Permanent TSB Group Holdings PLC · EURONEXT:PTSB
Permanent TSB — Irish Life & Permanent — FY2007 Earnings Presentation
50 slides from Permanent TSB's earnings presentation, 2008
Slide 1: 2007 Preliminary Results
2007 Preliminary Results www.irishlifepermanent.ie 1 2007 Preliminary Results
Slide 2: Index
Index Section Page Key messages & Highlights 3 Group earnings 9 Life earnings 11 Bank earnings 12 Credit quality 14 Asset quality 15 Funding 17 Capital and Dividend 18 Review of the Life business 23 Review of Banking business 29 Outlook 34 Additional information Group Earnings Analysis of PAT and EP
Slide 3: Key Messages
Key Messages Excellent 2007 performance Successfully managed challenges Low risk business model Strong position going into 2008 Denis Casey Group Chief Executive 3 2007 Preliminary Results
Slide 4: Excellent 2007 Performance
Excellent 2007 Performance Life & investment sales 44% Bank loan book growth 16% New current account customers 69,000 Combined life & banking operating profit 19% Operating EPS 9% 4 2007 Preliminary Results
Slide 5: Successfully Managed Challenges
Successfully Managed Challenges Slowdown in Irish mortgage market Upheaval in global credit markets Falls in equity markets 5 2007 Preliminary Results
Slide 6: Low Risk Business Model
Low Risk Business Model Diversified portfolio of businesses Life & Investment business - 93% of net liabilities are unit-linked Bank loan book - 98% secured, 88% residential mortgages Excellent credit quality – continuing low arrears experience Conservative life and banking investment portfolios 6 2
Slide 7: Strong Position going into 2008
Strong Position going into 2008 Businesses in excellent shape Strong and conservative balance sheet Well positioned to meet funding and capital needs Outlook 7 2007 Preliminary Results
Slide 8: Financial Review
Financial Review 2007 earnings & performance Asset quality Bank funding Capital & dividend Peter Fitzpatrick Group Finance Director 8 2007 Preliminary Results
Slide 9: 2007 Group Earnings
2007 Group Earnings Group Income 2007 2006 Change Operating Profit up 12% on 2006 Statement €m €m % Operating profit 590 529 12 Total profit after tax of €408m is down 28% mainly due to a negative investment Investment fluctuations* (114) 101 fluctuations* of €114m, reversing the Economic assumption
Slide 10: 2007 Operating Earnings
2007 Operating Earnings Group Income 2007 2006 Change Pre-tax operating profit from core life & Statement €m €m % banking operations €565m, up 19% Operating profit Reduced contribution from Associate • Life 346 274 26 (general insurance) business • Banking 219 202 8 Effective tax rate on operating p
Slide 11: 2007 Life Earnings
2007 Life Earnings Life Income 2007 2006 Change Life (excl. ILIM) new business margin Statement €m €m % APE: 19.2% (2006: 20.6%) New business 154 128 20 PVNBP: 2.9% (2006: 3.1%) In-force business Return on life new business • Total expected return 147 115 IRR: 13.3% (2006: 12.1%) • Experience varian
Slide 12: 2007 Bank Earnings
2007 Bank Earnings Bank Income 2007 2006 Change Statement €m €m % Strong NII growth and margin of 117bps (2006: 119bps) Net interest income 500 429 17 Other income 43 45 Cost income ratio Trading income 5 12 Reported: 55% 548 486 13 Incl. Bank EV earnings: 49% Expenses (302) (273) Credit impairment
Slide 13: Bank – Net Interest Margin
Bank – Net Interest Margin 2007 Movement Margin attrition less marked than expected due to higher returns on bps deposits and new liquidity protocol Dec 2006 119 Wholesale funding re-priced gradually Funding mix & basis risk (5) through H2 2007 Asset re-pricing (6) Outlook for 2008 in the range of L
