

ROI commercial

Consumer finance

Specific

€m

187

25

80

5

297

Collective

€m

56

2

25

40

123

Total

€m

243

27

105

45

420

2010

Collective provisions: are determined on a portfolio basis generally using a statistical roll-rate model, and are

used where individual loans are small and / or to recognise losses which has been incurred but not yet reported.

Impairment Charge

Total

€m

154

33

99

90

376

2009


31PAGE

2010 FINAL RESULTS

Regulatory Capital Movement

Jan 2010

Capital from existing business

New business strain

Net capital release

Investment fluctuations / other

Dividend paid

VIF loan

Dec 2010 before available dividend

Available dividend

Dec 2010

€m

685

252

(46)

(13)

100

978

(243)

735

Capital - Life


Minimum solvency requirement for Irish Life Assurance of €401m (Dec 09: €413m) covered 1.75 times (Dec 09: 1.6 times)

Strong cash-flow generation boosted by

€50m of expense reserve releases

€40m stop-loss treaty, and

€30m from a change in risk assumptions

Loan secured on VIF

Dividend available of €243m to recapitalise bank

327

(75)

32PAGE

2010 FINAL RESULTS

Basel II

Tier 1 capital

Total required capital

Total RWAs

Core Tier 1 ratio

Dec 09

€m

1,858

1,313

16,411

%

11.3

Dec 10

€m

1,681

1,265

15,809

%

10.6

Robust group capital position to absorb expected defaults

Core Tier 1 ratio of 10.6% (Dec 09: 11.3%)

Basel II minimum total capital requirement of 8%

Surplus capital of €416m

Prudential Capital & Liquidity Assessment Reviews (PCAR / PLAR) in progress with Financial Regulator

Including available dividend of €243m in life company would increase Core Tier 1 ratio to 12.2%

Capital - Bank


33PAGE

2010 FINAL RESULTS

Life

Banking

Risks / Uncertainties

Earnings Outlook


34PAGE

2010 FINAL RESULTS

Page35. Group total (loss) after tax - EV basis36. Group operating (loss) after tax - EV basis37. Group operating EPS - EV basis38. Group IFRS (loss) after tax39. Group IFRS and EV basis results reconciliation40. Bank non-interest income41. Bank asset portfolio42. Bank impaired loans43. Bank non-performing loans44. Bank regulatory capital45. Life embedded value movement46. Life asset quality47. Life new business margin48. Life operating costs49. Life & investment sales50. Life sales - Retail & Corporate51. Other activities operating (loss) / profit

Additional Information

35PAGE

2010 FINAL RESULTS

Operating (loss)

Investment fluctuations

Economic assumptions

Other changes

Total (loss)

Pre-tax

€m

(197)

49

(51)

(38)

(237)

2010

Tax

€m

30

-

4

5

39

2009

Post-tax

€m

(182)

(53)

(27)

(17)

(279)

Post-tax

€m

(167)

49

(47)

(33)

(198)

Group Total (Loss) After Tax - EV Basis

36PAGE

2010 FINAL RESULTS

Life assurance

Banking

Associate

Other


Pre-tax

€m

160

(364)

9

(2)

(197)

2010

Tax

€m

(17)

47

-

-

30

2009

Post-tax

€m

90

(246)

(2)

(24)

(182)

Post-tax

€m

143

(317)

9

(2)

(167)

Group Operating (Loss) After Tax - EV Basis

37PAGE

2010 FINAL RESULTS

Note: “own shares” included for EPS calculation


Taxation

(Loss) / profit after tax

Average no. of shares

EPS

2009

€m

(196)

14

(182)

276m

(66)c

2010

€m

(197)

30

(167)

276m

(60)c

Group Operating EPS - EV Basis

38PAGE

2010 FINAL RESULTS

Life assurance & investment

Banking

General Insurance

Other


Economic variance

Other / Goodwill impairment

Taxation

(Loss) / profit after Tax

2009

€m

93

(270)

