Permanent TSB Group Holdings PLC · EURONEXT:PTSB
Permanent TSB — Irish Life & Permanent — FY2008 Earnings Presentation
52 slides from Permanent TSB's earnings presentation, 2009
Slide 1: 2008 Preliminary Results
2008 Preliminary Results 1 2008 Preliminary Results
Slide 2: Index
Index Section Page Financial Review: Group earnings 3 Life earnings 6 Bank earnings 7 Funding 9 Credit quality & Impairments 10 Capital 15 Business review: 19 Review of Life business 21 Review of Banking business 24 Outlook 28 Additional information: Group: Analysis of PAT and EPS 35 IFRS PAT & IFRS
Slide 3: 2008 Financial Review
2008 Financial Review Solid Life & Banking performances - profits €341m Lower risk retail businesses Strong and flexible capital position Managing businesses through the cycle Cost reductions Minimising impairments Managing capital David McCarthy Finance Director 3 2008 Preliminary Results
Slide 4: 2008 Group Earnings
2008 Group Earnings 2008 2007 Change €m €m % Operating profit* 341 590 (42) Operating profit net of exceptional impairments Life Embedded Value: • Investment fluctuations (640) (114) Balance sheet movements • Economic assumptions 105 (14) Life embedded value Bank goodwill write off (170) (2) Bank go
Slide 5: 2008 Operating Earnings
2008 Operating Earnings Group Income 2008 2007 Change Pre-tax operating profit from core life & Statement €m €m % banking operations €314m Operating profit* Effective tax rate on operating profit* of • Life 284 346 (18) 11% (2007: 10%) • Banking 30 219 (86) Operating Profit after Tax down 43% on • A
Slide 6: Operating Profit - Life
Operating Profit - Life Life Income 2008 2007 Change Life (excl. ILIM) new business margin Statement €m €m % APE: 15.1% (2007: 19.2%) New business 100 154 (35) PVNBP: 2.4% (2007: 2.9%) In-force business 184 192 (4) Return on life new business • Total expected return 165 147 12 IRR: 12.1% (2007: 13.3
Slide 7: Operating Profit - Bank
Operating Profit - Bank Revenues Bank Income 2008 2007 Change Statement €m €m % ● NII impacted by wholesale funding spreads Net interest income 473 500 (5) Other income 42 43 ● Margin of 105bps (2007: 117bps) Trading income 5 5 ● Exceptional gain of €29m on disposing of Gilt gains 29 - gilt portfoli
Slide 8: Bank - Net Interest Margin
Bank - Net Interest Margin 2008 Movement bps EURIBOR spread widened for most of year Dec 2007 117 Funding mix & basis risk (16) Counterparty credit spreads remain high Asset margins 6 Liability margin squeeze - deposits Liquidity 3 Liability margins (5) High level of ECB funding in Q4 2008 Dec 2008
Slide 9: Bank Funding
Bank Funding December 2008 - Total €44bn Government guarantee scheme Customer accounts / deposits & long- Short-term debt Long-term debt term debt accounted for 62% of total 38% 29% funding at Dec 2008 down from 64% at Dec 2007 Retail deposits increased by €1bn in 2008 ECB funding €11.8bn at Dec 200
Slide 10: Impairments - ROI Mortgage Arrears Cases
Impairments - ROI Mortgage Arrears Cases Irish Mortgage* Arrears Cases (> 1 month) Marked increase in arrears cases in Q4 000’s 000’s 12 No. of Mortgages (RHS) 200 Irish mortgages cases > 1 month in arrears 7,900 at Dec 08 out of a total 190 10 portfolio of over 192,000 cases 180 Average indexed LTV
Slide 11: Impairments - UK Mortgage Arrears Cases
Impairments - UK Mortgage Arrears Cases UK Buy-to-Let Mortgage Arrears Cases* BTL accounts for 93% of Capital Home Loans (CHL) portfolio % 3 2.79 CML (Industry average) CHL BTL arrears cases significantly 2.5 2.15 increased, 946 cases at Dec 2008 out of 2 CHL a book of 44,000 1.5 1.40 Closed to new
Slide 12: Impaired Loans
Impaired Loans December 2008 December 2007 Balances Total Loans Balances Total Loans €m % €m % Residential mortgages • ROI 51 0.2 21 0.1 • UK 74 1.0 21 0.3 Commercial mortgages 16 0.8 9 0.5 Consumer finance 61 2.6 47 2.1 202 0.5 98 0.3 Provisions 137 75 12 2008 Preliminary Results
Slide 13: Impairment Provisions
Impairment Provisions 2008 2007 Specific Collective Total Total €m €m €m €m ROI mortgages 6 21 27 1 UK mortgages 6 9 15 4 ROI commercial 4 5 9 - Consumer finance • ptsb Finance - 21 21 3 • Term, Visa, overdraft - 10 10 8 16 66 82 16 Bps Bps Impairment charge 21 4 13 2008 Preliminary Results
Slide 14: Loan Impairments - 2009-2011
Loan Impairments - 2009-2011 z Base case z 2009-11: 103 bps z Stress case z 2009-11: 160 bps z Stress case assumptions for Ireland: z Unemployment 14% z House price falls -40% z ROI mortgage foreclosure costs 24% z Probability of default and loss given default based on UK 1990s experience 14 2008 Pr