Slide 14: Bank Credit Quality
Bank Credit Quality ROI Residential Mortgage Arrears 000’s 000’s 12 200 No. of Mortgages (RHS) 190 Overall credit quality experience remains 10 180 excellent 8 170 ROI mortgages continuing downward 160 trend in arrears 6 No. in Arrears * 150 CHL – consistent experience in BTL 4 140 portfolio and wel
Slide 15: Asset Quality - Life
Asset Quality - Life Non-linked Debt Securities Non-linked liabilities matched with debt Rating €m % securities of appropriate duration AAA 1,208 70 Majority high quality sovereign bonds AA 389 23 Single structured investment of €38m A 115 7 with €8m write-down provision No exposure to “toxic” asset
Slide 16: Asset Quality - Bank
Asset Quality - Bank Liquidity Portfolio Dec 2007 Total bank liquidity portfolio of €4.2bn Category €m % The portfolio is made up of €2.5bn Sovereign Bonds Sovereign Bonds (59%), €1.2bn Bank FRNs (28%), and €540m Prime RMBS AAA 2,500 100 (13%) Bank FRNs The Sovereign Bonds are all EURO AAA 60 5 deno
Slide 17: Bank Funding
Bank Funding 2007 2006 US & Euro CP 12% 20% Customer accounts (deposits) & long- ECB Repo term debt at Dec 2007: 64% of total 12% Deposits by Banks 1% funding (2006: 68%) 5% - secured 6% Deposits by Banks 3% 6% ECB drawings of €5.3bn at Dec 2007, - unsecured 4% X-Notes 3% reduced to €4.6bn (Feb 08)
Slide 18: Capital - Life
Capital - Life Life Capital Movement Life in-force book strongly cash €m generative - €297m in 2007 Net worth Dec 2006 747 €200m of debt capital raised in Q1 2007 Capital generated 297 Debt capital issued 200 Minimum solvency requirement of €386m (2006: €372m) covered 1.6 times after 1,244 proposed
Slide 19: Capital - Banking
Capital - Banking Bank Regulatory Capital Movement €m Increase of €300m in bank capital Dec 2006 2,152 RWAs increased by €2.9bn to €23.5bn Capital generated (2006: €20.6bn) • Net earnings 171 RAR of 10.4% (2006: 10.4%) all Tier 1 • Dividends received 297 Excess capital of c. €200m at Dec 2007 • Capi
Slide 20: Capital 2008
Capital 2008 Requirements Business growth Maturing Tier 2 debt (€200m) Dividend Sources Surplus from 2007 Earnings in 2008 Self-sufficient to meet ongoing requirements Basel II release Options to replace maturing debt 20 2007 Preliminary Results
Slide 21: EPS & Dividend
EPS & Dividend 2007 2006 Change cent cent % Operating EPS 195 178 9 Growth in operating EPS and strong Total EPS 147 205 (28) capital generation supports 10% dividend growth for 2007 Dividend 75 68 10 Full year dividend of 75c, represents yield of 7%+ NAV €12.3 €11.6 6 Share price at 17% discount to
Slide 22: Business Review
Business Review Denis Casey Group Chief Executive 22 2007 Preliminary Results
Slide 23: Irish Life
Life & Investment Record 2007 Life sales ILIM success Increased market share Market outlook Irish Life 23 2007 Preliminary Results
Slide 24: Life & Investment Sales
Life & Investment Sales Total Life & Investment sales €1,014m, up 44% (2006: €706m) €m 450 +31% 400 +79% 2007 350 2006 300 250 +33% 200 150 100 +15% 50 0 Retail Corporate ILIM ILI * APE basis 24 2007 Preliminary Results
Slide 25: Life Products
Life Products Retail & Corporate Life Pension sales growth of 39% driven by economy, demographics and public policy support Slower protection / risk sales growth in Retail of 2% due to reduction in mortgage lending offset by rise in Corporate sales of 44% Total sales* €634m (2006: €482m) Lump sum in
Slide 26: Life Distribution
