Permanent TSB Group Holdings PLC · EURONEXT:PTSB
Permanent TSB — Irish Life & Permanent — FY2004 Earnings Presentation
34 slides from Permanent TSB's earnings presentation, Jul 21, 2005
Slide 1: Financial Reporting Update EEV & IFRS
Financial Reporting Update EEV & IFRS www.irishlifepermanent.ie London & Dublin 21 July 2005
Slide 2: Finance Team
Finance Team Peter Fitzpatrick Finance Director David McCarthy Group CFO Bruce Maxwell Chief Actuary 2
Slide 3: Agenda
Agenda n Overview n Group EEV Results n Group IFRS Results n Questions & Answers 3
Slide 4: Overview
Overview n Update on Nov 2004 presentation on IFRS n Restatement of 2004 ROI GAAP results for (i) EEV (ii) IFRS n Significant change in accounts formats Ø Statutory / primary financial statements - IFRS Ø Supplementary financial information - EEV n Key messages unchanged Ø Continue to manage life bu
Slide 5: Overview - EEV
Overview - EEV n Adopting principles issued by European CFO Forum n Builds on existing embedded value / achieved profits reporting n Key themes: Ø Increased transparency Ø Greater consistency and comparability Ø Robust assumptions & recognition of FOGs n So far – more disclosure but lacking consiste
Slide 6: Overview - IFRS
Overview - IFRS n New statutory / primary reporting basis n Single P&L and B/S comprising Ø Banking Ø Insurance Activities Ø Investment Ø Other n Key changes in Life & Banking Ø Split of life business between insurance and investment Ø Spreading forward of fees, discounts etc in banking Ø Eliminatio
Slide 7: Summary 2004 Results
Summary 2004 Results Reported Re-stated ROI GAAP EEV IFRS €m €m €m Operating Profit after tax 323 341 n/a Total Profit after tax 411 427 353 Shareholder Equity 2,301 2,329 1,829 € € € EPS* - basic 152.5c 158.4c 130.9c φ - operating 120.0c 126.5c n/a * Including own shares held by policyholder funds
Slide 8: IFRS - Group Changes
IFRS - Group Changes n Goodwill Ø Impairment test for carrying value Ø no amortisation n Share based payments Ø No charge for options granted pre- 2003 Ø Cost of options (post-2003) spread over vesting period n Dividends Ø Final dividend recognised when approved by shareholders Ø Interim dividend re
Slide 9: IFRS - Group Changes
IFRS - Group Changes n Own shares Ø Shares in parent held for policyholders in unit-linked funds Ø No shareholder interest; permitted by legislation Ø Requirement to deduct market value of shares from shareholders funds n Pensions Ø Adopting corridor approach (similar to US) Ø Deficits at January 1
Slide 10: Group EEV Results
Group EEV Results David McCarthy Group CFO
Slide 11: Group EEV Results
Group EEV Results EEV applied to “Covered” business Ø Life Assurance – insurance & investment contracts Ø Investment management + IFRS applied to other activities Ø Banking Ø Associate Ø Cornmarket & IPSI Ø Corporate costs 11
Slide 12: Group EEV Results 2004
Group EEV Results 2004 Profit after tax Reported Restated ROI GAAP EEV €m €m Operating Profit 400 387 Investment fluctuations 30 26 Economic Variance 47 30 Exceptional gains 21 21 Goodwill (12) - 486 464 Tax/Levy/Minority (75) (47) Discontinued activities - 10 Total profit after tax 411 427 12
Slide 13: Group EEV Results 2004
Group EEV Results 2004 Operating Profit Reported Restated ROI GAAP EEV €m €m Life 215 192 Banking 120 139 Associate 63 56 Other 2 - 400 387 13
Slide 14: Life - EEV Changes
Life - EEV Changes n Required Capital n Financial Options & Guarantees n Economic Assumptions / Risk Discount Rate n Tax Gross-Up n Pensions costs 14
Slide 15: EEV - Required Capital
EEV - Required Capital n Capital level below which regulator can take action n Current guidance from IFSRA - 150% EU solvency margin n Conservative basis for IL&P given: Ø Above minimum regulatory reserving basis Ø FOGs fully costed Ø Low insurance / operational risks n EEV cost as risk discount rat
Slide 16: EEV - Financial Options & Guarantees
EEV - Financial Options & Guarantees n Investment and death guarantees n Intrinsic value (in-the-money) Ø computed on deterministic basis Ø already reflected in existing EV n Time value (out-of-the-money) Ø Computed using stochastic modelling Ø Market consistent basis – assumes risk free rate return
Slide 17: EEV - RDR Risk Margin
EEV - RDR Risk Margin n Bottom-up approach to calculation of risk margin n Market risk - 1.1% Ø Uncertainty of cashflows on equities/property Ø Will vary with asset mix to eliminate gains/losses n Non-market risks - 2.1% Ø Mismatch – group policy to match Ø Mortality / morbidity - regulatory basis p
