annual report and financial statements...
TRANSCRIPT
A n n u a l R e p o r t a n d F i n a n c i a l S t a t e m e n t s 2 0 0 0
Irish Life & Permanent investor and shareholder information and services, including the annual report, are available on-line at www.irishlifepermanent.ie
2 Financial Highlights
4 Board of Directors
6 Chairman’s Statement
8 Group Chief Executive’s Operating & Financial Review
26 Directors’ Report
28 Corporate Governance
31 Directors’ Report on Remuneration
35 Statement of Directors’Responsibilities
36 Auditors’ Report
38 Group Accounting Policies
41 Group Financial Statements
47 Notes to the Group FinancialStatements
80 Additional Information
81 Business Addresses
82 Letter From the Chairman
88 Notice of Annual General Meeting
Financial HighlightsFor the year ended 31 December 2000
Product earnings of €266m, an increase of
on 1999 of €227m.
Operating earningsof €286.6m, an
increase of
17%
Shareholders’ Funds €m
1,27
4.4 1,50
8.5
1,67
2.0 1,92
7.8
2,00
8.7
96 97 98 99 00
10,3
03
12,7
70 14,6
76
17,9
20
18,7
04
96 97 98 99 00
Ireland 89%
Overseas 11%
Life 76%
Banking 24%
Funds Under Management €m
Group Operating Profit after Tax by country
Group Operating Profit after Tax by source
13%
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on 1999 of €252.8m.
Financial HighlightsFor the year ended 31 December 2000
Final dividend of 27.9 cents per share and a total dividend for the year of
Summary of Results
2000 1999 Increase€m €m %
Product earnings 266.0 227.0 17
Operating earnings 286.6 252.8 13
Post tax profit afterexceptional items and economic variance 284.2 294.4 (3)
Shareholders’ funds 2,009 1,928 4
Total assets 30,660 27,159 13
Funds under management 18,704 17,920 4
New Business
Lending 3,147 2,855 10
Life assurance (weighted) 413 304 36
€ cents € cents %
Operating earnings per share 99.0 87.3 13
Earning per share 98.2 101.7 (3)
Shareholders’ funds per share 709 664 7
Final dividend per share 27.9 25.0 12
Total dividend per share 39.0 35.1 11
All of the above figures are presented on an after tax basis
Analysis of Profit
2000 1999€m €m
Banking and other activities 53.5 55.9
Life assurance 212.5 171.1
Product earnings 266.0 227.0
Life investment earnings 4.2 5.9
Other investment earnings 14.0 6.2
Associates 2.4 13.7
Operating earnings 286.6 252.8
Other (charges)/income (14.7) 69.5
Profit after exceptional items and before economic variance 271.9 322.3
Economic variance 14.3 (25.9)
Minority interests (2.0) (2.0)
Total profit 284.2 294.4
21%
Value of newbusiness for lifeassurance ahead
to €37m from €30.7m.
39.0 cents pershare
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Denis Casey, Patrick O’Neill, Roy Douglas, Sean Ryan, Gillian Bowler, David Went.
Richard Hooper, Peter Fitzpatrick, Conor McCarthy, Brian McConnell, Kieran McGowan, Michael Donnelly.
Patrick Kenny, Kevin Murphy, Muriel Scorer, John Bourke, Billy Kane, Brendan Halligan.
Neville Bowen, Monty Hilkowitz.
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Roy Douglas (56) Chairman A,B,D,E
Appointed Chairman in May 2000.Previously Chief Executive of IrishPermanent, having joined theboard in 1991. Prior to joining IrishPermanent he was Group GeneralManager – Britain for Allied IrishBanks plc, having formerly workedin the Central Bank of Ireland.
David Went (54) Group Chief Executive B,D,E
Previously Managing Director ofIrish Life which he joined in 1998.Worked for most of his career inthe NatWest Group where he wasChief Executive of the Ulster BankGroup from 1988 to 1994 andChief Executive of Coutts Groupfrom 1994 to 1997.
John Bourke (64) Non-Executive A,B,C,D,E
Previously non-executive Chairmanof Irish Permanent since 1992 andJoint Chairman of the merged groupuntil May 2000. He spent themajority of his banking career with the Bank of Ireland, where he was a Managing Director and amember of the Court of Directors.Formerly Chief Executive of TSBCommercial Holdings plc inLondon and a non-executivedirector of Hill Samuel Bank Ltd.He is Chairman of Ire-Tex Group plc.