Life Distribution Retail & Corporate Life Record bancassurance sales of over €100m in permanent tsb network Institutional relationships provide opportunity for further growth Broadening capability for mass affluent and HNW via bancassurance, direct Total sales* €634m (2006: €482m) sales and dedicate
Slide 27: Investment Management
Investment Management Funds under Management - Continue to grow market share €bn 40 35 34 31 30 25 25 21 Institutional 20 17 Life Company 15 10 5 0 2003 2004 2005 2006 2007 * Excludes ILI 27 2007 Preliminary Results
Slide 28: Life Market Share
Life Market Share % 35 30% 30 28% 26% Clear market leader in growth market 25% 25 23% 8th consecutive year of market share 22% 21% 21% gains 19% 20 Franchise based on distribution reach, product performance and service 15 10 1999 2000 2001 2002 2003 2004 2005 2006 2007E Source: Irish Insurance Feder
Slide 29: Banking
Banking Growing retail franchise Strong lending growth Continued customer acquisition Excellent credit experience Market outlook 29 2007 Preliminary Results
Slide 30: Bank Loan Book
Bank Loan Book Loan Balances Irish residential loan book grew 14% with gross new lending of €7bn (2006: €8.7bn) Increased distribution capability in UK behind strong new lending of £2.3bn (2006: £1.5bn) in CHL Commercial lending consists of dry Total Loan Book €39.2bn (2006: €33.8bn) investment prop
Slide 31: ROI Mortgage Credit Quality
ROI Mortgage Credit Quality Residential Mortgage Arrears 000’s 000’s 12 200 No. of Mortgages (RHS) 190 10 Falling new lending LTVs 180 FTB LTV down from 87% to 84% 8 170 160 Tightened credit criteria in Q3 6 No. in Arrears * 150 Value of arrears (> 1 month) on ROI 4 140 residential mortgage book amo
Slide 32: UK Mortgages (CHL)
UK Mortgages (CHL) Credit quality remains excellent 3 month arrears cases CHL: 0.40% (Q4 2007) CML: 0.78% (Q3 2007) Current market provides opportunity to tighten credit criteria and pricing Unchanged level of new lending in 2008 32 2007 Preliminary Results
Slide 33: Customer Acquisition
Customer Acquisition permanent tsb growing franchise and market share Over half a million current account customers 69,000 added in 2007 Fuel for future growth Powerful brand Youthful & dynamic Superior service promise Customer Satisfaction Index score for 2007 at 84%, up 3% 33 2007 Preliminary Resu
Slide 34: Outlook
Outlook Strong franchises and market positions Low risk business Capital self-sufficiency Improved 2008 earnings guidance 34 2007 Preliminary Results
Slide 35: Additional Information
Additional Information Page 36. Total profit after tax 37. Operating profit after tax 38 Operating EPS 39 IFRS (Statutory) profit after tax 40 IFRS / EV reconciliation 41 Bank capital 42 Bank non-interest income 43 Embedded value movement 44 Life new business margin 45 Life variances & assumptions 4
Slide 36: Total Profit After Tax
Total Profit After Tax 2007 2006 Pre-tax Tax Post-tax Post-tax €m €m €m €m Operating profit 590 (54) 536 487 Investment fluctuations (114) 5 (109) 116 Economic assumptions (14) (3) (17) (39) Other changes / Credits (2) - (2) - 460 (52) 408 564 Discontinued / Minority (4) - (4) (3) Total profit 456 (
Slide 37: Operating Profit After Tax
Operating Profit After Tax 2007 2006 Pre-tax Tax Post-tax Post-tax €m €m €m €m Life assurance 346 (21) 325 261 Banking 219 (33) 186 172 Other activities (4) - (4) (1) 561 (54) 507 432 Associate / JV 29 - 29 55 590 (54) 536 487 37 2007 Preliminary Results
Slide 38: Operating EPS
Operating EPS 2007 2006 Change €m €m % Operating profit 590 529 Taxation (54) (42) Operating PAT 536 487 10 Average no. of shares 275m 274m EPS 195c 178c 9 Note: “own shares” included for EPS calculation 38 2007 Preliminary Results