(2)

(26)

(205)

(73)

(22)

(10)

(3)

(313)

2010

€m

167

(364)

9

(2)

(190)

41

(29)

21

29

(128)

167

IFRS Life Earnings Movement 2010€m

New business effect (6)Interest on insurance VIF 61Expected profit on Inv. contracts 70Exp var. & assumption changes 28Expected Investment Return 14

Group Total (Loss) After Tax - IFRS Basis

39PAGE

2010 FINAL RESULTS

Embedded Value basis

Investment business

• Value of in-force

• Deferred costs & fees

• Restatement of liabilities

Own shares adjustment

VIF loan

Other / Tax

IFRS (Statutory) basis

S’Holders Equity

€m

2,045

(635)

140

63

-

17

(14)

1,616

Total (Loss) / Profit after Tax

€m

(198)

28

(3)

(9)

13

17

24

(128)

2010

IFRS / EV Reconciliation

40PAGE

2010 FINAL RESULTS

Note: Bancassurance Embedded Value operating profit €8m [2009: €14m] included in life assurance

Fees & Comms (rec’d)

Fees & Comms (payable)

Trading income

Investment return

2009

€m

54

(10)

44

(3)

6

47

2010

€m

54

(12)

42

(3)

(3)

36

Bank Non-Interest Income

41PAGE

2010 FINAL RESULTS

Category

Sovereign BondsAAAABAA/BA/B

Bank FRNs / Corporate BondsAAABAA/BA/B & lower

RMBSAAAAA / A

Total bank asset portfolio of €4.7bn

The portfolio is made up of €2.9bn Sovereign Bonds (61%), €1.2bn Bank FRNs (27%) and €0.6bn Prime RMBS (12%)

94% of the Prime RMBS is EURO denominated and there is zero US exposure in balance

€bn

1.00.11.8

0.20.40.6

0.40.2

Asset Portfolio December 2010

%

353

62

173350

6733

Bank Asset Portfolio

42PAGE

2010 FINAL RESULTS

Residential mortgages

• ROI

• UK

Commercial mortgages

Consumer finance

Balances

€m

736

105

217

160

1,218

Total Loans

%

2.7

1.3

9.1

10.5

3.2

June 2010

Balances

€m

415

75

171

167

828

Total Loans

%

1.5

1.0

7.2

9.5

2.1

December 2009

Impaired Loans

Impaired loans: are loans where there is objective evidence that an impairment loss had occurred, including cash-flow difficulties,

overdue contractual payments and breach of loan covenants

Balances

€m

992

111

280

155

1,538

Total Loans

%

3.8

1.5

11.9

11.3

4.1

December 2010

43PAGE

2010 FINAL RESULTS

Residential mortgages

• ROI

• UK

Commercial mortgages

Consumer finance

Balances

€m

1,858

265

378

195

2,696

Total Loans

%

6.9

3.3

16.2

12.8

7.0

June 2010

Balances

€m

1,342

258

307

206

2,113

Total Loans

%

4.9

3.4

12.9

11.8

5.4

December 2009

Non-Performing Loans

Balances

€m

2,417

258

471

184

3,330

Total Loans

%

9.2

3.4

20.1

13.4

8.9

December 2010

Non-performing loans: are impaired loans and loans where repayments are over 90 days in arrears

44PAGE

2010 FINAL RESULTS

Basel II Capital

Available capitalTier 1Tier 2Total capitalDeductions*

Total available capital (Tier 1)

Required capital

Excess own funds

Total RWAs

RAR (all Core Tier 1)

Dec 09€bn

3.91.25.1

(3.3)

1.8

1.3

0.5

16.4%

11.3

Dec 10€bn

3.81.25.0

(3.3)

1.7

1.3

0.4

15.8%

10.6

Bank Regulatory Capital

* Life company investment and other regulatory adjustments

Basel II minimum total capital requirement of 8%Surplus capital of €416m Strong capital position to absorb expected defaults