Neville Bowen (66) Non-Executive E
A member of the board of IrishLife since 1992. Non-executivechairman of Irish Life InvestmentManagers Ltd, formerly ChiefExecutive of Citibank Global AssetManagement and a former directorof Citibank International plc, HillSamuel Group and a number ofother international companies.
Gillian Bowler (48)Non-Executive C,E
A member of the board of IrishLife since July 1998. Joint Chairmanof Budget Travel. A non-executivedirector of Grafton Group plc,President of the Institute ofDirectors and a director of anumber of other companies.
Board of Directors
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Denis Casey (41) Executive
Chief Executive of Irish Life Retail.Joined Irish Life in 1980, havingstarted his career in Allied IrishBanks plc. A certified accountant, he has held senior managementpositions in both Ireland and theUK. Appointed to the board in 2000.
Michael Donnelly (62) Non-Executive A,D
A member of the board of IrishLife since 1989. Senior partner inBFCD, Chartered Accountants anda Dublin City Alderman.
Peter Fitzpatrick (48) Executive
Group Finance Director, appointedto the board of Irish Permanent in1992. He is a chartered accountantand was formerly a partner in Coopers & Lybrand (nowPriceWaterhouseCoopers).
Brendan Halligan (64) Non-Executive D
Member of the board of IrishPermanent since 1992. Previouslya member of the Oireachtas andof the European Parliament. He is non-executive Chairman of the Institute of European Affairs,Dublin. He is Adjunct Professor ofEuropean Affairs at the Universityof Limerick.
Monty Hilkowitz (60) Non-Executive E
Member of the board of Irish Life since 1994. An actuary, he isChairman of Irish Life InternationalLtd. Formerly Managing Directorof Liberty Life in South Africa andof Westpac Life in Australia.
Richard Hooper (64) Non-Executive B,C
Member of the board of IrishPermanent since 1994. He wasformerly Managing Director of IBI Corporate Finance Ltd and isChairman of National Toll Roadsplc and a non-executive director of Jurys Doyle Hotel Group plc and Green Property plc.
Billy Kane (46) Executive
Currently Director of Integrationfor the new Permanent TSBbanking division. Formerly ChiefExecutive of Irish Permanent,appointed to the board in 1999.Joined Irish Permanent in 1992 as Managing Director of IrishPermanent Finance, which hehelped to establish. Prior to joiningIrish Permanent he was ManagingDirector of Woodchester Bank UK.
Patrick Kenny (54) Non-Executive B,C
Member of the board of Irish Life since 1987. Managing partnerin Deloitte & Touche, CharteredAccountants. Former Chairman ofTemple Bar Properties Ltd and adirector of a number of othercompanies.
Conor McCarthy (68) Non-Executive A,B,C,D,E
Previously non-executive Chairmanof Irish Life from 1990 and JointChairman of the merged groupuntil May 2000. Chairman ofthe Dublin Transportation Office
Steering Committee. FormerChairman and Chief Executive of Ryan Hotels plc and a directorof a number of other companies.
Brian McConnell (54) Executive
Group Chief Operating Officer,appointed to the board in 1999.Worked for most of his career with the NatWest Group beforejoining Irish Life in 1998. WasChief Executive of Ulster InvestmentBank and a main board director ofUlster Bank in Ireland. Immediatelyprior to joining Irish Life, he was a Regional Managing Director forNatWest UK Corporate BankingServices.
Kieran McGowan (57) Non-Executive B,D
Joined the board in 1999 followingthe merger of Irish Life and IrishPermanent. Previously ChiefExecutive of IDA Ireland, theIndustrial Development Agency.He is a non-executive director of a number of companies includingCRH plc, United Drug plc and Elan Corporation. He is a memberof Enterprise Ireland and a formerChairman of the Irish ManagementInstitute.
Kevin Murphy (49) Executive E
Chief Executive of Irish Life’sCorporate Business and of IrishLife Investment Managers Ltd. An employee of Irish Life since1972, he has held seniormanagement positions in both the Individual Life and Group Life divisions of the company. An actuary, he was appointed a main board director followingthe merger of Irish Life and IrishPermanent in 1999.He is a formerChairman of the Irish Associationof Investment Managers.
Patrick O’Neill (62) Non-Executive A,B,C
A member of the board of IrishPermanent since 1994. He is theformer Group Managing Directorof Glanbia plc. He is currentlyChairman of the Irish SportsCouncil and a director of a number of other companies.