Slide 15: Capital - Life
Capital - Life Life Capital Movement €m Dec 2007 In-force book strongly cash generative • Net worth 587 193 Reinsurance increased net worth by • Debt capital* 780 €125m in 2008 - adding €66m to in-force earnings and reducing new business 2008 Movement strain by €59m • In-force earnings 377 Admissibl
Slide 16: Life EV - Investment Fluctuations
Life EV - Investment Fluctuations 2008 Movement €m Unit-linked management fees (383) Unit-linked management fees impacted by c. 35% fall in markets against Property (128) assumptions Options / guarantees (62) Property predominately owner-occupied Sigma (34) plus seed capital for property funds Lehma
Slide 17: Capital - Bank
Capital - Bank Dec 08 Dec 07 Basel I Basis Transitioning to Basel II Core Tier 1 ratio 10.1% 10.4% Basel I equivalent basis: Core Tier 1 ratio of 10.1% Basel II Regulatory minimum 9.03% Tier 1 capital €2.1bn €2.0bn Basel II Pillar 1 RWAs €18.2bn €18.9bn Pillar 1 in operation Pillar 2 outstanding Cor
Slide 18: Capital 2009 Options
Capital 2009 Options Capital targets Life Banking Reduced capital strain Life new business Bank lending Dividends Additional capital Life reinsurance VIF securitisation 18 2008 Preliminary Results
Slide 19: Business Review
Business Review Review 2008 Life company Bank Priorities for 2009 Kevin Murphy CEO Irish Life Director 19 2008 Preliminary Results
Slide 20: Priorities 2008
Priorities 2008 Maintain Irish Life’s market-leading franchise Grow life & pensions market share Build leadership position in investment management Group opportunities - pension & protection Adapt banking business to changing conditions Lending - restrict focus to retail in Ireland Manage credit imp
Slide 21: Life & Investment - Overcoming Challenges
Life & Investment - Overcoming Challenges Sales - continue to out-perform the market Irish Life -24% v Market of -29% Market share now 32% (up 2%) Pensions out-performance Benefiting from trend towards defined contribution ILIM - €2bn of new inflows Increase in customer withdrawals Primary customer
Slide 22: Life & Pension Sales – Out-performance in a difficult market
Life & Pension Sales – Out-performance in a difficult market Total sales €511m (2007: €673m) €m ILI* Retail Life -40% - sales declined in -23% line with market Retail • Investment Corporate Business +6% - defensive & Savings -64% qualities come through • Protection Pensions out-performance - market
Slide 23: Investment Management - sustained inflows
Investment Management - sustained inflows ILIM Funds under Management €bn 40 35 34 31 ILIM now acknowledged market leader in 30 27 Ireland 25 25 21 Market share 30% - up 7% in last 5 years 20 In-flows of over €2bn in 2008 - €7.5bn in 15 last 3 years 10 Strong and growing client base 5 0 2004 2005 20
Slide 24: Retail Banking - adapting to changing market conditions
Retail Banking - adapting to changing market conditions Focusing lending to retail in Ireland Principally secured residential mortgages Pro-actively managing arrears Managing credit impairment Growing the retail deposit base +€1bn in 2008 24 2008 Preliminary Results
Slide 25: Bank Loan Book is Low Risk
Bank Loan Book is Low Risk Loan Balances Loan book growth of 2% in 2008 Gross new lending of €7.1bn down 43% Sharp slowdown in redemptions CHL (UK) closed to new business in Q1 2008 Total Loan Book €39.9bn (2007: €39.2bn) No corporate / SME / development exposure Mix Growth % S% ROI residential mort
Slide 26: Credit Management a Priority
Credit Management a Priority Pro-actively managing arrears Dedicated resources in place Early intervention with customers - providing a range of options Securing preferential treatment versus other debts Contingency planning for large-scale redundancies Tighter credit policy Mortgages - tighter crit
Slide 27: Growing the Bank Resource Base
Growing the Bank Resource Base €1bn in new retail deposits in 2008 Ireland €700m+ ¾ Branches €500m+ ¾ Brokers €200m+ Isle of Man £300m+ stg Customer acquisition - continued growth in current accounts 53,000 new current accounts in 2008 250,000 new current accounts over past four years 27 2008 Prelim
Slide 28: Outlook for 2009
Outlook for 2009 Life company Bank Costs Strategy 28 2008 Preliminary Results
Slide 29: Outlook for 2009 - Life Company
Outlook for 2009 - Life Company Sales projected to fall Corporate Business & ILIM will continue to show defensive qualities Need to develop new investment solutions to meet customer needs Pensions & Protection will remain the focus Retention agenda needs to be managed Dedicated resources now in plac
