1 PAGE FINAL RESULTS 2010: 2010 FINAL RESULTS
Forward looking statement PAGE 2 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. 2010 FINAL RESULTS
Index PAGE 3 SECTION: PAGE: Business review 05 Review of life business 11 Review of banking business 18 Strategic agenda & Summary Financial Review 21 Group earnings 26 Funding 27 Arrears 29 Loan impairments 31 Capital 33 Outlook 34 Additional information 2010 FINAL RESULTS
Business Review PAGE 4 � Life* profits recover OVERALL RESULTS IN-LINE WITH 2009 � Impairments rise in bank � Overall result -€197m � Operating profit � 57% LIFE PERFORMANCE RECOVERY � Business retention improving � Net interest income improved** BANK MANAGING KEY CHALLENGES � Retail deposits strong � Impairments increase STRATEGY � Making progress * Life & Fund Management ** Excl. ELG charge KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Life & Fund Management Business PAGE 5 � Profitability - recovery � Retention - improvement � Sales – ahead KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Life: Recovery in Profitability PAGE 6 � New business earnings €m ▲ % 2010 � Margins flat 52 +2 New business � Reduced pension sales offset 108 +112 by strong investment inflows In-force Operating profit 160 +57 � In-force earnings � Strong risk profits � Lower persistency variance KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Life: Retention Improved PAGE 7 Retail: Returning to long term lapse assumptions Retail � Lapses peaked Q1 2009 2010 2009 Lapses v LTA Change � Significant improvement during year � Budget impact on Q4 performance Quarter 1 134% 192% +58% � Actions on: Quarter 2 123% 159% +36% � Seller / distribution remuneration Quarter 3 � 100% 139% +39% Product features / flexibility � MIS and activity management Quarter 4 129% 147% +21% FY 121 % 159 % +38% Corporate � Policy lapses peaked in H2 2009 � Trends improving through year end 2010 KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Life: Sales Recovery PAGE 8 � Retail Life � Sharp declines in 2008 & 2009 but stabilised in 2010 � Demand driven by strong 2009 2010 2011 2012 consumer confidence and by improvement in equity markets RETAIL DECLINE STABLE RECOVERY GROWTH CORPORATE DECLINE DECLINE STABLE RECOVERY � Corporate Life � Declines in 2009 & 2010 ILIM GROWTH GROWTH GROWTH GROWTH � Resumption of salary and employment growth required to drive sales Bottom of cycle � ILIM – benefiting from � Strong track record � Sector consolidation KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Life: Sales Ahead PAGE 9 � Overall sales � 6% €m ▲ % 2010 � Single premium life sales � 1% � Investment bonds � 20% 146 (8) Retail � Pension � 5% 137 (16) Corporate Annual premium life sales � 20% � � Low salary growth and 289 +34 ILIM & ILI recruitment � SME cash-flow weak 572 +6 � Total ILIM continues to outperform � Inflows to €2.5bn * APE basis KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Life: Outlook PAGE 10 >>> SALES: Recovery in line with expectations >>> RETENTION: Back to normal variances >>> PROFITABILITY: Sustained recovery KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Banking Business PAGE 11 � Funding – responding to debt crisis � Impairments – increased provisions � Profitability – pricing and cost cutting actions � Strategy – sector restructure KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Bank: Funding 2010 PAGE 12 � Retail deposit growth via branches and Deposit Mix - Dec 2010 broker distribution � Corporate deposits � Outflows similar to H1 2010 � Impacted by Sovereign and bank downgrades Corporate deposits � €5bn term debt issuance to end Aug. � Funding ratios Retail deposits Dec 10 Dec 09 � Stable 52% 48% � LTD 249% 246% � Addition of €3.6bn INBS deposits � On pro-forma basis would improve stable funding and LTD ratio to c. 60% & 200% (Dec 2010) KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Bank: PLAR 2011 & Funding Strategy PAGE 13 � 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 KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Bank: Loan Book PAGE 14 Loan Balances 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) * Before impairment provisions KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Bank: Loan Arrears PAGE 15 � Reductions in ROI consumer finance PTSB ROI Residential Mortgage Arrears Cases 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 KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Bank: Profitability - Margins & Costs PAGE 16 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 KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Bank: Outlook PAGE 17 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% KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Strategic Agenda PAGE 18 � PCAR / PLAR � Consolidation � INBS + Anglo deposits � EBS � Irish Life International KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Summary PAGE 19 LIFE - STRONG PROFIT GROWTH BANKING - MANAGING KEY CHALLENGES STRATEGY - MAKING PROGRESS KEVIN MURPHY: GROUP CHIEF EXECUTIVE 2010 FINAL RESULTS
Financial Review PAGE 20 � Earnings � Funding � Credit quality & impairment provisions � Capital � Outlook DAVID MCCARTHY: GROUP FINANCE DIRECTOR 2010 FINAL RESULTS
Group Earnings PAGE 21 � Operating profit flat on 2009 2010 2009 Change � Life business continuing to €m €m % recover Operating (loss) / profit � Bank continuing to suffer from 160 102 • Life 57 worsening economic conditions with higher funding costs and (364) (270) • Banking (35) increased impairment provisions 7 (28) • Associate / other � Life embedded value changes: (197) (196) Operating (loss) (1) � Improved equity and property Life embedded value: markets compared to large hits in 2009 49 (68) • Investment fluctuations � Impact of lower gilt yields on (51) (38) • Economic assumptions financial options & guarantees • VIF financing cost (22) - and future investment returns • Other (16) (17) � Cost of VIF financing deal (237) (319) 26 (Loss) before tax * Embedded value basis DAVID MCCARTHY: GROUP FINANCE DIRECTOR 2010 FINAL RESULTS
Life Earnings PAGE 22 2010 2009 Change � Life new business volumes � 8%, offset €m €m % by strong sales in ILIM � Overall sales � 6% 52 51 2 New business Total expected return 131 122 � Life (excl. ILIM) new business margin: Experience variances 18 (70) � Assumption changes (41) (1) APE: 11.5% (FY 09: 11.4%) In-force 108 51 112 � Significant improvement in in-force Operating profit 160 102 57 earnings (12) Taxation (17) � Very strong risk experience � Improved persistency 143 90 59 Profit after tax * Embedded value basis DAVID MCCARTHY: GROUP FINANCE DIRECTOR 2010 FINAL RESULTS
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