Muriel Scorer (53) Non-Executive A,D
A member of the board of IrishPermanent since 1994. She is aformer non-executive director ofFairdale Estates Ltd.
Sean Ryan (54) Group Secretary
Board Committee Members:
A. Audit
B. Finance
C. Remuneration and Compensation
D. Nomination/Chairman’s
E. Director of Irish Life InvestmentManagers Limited.
Throughout the year, the groupdemonstrated that it is firing on all cylinders in the Irish market and is well-positioned for further growth in the years ahead.
Chairman’s Statement
2000 was a milestone year for Irish Life &
Permanent plc.
It was the first full year of trading since the merger
which formed the group was completed in April 1999.
Our key operating businesses in Ireland made
major progress in their various markets.
At a group level we advanced our strategic goal
of becoming the number one provider of personal
financial services in the Irish market through reaching
agreement on the acquisition of TSB Bank.
Throughout the year, the group demonstrated that
it is firing on all cylinders in the Irish market and is
well-positioned for further growth in the years ahead.
Strong Financial Performance
The financial performance of the group was very satisfactory
with strong growth in sales driving increased profitability.
Reflecting this performance, the board has proposed
a final dividend of 27.9 cents – a 12% increase on
the 1999 figure (25.0 cents). As a result, the full
year dividend is 39.0 cents – an 11% increase on
the 1999 figure (35.1 cents).
Exceptional performance in Ireland
The group is focussed on the personal financial
services market in Ireland and our performance
here is always going to be critical to our success.
During the year, each of our principal Irish
businesses performed very impressively.
The integration of Irish Life and Irish Permanent
was completed and the benefits that have resulted
have been substantial.
In the retail life & pensions business, the merger
of the businesses of Irish Life and Irish Progressive
(the former life & pensions subsidiary of Irish
Permanent) has created a powerful new force in
the marketplace. The Irish Life (Retail) business, which
resulted from this merger, has been substantially
repositioned and is now number one in the market
and the clear leader in all its key product areas.
The benefits of the merger were also evident
in the growth in bancassurance sales (with such
sales in Irish Permanent branches rising by 55%).
This was a major achievement by Irish Permanent.
It is particularly significant in the context of the
forthcoming completion of the acquisition of TSB Bank
with the additional bancassurance opportunities
which that presents to the group.
The wider performance of Irish Permanent was
also very satisfactory. That business remains the
leading player in the residential mortgage market
in Ireland. During the year, it made important
progress on improving its efficiency and the
sales focus of its branch network.
Roy Douglas
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Overseas Markets
Our overseas operations comprise businesses in
the UK and in the United States of America. While
our UK operations performed very much in line
with expectations, we continue to be disappointed
by the performance of our US businesses.
In light of this, we are actively reviewing our
options in the US market in order to secure
the future of the businesses and to maximise
shareholder value. We will advise shareholders
of our chosen strategy in due course.
Acquisition of TSB Bank
A considerable part of the year was taken up
with preparations for our successful bid to acquire
TSB Bank. The Trustees of that bank accepted our
proposals in December 2000, and we expect the
acquisition to be completed in April of this year.
Subsequent to that completion, we will merge the
business of TSB Bank with that of Irish Permanent
to create Permanent TSB – a dynamic new force
in retail financial services in Ireland.
Acquiring TSB Bank is a significant step for the group.
It marks a major advance in our strategy to become
the number one personal financial services provider
in Ireland and we look forward to progressing the
creation of Permanent TSB over the coming months.
Tribute to Staff and Colleagues
On behalf of the board, I would like to pay tribute
to staff across the group for their hard work and
enthusiasm during the last year. They are the real
heroes and heroines of our story and their individual
contributions in their various roles are the reason we
have enjoyed such success in recent years.
I also want to pay tribute to the management
of the group and to my colleagues on the
board. We have a very special team of people
at the helm of Irish Life & Permanent and their
contribution to our success has been immense.
I particularly want to acknowledge the contribution
of my board colleagues John Bourke and Conor
McCarthy – who retired as Joint Chairmen of
the group in May last and who will step down
from the board at the forthcoming AGM.
Together, John and Conor made a major contribution
to the merger of Irish Life and Irish Permanent and
helped lay the foundations for our current strength.
They set an exemplary standard as Joint Chairmen
and I am grateful for their support and kindness in
the months since their retirement from that position.