Slide 30: Outlook for 2009 - Bank Business
Outlook for 2009 - Bank Business Bank loan book to decline New lending volumes halved Remain closed for new business in UK & Ireland Commercial Retail deposit base to grow by €2bn Branches / Brokers / Isle of Man - build on 2008 success 30 2008 Preliminary Results
Slide 31: 2009 - €50m Cost Agenda
2009 - €50m Cost Agenda Group headcount projected to fall by 500 (FTE) in 12 months to June 2009 150 via career break Non-replacement & re-deployment Remuneration proposal - will generate payroll savings of €22m in 2009 Freeze on salary increase for all staff / no bonus for senior staff Discussions
Slide 32: 2009 Strategic Agenda
2009 Strategic Agenda Government has acknowledged that IL&P is “systemically important” Strong & flexible capital position Structure - range of options under consideration Primary goal is to enhance shareholder value Funding - resolving long-term issues is vital Range of proposals for government Pot
Slide 33: 2009 - Summary Outlook
2009 - Summary Outlook Life company Bank Associate Overall operating profit Low risk diversified business model, IL&P well placed to deal with the undoubted challenges ahead 33 2008 Preliminary Results
Slide 34: Additional Information
Additional Information Page 35. Group total profit after tax - EV basis 36. Group operating profit after tax - EV basis 37. Group operating EPS - EV basis 38. Group IFRS (Statutory) profit after tax 39. Group IFRS and EV basis results reconciliation 40. Bank new lending & LTVs 41. Bank non-interest
Slide 35: Total Profit After Tax
Total Profit After Tax 2008 2007 Pre-tax Tax Post-tax Post-tax €m €m €m €m Operating profit 341 (35) 306 536 Investment fluctuations (640) (20) (660) (109) Economic assumptions 105 (24) 81 (17) Impairment of goodwill (170) - (170) - Other changes - 14 14 (2) (364) (65) (429) 408 Minority (4) - (4) (
Slide 36: Operating Profit After Tax
Operating Profit After Tax 2008 2007 Pre-tax Tax Post-tax Post-tax €m €m €m €m Life assurance 284 (24) 260 325 Banking 30 (10) 20 186 Associate 23 - 23 31 Other 4 (1) 3 (6) Operating profit 341 (35) 306 536 36 2008 Preliminary Results
Slide 37: Operating EPS
Operating EPS 2008 2007 Change €m €m % Operating profit 341 590 Taxation (35) (54) Operating PAT 306 536 (43) Average no. of shares 276m 275m EPS 111c 195c (43) Note: “own shares” included for EPS calculation 37 2008 Preliminary Results
Slide 38: IFRS (Statutory) Profit After Tax
IFRS (Statutory) Profit After Tax 2008 2007 Change €m €m % Life assurance 288 238 21 IFRS Life Earnings Movement 2008 Banking 30 219 (86) €m New business effect 0 General Insurance 23 31 Interest on insurance VIF 61 Other 4 (6) Expected surplus on Inv. contracts 108 288 Exp var. & assumption changes
Slide 39: IFRS / EV Reconciliation
IFRS / EV Reconciliation 2008 S’Holders Total Profit* Equity after Tax €m €m Embedded Value basis 2,775 (429) Investment business • Value of in-force (600) 284 • Deferred costs & fees 139 25 • Restatement of liabilities 74 45 Own shares adjustment - 86 Other (41) 42 IFRS (Statutory) basis 2,347 53 *
Slide 40: Bank New Lending
Bank New Lending Total new lending €7.1bn (2007: €12.4bn) Irish Residential New Lending LTVs €bn 2008 2007 2006 8 Home Loans % % % 7.0 First Time Buyers 78 84 87 7 Second Time Buyers 56 57 58 6 Average 64 69 71 5 BTL Average 66 67 68 4.2 4 Equity Release Average 52 54 51 3.3 3 Total New Lending* 63
Slide 41: Bank Non-Interest Income
Bank Non-Interest Income 2008 2007 €m €m Fees & Comms (rec’d) 52 53 Fees & Comms (payable) (10) (40) 42 43 Trading income 5 5 47 48 Gilt portfolio 29 - 76 48 Note: Bancassurance Embedded Value operating profit €37m [2007: €64m] included in life assurance 41 2008 Preliminary Results
Slide 42: Bank Asset Portfolio
Bank Asset Portfolio Asset Portfolio December 2008 Category €m % Total bank asset portfolio of €3.4bn Sovereign Bonds The portfolio is made up of €428m AAA 356 83 Sovereign Bonds (12%), €2.2bn Bank A 72 17 FRNs (64%) and €804m Prime RMBS (24%) Bank FRNs / Corporate Bonds 97% of the Prime RMBS is EUR
Slide 43: Bank Capital - Basel II
Bank Capital - Basel II Basel II Capital Dec 08 Dec 07 €bn €bn Available capital Transitioning to Basel II Tier 1 4.2 4.4 Basel I equivalent basis: Tier 2 1.3 1.4 Total capital 5.5 5.8 Core Tier 1 ratio of 10.1% Deductions* (3.4) (3.8) Regulatory minimum 9.03% Total available capital (Tier 1) 2.1 2.