45PAGE

2010 FINAL RESULTS

Opening 1 Jan 2010

Operating profit


Economic assumptions

VIF loan

Capital & other movements

Closing 31 Dec 2010

Net Worth

€m

566

252

21

(48)

100

(13)

878

VIF

€m

1,076

(109)

28

1

(117)

(11)

868

Required Capital

€m

634

614

Total

€m

1,642

143

49

(47)

(17)

(24)

1,746

Life: Embedded Value Movement

* All movements net of tax

46PAGE

2010 FINAL RESULTS

Rating

AAA

AA

A / BAA

€m

1,366

171

234

1,771

%

77

10

13

100

Non-linked Debt Securities

Non-linked liabilities matched with debt securities of appropriate duration

Majority high quality sovereign bonds

Insurance & investment assets

Deposits

Property

Equity

Debt securities / other

Subordinated debt

€m

697

234

30

133

1,094

(216)

878

%

64

21

3

12

100

Shareholders’ Net Worth

Property - owner occupied plus seed capital for property funds

Subordinated debt - €200m capital raised in 2007

Life Asset Quality

47PAGE

2010 FINAL RESULTS

New Business Contribution

Life

ILIM

Margin - APE

Life

ILIM

Margin – PVNBP*

Life

ILIM

2009

€m

40

11

%

11.4

5.9

%

1.6

0.6

2010

€m

37

15

%

11.5

6.1

%

1.6

0.6

APE Sales2010 2009

€m €m

Life 320 348

ILIM 252 191

PVNBP* Sales2010 2009

€m €m

Life 2,288 2,398

ILIM 2,520 1,908

* Present value of new business premiums

Life New Business Margin

48PAGE

2010 FINAL RESULTS

Retail & Corporate

ILIM

Other

IFRS adjustment

2010

€m

165

14

10

189

(9)

180

2009

€m

169

14

7

190

1

191

Life Operating Costs

49PAGE

2010 FINAL RESULTS

Recurring Premium Single Premium2009

€m

736

471

1,908

252

3,367

337

3,367

2010

€m

689

525

2,520

371

4,105

410

4,105

Retail

Corporate

ILIM

ILI

Total

APE Basis

PVNBP Basis

2009

€m

85

117

-

-

202

202

939

2010

€m

78

84

-

-

162

162

703

Life & Investment Sales

50PAGE

2010 FINAL RESULTS

ProductsPensionProtection / RiskInvestmentsSavings

DistributionBancassuranceDirect Sales forceBrokers / IFAsInstitutions

2009€m

824325

9159

29426820

2010€m

684030

8146

29385920

Change%

(17)(7)20

(11)(8)

-(10)(13)

-159146 (8)

ProductsDC pensionProtection / RiskAnnuitiesPRB / DB

DistributionConsultantBrokersDirect / Cornmarket

2009€m

98251823

164

644258

164

2010€m

76142423

137

643538

137

Change%

(22)(44)

33-

(16)

-(17)(34)

(16)

Retail APE Sales Corporate APE Sales

Retail & Corporate Life Sales

51PAGE

2010 FINAL RESULTS

Cornmarket / IPSI

Corporate costs

Associate

2009

€m

4

(30)

(26)

(2)

(28)

2010

€m

14

(16)

(2)

9

7

Other Operating Activities

52PAGE

2010 FINAL RESULTS

Please contact our Investor Relations Department for any furtherinformation or visit our group website at

www.irishlifepermanent.ie

Contact details:

Barry Walsh [email protected] +353 1 704 2678

Orla Brannigan [email protected] +353 1 704 1345

Contact Information

http://www.irishlifepermanent.ie/

mailto:[email protected]

mailto:[email protected]

final results 2010/media/files/i/irish-life-and-permanent/...page 2 2010 final results forward...

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