I also want to pay tribute to Neville Bowen,
Michael Donnelly and Brendan Halligan who will
also step down from the board at the forthcoming
AGM. I thank each of these directors – and John
Keogh, who retired from the board in November
2000 - for dedicated service over many years.
In November 2000, Billy Kane announced his
intention to step down from the group in 2001
to pursue other career opportunities. I have had
the pleasure of working with Billy for many years –
most recently as Chief Executive of Irish Permanent
and a director of the group. Billy has successfully
led the business through a period of very strong
growth and change. He has also played an
important role in preparing for the integration
of Irish Permanent and TSB Bank. On behalf of
the board, I want to thank Billy for his valuable
contribution to the group and wish him every
success in the next phase of his career.
In July, Denis Casey was appointed a director.
As Chief Executive of Irish Life (Retail), Denis
has overseen an exceptional performance in that
business in recent years and we welcome his
addition to the board.
Outlook
Much has been achieved by Irish Life & Permanent
plc since its formation but much remains to be
done. We remain very confident of our ability to
develop our business further in the coming years
and to attain our strategic goal in the Irish market.
We remain confident in the outlook for the Irish
economy and believe that this sets the foundation
for a further satisfactory performance in the
coming year. We look forward to a favourable
2001 and another year of growth for the group.
Roy Douglas
Chairman
21 March 2001
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Overview
Irish Life & Permanent plc achieved an excellent
performance during the year 2000. The group made
significant progress towards its goal of becoming
the number one Personal Financial Services Provider
in Ireland through the agreement to acquire the TSB
Bank (subject to the passing of enabling legislation)
and through an outstanding performance in its core
business in Ireland. The year was the first full year
of trading since the merger which formed the group
in 1999 and the success of that merger is reflected
in the year’s performance.
Group product earnings after tax increased 17%
to €266m from €227m in 1999 while post tax
operating profits, which include investment earnings,
were ahead 13% to €286.6m from €252.8m
in 1999. These results reflect an outstanding
performance within the group’s core Irish banking
and life insurance operations.
After other charges of €14.7m (1999: gain of
€69.5m) and a positive economic variance of
€14.3m (1999: loss of €25.9m), total post tax
profits for the year were €286.2m compared
to €296.4m in 1999.
The life business in Ireland further improved upon
the exceptional performance which it has enjoyed
in recent years. New sales for the year were up
a record 38% to €320m, on a weighted premium
basis. The business now offers not only the most
compelling suite of products in the market in
Ireland but also the most comprehensive range
of access channels for customers of any financial
institution in the country. As a result, the position
of Irish Life as the leader in the life and pensions
market in Ireland has been further strengthened.
The banking business performed very satisfactorily
with residential home loans, the key activity of the
banking business, growing to €7.6bn. New residential
mortgage loans issued in Ireland increased 14% to
€1.8bn which was a very strong out-turn particularly
given the decision of the group to withdraw from
certain sectors of the residential investment market
in the first half of the year. We remain at the
forefront of the home loan market.
One of the great successes of the year was the
exceptional growth in bancassurance sales. This
is a direct consequence of the merger, with sales
of life and pension products within the banking
division increasing by 55% to €29.3m on a
weighted premium basis.
Irish Life & Permanent was formed in 1999 by the merger of the largest players in the life assurance and mortgage markets in Ireland. That merger has given the new groupunprecedented strength in these coremarkets and the widest range ofcustomer access channels of any financial services company in Ireland.
Group Chief Executive’s Operating & Financial Review
growthDavid Went
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company
growth
If there was one disappointment in the year it was
in relation to our US business. While this accounts
for a relatively small proportion of our overall
activities, its performance during the year was
unsatisfactory. Going forward, we are reviewing
a number of strategic options to secure the future
growth of the business and to maximise the return
for our shareholders.
At the end of the year, the group successfully
bid to acquire TSB Bank. This acquisition is
expected to be completed in April 2001 and
we are currently engaged in detailed planning
for the merger of Irish Permanent with TSB. This
is an important acquisition for the group which
significantly advances us towards our goal of
becoming the number one Personal Financial
Services Provider in Ireland.
Banking and Other Activities
Irish Permanent is the group’s banking business
and it performed strongly in a market which became
increasingly competitive during the year. Lending
for residential mortgages remained strong – as did car
finance. Bancassurance sales rose very dramatically
– reflecting the success of the merger with Irish
Life. Irish Permanent also made significant progress
in addressing the future cost base of the business
through the “Vision 21” exercise.