Slide 39: IFRS (Statutory) Profit After Tax
IFRS (Statutory) Profit After Tax 2007 2006 Change €m €m % Life assurance 235 186 26 IFRS Life Earnings Movement 2007 €m Banking 219 202 8 New business effect (2) General Insurance 31 56 Interest on insurance VIF 56 Expected surplus on Inv. contracts 108 Other (8) (3) Exp & assumption changes 47 235
Slide 40: IFRS / EV Reconciliation
IFRS / EV Reconciliation 2007 S’Holders Total Profit* Equity after Tax €m €m Embedded Value basis 3,385 408 Investment business • Value of in-force (889) (75) • Deferred costs & fees 114 51 • Restatement of liabilities 29 (7) Own shares adjustment (5) 73 Other (4) 2 IFRS (Statutory) basis 2,630 452
Slide 41: Bank Capital
Bank Capital 2007 2006 €bn €bn Risk weighted assets 23.5 20.6 Capital: Tier 1 4.7 4.4 Less Goodwill (Irish Life & TSB) (1.5) (1.5) 3.2 2.9 Tier 2 1.4 1.4 Total Capital 4.6 4.3 Less Embedded Value deduction (2.1) (2.1) Available Capital 2.5 2.2 RAR 10.4% 10.4% 41 2007 Preliminary Results
Slide 42: Bank Non-Interest Income
Bank Non-Interest Income 2007 2006 Change €m €m % Fees & Comms (rec’d) 53 51 Fees & Comms (payable) (10) (6) 43 45 (4) Trading income 5 12 48 57 (16) Note: Bancassurance Embedded Value operating profit €64m [2006: €56m] included in life assurance 42 2007 Preliminary Results
Slide 43: Embedded Value Change
Embedded Value Change Net Worth VIF Total Required Capital €m €m €m €m Opening 1 Jan 2007 747 1,354 2,101 560 Operating profit 117 208 325 Investment fluctuations (17) (92) (109) Economic assumptions (7) (10) (17) Capital movements (253) - (253) Closing 31 Dec 2007 587 1,460 2,047 589 43 2007 Prelim
Slide 44: Life New Business Margin
Life New Business Margin 2007 2006 APE Sales New Business Contribution €m €m 2007 2006 Life 129 106 €m €m Life 673 516 ILIM 25 22 ILIM 341 190 Margin - APE Life 19.2 20.6 ILIM 7.4 11.4 PVNBP Sales Margin - PVNBP % % 2007 2006 €m €m Life 2.9 3.1 Life 4,490 3,482 ILIM 0.7 1.1 ILIM 3,406 1,901 44 2007
Slide 45: Life Variances & Assumptions
Life Variances & Assumptions Experience Variances Assumption Changes 2007 2006 2007 2006 €m €m €m €m Persistency 1 (1) 5 3 Risk 21 23 2 19 Expenses / Other (12) (8) 28 (5) 10 14 35 17 45 2007 Preliminary Results
Slide 46: Life & Investment Sales
Life & Investment Sales Recurring Premium Single Premium 2007 2006 2007 2006 €m €m €m €m Retail 237 182 1,778 1,347 Corporate 165 130 546 348 ILIM - - 3,406 1,901 ILI - - 390 339 Total 402 312 6,120 3,935 APE Basis 402 312 612 394 PVNBP Basis 1,776 1,448 6,120 3,935 46 2007 Preliminary Results 2006
Slide 47: Retail & Corporate Life Sales
Retail & Corporate Life Sales Retail APE Sales Corporate APE Sales 2007 2006 Change 2007 2006 Change €m €m % €m €m % Products Products Pension 180 123 46 DC pension 155 120 30 Investments 124 101 23 Annuities / Other 42 29 44 Protection / Risk 62 61 2 Protection / Risk 23 16 44 Savings 48 32 50 220
Slide 48: Other Activities Operating Profit
Other Activities Operating Profit 2007 2006 Change €m €m % Cornmarket / IPSI 21 16 25 Corporate costs (25) (18) (4) (2) 48 2007 Preliminary Results
Slide 49: General Insurance Operating Profit
General Insurance Operating Profit 2007 2006 Change €m €m % Combined Ratio Underwriting results 10 52 % 2007 95 Investment return 9 12 Property disposal 20 3 2006 71 39 67 Taxation (8) (11) Operating profit 31 56 (45) 49 2007 Preliminary Results
Slide 50: 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
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