Slide 18: EEV - RDR Risk Margin
EEV - RDR Risk Margin n Change in risk discount rate for 2004 Reported Restated % % Risk margin 3.4 3.2 Risk free rate 3.6 3.5 RDR 7.0 6.7 n Additional to treatment of: Ø FOGs - market consistent cost Ø Required Capital - 150% of EU solvency margin n Compares favourably with peers Addition to EEV €3
Slide 19: EEV - Life Operating Profit 2004
EEV - Life Operating Profit 2004 Gross Net €m €m Reported - ROI GAAP 215 185 Discontinued business (10) (8) Reclassified activities (3) (3) Continuing business 202 174 Cost of Capital Required (2) (1) Economic assumptions / RDR 13 12 Tax gross-up (12) - Pension costs - IAS 19 (9) (8) Restated - EEV
Slide 20: EEV - Life Operating Profit 2004
EEV - Life Operating Profit 2004 Reported Restated ROI GAAP EEV €m €m New business 52 58 Existing business 150 134 202 192 20
Slide 21: EEV - New Business
EEV - New Business Sales : New contracts + increases to existing contracts Value of Sales : Present value of new business premiums (PVNBP) replaces APE measure Margin : New Business Contribution % PVNBP 21
Slide 22: EEV - New Business 2004
EEV - New Business 2004 Life ILIM* Total €m €m €m Sales PVNBP 2,029 1,601 3,630 APE 310 160 470 Contribution (EEV) 46 12 58 New business margin PVNBP 2.3% 0.8% 1.6% APE 14.9% 7.6% 12.4% * All new business inflows of institutional funds, both on and off-balance sheet 22
Slide 23: Banking - IFRS Changes
Banking - IFRS Changes n Effective yield Ø Costs / non-interest income amortised over asset / liability life Ø Principally discounts, broker commissions, application fees Ø Taken into net interest income line n Impairment and general provisions Ø No general provision allowed Ø Suspension of interest
Slide 24: IFRS - Banking Operating Profit 2004
IFRS - Banking Operating Profit 2004 €m Reported - ROI GAAP 120 Effective yield 19 Impairment 1 Pension (IAS 19) (6) Property revaluation (2) Other (1) Restated - IFRS 131 Reclassified 8 Total 139 24
Slide 25: IFRS - Banking Operating Profit 2004
IFRS - Banking Operating Profit 2004 Reported Restated ROI GAAP IFRS €m €m Net interest receivable 349 349 Other income 13 45 362 394 Expenses (233) (245) Bad & doubtful debts (9) (10) 120 139 25
Slide 26: IFRS - Other Operating Profit 2004
IFRS - “Other” Operating Profit 2004 €m Reported - ROI GAAP 2 Reclassified • Cornmarket / IPSI 8 • Corporate costs (13) (5) Pension & Other 3 Restated - EEV - 26
Slide 27: Group EEV - Shareholder Equity
Group EEV – S’holder Equity Year ended 31 Dec 2004 Total €m Reported – ROI GAAP 2,301 Pension costs (IAS 19) (166) Cost of capital (35) Cost of FOGs (26) Other EEV (25) Dividend 104 Effective yield 76 Impairment 50 Goodwill 11 Change in Econ. Assumptions / RDR 39 Restated – EEV 2,329 27
Slide 28: Group IFRS Results
Group IFRS Results Peter Fitzpatrick Finance Director
Slide 29: IFRS - 2004 Results
IFRS - 2004 Results Restated Restated EEV IFRS €m €m Profit & Loss A/C Life Operating profit Investment fluctuations 248 150 Economic variance Banking 139 139 Associate (net) 56 56 Exceptional gains 21 21 Tax/Minority (47) (20) Discontinued activities 10 7 Total profit after tax 427 353 29
Slide 30: IFRS - Life Changes
IFRS - Life Changes n Insurance contracts Ø Significant degree of risk in contract Ø 13% of life technical provisions in 2004 n Investment contracts Ø VIF removed from balance sheet Ø 87% of life technical provisions in 2004 30
Slide 31: IFRS - Life Total Profit 2004
IFRS - Life Total Profit 2004 IFRS Changes €m Restated - EEV 248 Investment contracts (94) Own shares (6) Property/Fixed asset revaluation (3) Other 5 Restated - IFRS 150 31
Slide 32: IFRS - Shareholders Equity 2004
IFRS - Shareholders Equity 2004 €m Reported - ROI GAAP 2,301 Pension costs (IAS 19) (166) Dividend 104 Effective yield 76 Impairment provisions 50 Own shares (34) EEV (51) Investment contracts (IFRS 4) (470) Other 19 Restated - IFRS 1,829 32
Slide 33: IFRS - Regulatory Capital
IFRS - Regulatory Capital n Banking - 11.2% RAR Ø QIS exercise for IFSRA - no change n Life - 170% EU solvency Ø Solvency margin based on regulatory returns Ø IFRS not relevant Ø No change 33
Slide 34: Summary
Summary n IFRS Ø Lots of effort Ø Limited value added n European EV Ø Greater transparency Ø More consistency needed n Next steps Ø H1 2004 EEV & IFRS – Aug. 25th Ø Interims 2005 – Sept. 7th 34
Irish Life & Permanent — FY2004 Earnings Presentation on 6ix