Product earnings within the group’s banking and
other activities before investment returns were
€53.5m, a 4% reduction on the 1999 out-turn
of €55.9m. This slight reduction in earnings
principally reflects a decline in net interest income
arising due to the decrease in variable mortgage
rates which occurred in the latter part of 1999
and which could not be offset by similar decreases
in retail deposit rates, together with a reduction
in the contribution from Group Treasury in the
first half of the year as a result of difficult market
conditions. These negative factors were partially
offset by strong growth in new business volumes.
Operating profit after tax increased 9% to
€67.5m from €62.1m in 1999, principally due
to higher investment earnings.
Total gross new loans issued in the group during
2000 were €3.1bn, a 10% increase on the 1999
levels of €2.9bn. Total loans and advances to
customers at 31 December 2000 grew to €9.3bn
(including securitised mortgage assets of €1.4bn),
an increase of 22% on the year ended 31 December
1999 total of €7.6bn (including securitised
mortgage assets of €1.1bn). Total residential
home loans outstanding grew to €7.6bn
(including securitised mortgage assets of €1.4bn)
at 31 December 2000 and represented 82% of
total loans and advances.
New residential home loans issued in the Republic
of Ireland increased 14% to €1,847m (1999:
€1,615m) as demand in the domestic mortgage
market continued to be buoyant. Early in the year
we took a strategic decision to limit our involvement
in certain sectors of the residential investment
property market and this decision dampened the
level of growth achieved. However, notwithstanding
this, total residential home loans outstanding in
the Republic of Ireland grew 20% to €5.9bn,
representing over 115,000 home loans.
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The Irish economy is the strongestperforming economy in Europe. Its growing workforce and risingincomes provide exceptionalopportunities for a bancassurancegroup focussed on life assuranceand residential mortgages.
economy
Group Chief Executive’s Operating & Financial Review
In Autumn of 2000, the bank launched its new
on-line mortgage services from the Irish Permanent
website. Customers are now able to complete
mortgage transactions from start to finish on-line.
In addition, all customers can track the status of
their mortgage application through all stages of
the process in addition to checking up to date
information on their mortgage loan on an
ongoing basis after it has been funded.
In the United Kingdom, new home loans
issued through Capital Home Loans were
Stg£289m, a decrease of 24% on the exceptional
levels achieved in 1999 of Stg£378m, reflecting
a slowdown in the niche markets in which the
company operates. Total residential home loan
advances amounted to Stg£969m (including
securitised mortgage assets of Stg£551m) compared
to Stg£878m (including securitised mortgage assets
of Stg£325m) at 31 December 1999.
The group continued to grow its non residential
loan portfolios during the year. New commercial
loans issued increased 12% to €346m (1999:
€309m). At 31 December 2000, the commercial
loan portfolio, all of which is secured, amounted
to €905m (1999: €751m) representing 10% of
the total portfolio.
Our motor vehicle and consumer finance
subsidiary, Irish Permanent Finance, had a very
good year with new loans issued growing 35%
to €479m (1999: €355m) as demand in this
sector continued to be extremely buoyant.
The motor vehicle and consumer finance loan
portfolio at 31 December 2000 amounted to €731m,
representing 8% of total loans and advances.
On the funding side, customer accounts increased
by €1,341m (1999: €496m) to €6bn. This
represented an increase of 29% over the 1999
closing balance of €4.7bn and principally reflects
a successful expansion of the Treasury Division’s
commercial deposit taking operations. With the
strong asset growth in the banking operations,
Group Treasury also continued to be active in
the wholesale funding markets raising €1.5bn
in a variety of instruments including a mortgage
securitisation of Capital Home Loans’ UK mortgage
portfolio which raised Stg£300m.
Sales of life and pension products within the
banking division increased strongly to €29.3m
from the levels achieved in 1999 of €18.9m. This
55% growth reflects the continuing realisation of
the cross-selling and revenue synergy opportunities
presented by the merger of Irish Life and Irish
Permanent. The performance in this area in 2000
puts us ahead of the targets which we set at the
time of the merger of doubling bancassurance
sales within three years.
In line with the group’s accounting policies,
earnings arising on bancassurance sales are
reflected in product earnings within the group’s
life assurance activities. Post tax embedded value
earnings derived from the bancassurance book
in the year to 31 December 2000 were €15.1m.