Slide 44: Life Embedded Value Movement
Life Embedded Value Movement Required Net Worth VIF Total Capital €m €m €m €m Opening 1 Jan 2008 587 1,460 2,047 589 Operating profit 289 (29) 260 Investment fluctuations (253) (407) (660) Economic assumptions 25 56 81 Capital & other movements (79) - (79) Closing 31 Dec 2008 569 1,080 1,649 626 * A
Slide 45: Life Asset Quality
Life Asset Quality Non-linked Debt Securities Non-linked liabilities matched with debt Rating €m % securities of appropriate duration AAA 1,385 88 Majority high quality sovereign bonds AA 142 9 No exposure to “toxic” assets A 46 3 1,573 Shareholders’ Net Worth Insurance & investment assets €m % Prop
Slide 46: Life New Business Margin
Life New Business Margin 2008 2007 APE Sales New Business Contribution €m €m 2008 2007 Life 77 129 €m €m Life 511 673 ILIM 23 25 ILIM 203 341 Margin - APE Life 15.1 19.2 ILIM 11.4 7.4 PVNBP Sales Margin - PVNBP % % 2008 2007 €m €m Life 2.4 2.9 Life 3,152 4,490 ILIM 1.1 0.7 ILIM 2,028 3,406 46 2008 P
Slide 47: Life Variances & Assumptions
Life Variances & Assumptions Experience Variances Assumption Changes 2008 2007 2008 2007 €m €m €m €m Persistency (29) 1 (31) 5 Risk 25 21 22 2 Expenses / Other 4 (12) 28 28 0 10 19 35 47 2008 Preliminary Results
Slide 48: Life Operating Costs
Life Operating Costs 2008 2007 Change €m €m % Retail & Corporate 194 196 ILIM 16 17 Other 14 18 224 231 (3) Pension IAS 19 adjust. (4) (15) 220 216 2 48 2008 Preliminary Results
Slide 49: Life & Investment Sales
Life & Investment Sales Recurring Premium Single Premium 2008 2007 2008 2007 €m €m €m €m Retail 170 237 772 1,778 Corporate 185 165 485 546 ILIM - - 2,028 3,406 ILI - - 304 390 Total 355 402 3,589 6,120 APE Basis 355 402 359 612 PVNBP Basis 1,591 1,776 3,589 6,120 49 2008 Preliminary Results 2006 In
Slide 50: Retail & Corporate Life Sales
Retail & Corporate Life Sales Retail APE Sales Corporate APE Sales 2008 2007 Change 2008 2007 Change €m €m % €m €m % Products Products Pension 129 180 (28) DC pension 162 155 5 Investments 36 124 (71) Protection / Risk 57 41 39 Protection / Risk 56 62 (10) Annuities / Other 15 24 (38) Savings 26 48
Slide 51: Other Activities Operating Profit
Other Activities Operating Profit 2008 2007 €m €m Cornmarket / IPSI 23 21 Corporate costs (18) (25) 5 (2) 51 2008 Preliminary Results
Slide 52: Contact Information
Contact Information Please contact our Investor Relations Department for any further information or visit our group website at www.irishlifepermanent.ie Contact details: Barry Walsh barry.walsh@irishlife.ie +353 1 704 2678 Orla Brannigan orla.brannigan@irishlife.ie +353 1 704 1345 Marie Gilsenan mar
Irish Life & Permanent — FY2008 Earnings Presentation on 6ix