A major initiative in the banking division was
the “Vision 21” Programme launched at the start of
the year. This is a key part of our response to the
margin pressures being faced by the business and
is designed to improve the cost efficiency of the
bank and to improve the sales focus of the branch
network in particular. As part of this exercise, we
closed 10 branches in the greater Dublin area and
reduced staff numbers by approximately 70.
The life assurance market in Ireland has experienced huge growth in recent years.Through the launch of innovativeproducts, like SCOPE, the grouphas increased its market share during that time and has furtherstrengthened its position as the leading player in the market.
growth
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Group Chief Executive’s Operating & Financial Review
life market
growth
Life Assurance Activities
Overall, the life assurance activities of the group
performed very strongly. In Ireland, our core
market, the performance was exceptional and
the group further strengthened its position as
the key player in the life and pensions market.
Total group life and pension sales for the year
ended 31 December 2000 were €413m*, an
increase of 36% on the 1999 level of €303.8m.
Life product earnings after tax increased 24%
to €212.5m from €171.1m in 1999 driven by
a combination of growth in the in-force book,
net positive experience against assumptions and
by growth in the value of new business which
increased 21% to €37m (1999: €30.7m). Total
operating profits after tax, including investment
earnings of €4.2m (1999: €5.9m), were ahead
22% at €216.7m (1999: €177m).
Ireland
Life and pension sales in Ireland grew to
€319.9m, an increase of 38% on the 1999
level of €231.5m.
Strong growth was experienced across all
businesses and reflects the extremely favourable
trading environment for life and pensions products
in Ireland which is the group’s main market. This
strong sales growth saw the value of new business
rise by 19% to €33.5m (1999: €28.1m), dampened
somewhat by the inclusion of high value lower
margin inflows into the investment management
business in the second half of the year.
After tax product earnings achieved in the Ireland
life assurance operations were €192.5m, a 44%
increase on the 1999 outcome of €133.6m. This
result includes the benefit of positive tax variances
of €49.4m (1999: €11.9m) and positive cost
synergy variances of €13.3m arising from the
merger, less the impact of a €25.5m turnaround
in unit linked management fee variances from
€22.4m in 1999 to a negative €3.1m in 2000.
The tax variance arises due to the legislative
enactment of a phased reduction in the Irish
corporation tax rates to 12.5% in 2003 together
with the release of provisions carried forward
from prior years which are no longer required.
Adjusting for the above variances and the impact
of the unit linked management fees variance, the
underlying growth in product earnings for the year
in Ireland was 34%. Investment earnings for the
year were €5.6m (1999: €2.6m) leading to a total
operating profit after tax in Ireland of €198.1m,
up 45% from €136.2m in 1999.
Retail Business
The Irish Retail business generated exceptional
growth in 2000 with sales increasing 40% to
€160.1m (1999: €114.6m). All distribution
channels performed well and generated significant
increases in sales. In very favourable market
conditions, the business benefited from the
buoyant demand for single premium investment
products with full value sales of such products
ahead 55% to €674m (1999: €434m). This
growth was led by the Scope range of products
where full value sales were €272m, averaging
over €1m of investments in each working day.
The mortgage market in Ireland has grown rapidly in recent years. The group holds the lead position in that market and today accounts for over one infive of all residential mortgages sold in Ireland.
mortgage market
* Unless otherwise indicated, all sales are on a weighted annual premium (“APE“) basis.
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Group Chief Executive’s Operating & Financial Review
We have continued to expand the Scope product
range adding two new investment options -
“Tech Scope“ and “Global Scope“ together with
a regular premium version of the product, called
“Saver Scope“. In addition, we e-enabled the
product so that enquiries and transactions may
now be undertaken on-line.
Sales of pension products also increased 72%
to €41.8m (1999: €24.2m) reflecting both
the strength of the group’s product range and
increased support in the independent broker
market on the back of excellent products
and service. During 2000, we negotiated
an exclusive arrangement with Fidelity under which
we can offer our pension clients access to Fidelity
Fund Managers, alongside a number of leading
international fund managers. This choice of
manager approach has been extremely popular and
gives us an outstanding offering in the retail
pensions market.
The retail business particularly benefited from
the realisation of opportunities presented by the
merger, especially the revenue enhancements
achieved from cross-selling through the Irish
Permanent branch network.
Corporate Business
Corporate Business had another successful year
with sales increasing 28% to €61.9m (1999:
€48.5m). This growth was driven by increased
new defined contribution sales together with
significant increases on existing business volumes
reflecting the increased levels of employment
being generated within the Irish economy.
Cornmarket Group Financial Services Limited,
which specialises in providing financial advice
and products to affinity groups and which
was acquired in June 1999, generated a good
contribution with profits ahead of expectations.
Investment Management
Full value sales (including off-balance sheet
inflows) increased 62% to €961m compared to
€595m in 1999. On balance sheet sales increased
48% to €79.5m on an APE basis compared
to €53.7m in 1999. The group’s consensus
funds continue to perform strongly and,
together with our broad range of indexed
product offerings, to attract significant demand.
A pleasing development during the year within
our investment management business was the
recovery in value stocks which provided an upturn
in the comparative performance of the group’s
actively managed funds.
IFSC Life Operations
Irish Life International Limited, which markets
life products through a number of international
distribution relationships, enjoyed an extremely
good year. Full value sales (including off-balance
sheet inflows) increased 30% to €421m compared
to €325m in 1999. Irish Progressive Services
International Limited, which provides third party
insurance administration services, had an excellent
year continuing to grow its client base and now
listing some of the largest life companies in
Europe amongst its clients.
growth
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Irish Life & Permanent iscommitted to growing further.The acquisition of TSB Bankand plans to use this acquisitionto further strengthen thebancassurance emphasis of thegroup will lay the foundationsfor continuing growth in theyears ahead.
Group Chief Executive’s Operating & Financial Review
ambition
Other Markets
U.S.A.
The outcome for the year 2000 from the US
operations was disappointing, notwithstanding
that the life industry in the US as a whole had
a difficult year. While the commitment and
enthusiasm of the management and staff in the
business is unquestionable, going forward the
business faces a number of significant challenges
in delivering the earnings performance that the
group requires. The group is therefore actively
reviewing its strategic options for the business
both to secure its future growth and to maximise
returns for shareholders. We will keep our
shareholders informed of any developments
as and when appropriate.
Total sales, at $81.8m, increased 13% over the
1999 level of $72.4m which was a satisfactory
outcome in difficult market conditions.
Product earnings, at $4.7m, compare to a year
end 1999 out-turn of $23.4m. The weak product
earnings include negative variances against
expected experience of $21.2m (1999: $7.1m)
principally in the areas of persistency, mortality
and expenses. Included also in the earnings for
the year, is a net charge of $3.6m which arises
from a change in persistency and mortality
assumptions, $16.3m negative, less the impact
of a change in the embedded value basis of
$12.7m positive. The latter adjustment reflects
a change from a passive to an active approach
in calculating embedded value, bringing the US
business into line with the approach adopted
in the rest of the group’s life activities.
Investment earnings were negative at $2.9m
compared to a positive $1.5m in 1999 as a result
of poor corporate bond markets during the period.
Operating profits after tax were $1.8m compared
to $24.8m achieved in 1999.
U.K.
City of Westminster Assurance, the group’s UK
based life subsidiary which manages a closed book
of business, returned operating profits after tax of
Stg£10.1m compared to Stg£11.4m in 1999. This
performance included good persistency variances
against the embedded value assumptions. The 1999
earnings include positive unit linked management
fee variances of Stg£1.7m compared to negative
variances of Stg£1.4m in 2000.
Associated Companies
The group’s share of the results of its associated
company, Allianz Irish Life Holdings, was €2.4m
in the year ended 2000 and reflects an improved
operating profit which was offset by the impact
of weaker investment markets which prevailed in
the period. The 1999 out-turn of €13.7m includes
contributions from the group’s former holdings
in Irish Intercontinental Bank, Irish Life Finance
Group and K & H Bank which were sold in 1999
at a substantial profit.
EMU
All of the group’s wholesale market activities, in
particular its Treasury and Investment Management
operations, currently transact business in Euros and
are fully Euro compliant. In other business areas,
facilities have been put in place to allow customers
to transact in Euros during the transition period.
A programme of work is in place to ensure that all
of the group’s computer systems and equipment
are Euro compliant and that details in respect of all
accounts and policies held with the group may be
converted to Euros on or before 1 January 2002
when the Euro changeover will be complete.
Deposit Interest Retention Tax (“DIRT”)
The Irish Life & Permanent group’s policy and
practice has always been to account for its DIRT
obligations in accordance with the law and with
Revenue practice.
As noted in the group’s interim report for the six
months to 30 June 2000, the Revenue Commissioners’
audit of the historic compliance with all aspects of
DIRT within Irish Permanent was completed during
the first half of the year. The group made an agreed
payment of €8.6m to the Revenue Commissioners
as a final settlement of all outstanding DIRT liabilities
of Irish Permanent for the period from April 1986 to
April 1999. The total settlement comprised €4.3m of
additional DIRT and €4.3m in interest and penalties.
The audit of Guinness & Mahon (Ireland) Limited,
a group subsidiary, is ongoing and a payment on
account of €0.1m has been made in respect of
this company.
The total payments made in relation to this issue
during the year ended 31 December 2000, of €8.7m,
have been included in the results for the period.
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Group Chief Executive’s Operating & Financial Review
Merger
The merger of Irish Permanent plc and Irish Life
plc was legally completed on 21 April 1999. At the
time the merger was announced, it was indicated
that cost savings of €15m were anticipated from
the integration in the year 2001. The annualised
cost savings arising and recognised in the financial
statements for the year ended 31 December 2000
were €15.7m, on a cash flow basis, with additional
cost synergies to come through in 2001. The group
has, accordingly, comfortably exceeded the cost
synergy targets identified at the time of the merger.
The organisational structures required to
generate revenue synergies from the merger
were put in place during the year ended 1999
involving, in particular, the cross-selling of
insurance and banking products through all
of the distribution channels available to the
group. The benefits of this reorganisation were
demonstrated in the year ended 2000 with sales of
the group’s life and pensions products through the
banking branch network increasing 55% to
€29.3m from €18.9m achieved in 1999. It is
anticipated that the group will continue to benefit
from the cross-selling opportunities presented by
the merger going forward.
Trustee Savings Bank (“TSB”)
On 8 November 2000, the group made an offer
of €430m for the business of TSB. This offer was
recommended to the Minister for Finance by the
Trustees of the TSB on 5 December 2000.
All necessary regulatory consents have been
received and completion of the acquisition is now
subject only to the passing of enabling legislation
which, it is anticipated, will occur in April 2001.
In February 2001, we successfully completed a
subordinated debt programme which raised
€500m in Tier 2 debt and which will be partially
used to fund the acquisition. It is anticipated that,
when completed, the acquisition will represent
a major step in the attainment of the group’s
strategic objective of becoming the number one
Personal Financial Services Provider in Ireland.
The planning of the integration of TSB and Irish
Permanent to create Permanent TSB, the group’s
new retail banking arm, commenced in January
2001 and is well advanced. With regard to the
integration of the respective branch networks,
the key driver is the selection and implementation
of the optimal information technology platforms
which in turn is impacted by both organisations’
Euro conversion programmes. We anticipate that
Permanent TSB branches will open to the public
within 12 months of completion of the transaction
and full integration to be complete within 24 months.
Financial Review
Banking and other activities
2000 1999
€m €m
Net interest income 182.7 183.4
Other operating income 18.9 14.6
201.6 198.0
Administration expenses (123.7) (113.8)
Provision for bad and
doubtful debts (10.7) (9.6)
67.2 74.6
Taxation (13.7) (18.7)
Product earnings 53.5 55.9
Investment earnings 14.0 6.2
Operating profit 67.5 62.1
Other charges (13.7) (10.0)
Total profit 53.8 52.1
Product earnings of the group’s banking and other
activities for the year ended 31 December 2000
were €53.5m, a decrease of 4% over the 1999
level of €55.9m. Operating profit after tax
increased 9% to €67.5m.
Net interest income of €182.7m was marginally
lower than the 1999 outcome of €183.4m, as
the impact of significant growth in the group’s
loan portfolio was offset by a reduction in variable
mortgage rates which could not be offset by
similar reductions in retail deposit rates. In
addition, there was a lower contribution from
Group Treasury due to difficult market conditions
in the first half of the year.
The net interest margin declined to 1.58%
compared to 1.98% for the year ended 1999.
This decline in the net interest margin reflects the
factors affecting net interest income noted above
combined with the impact of a continued increase
in the proportion of wholesale funding used by
the group. Increases in market rates above official
rates and a high level of liquidity held throughout
the year as a prudent measure to fund the significant
levels of asset growth also depressed margins which
improved during the second half of the year.
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Group Chief Executive’s Operating & Financial Review
Other operating income (before investment
returns) was €18.9m compared to €14.6m in
1999. Other operating income in 2000 includes
profits on the disposal of surplus owner occupied
properties of €9.8m. Excluding this item, other
operating income declined by 38%. This decline
reflects the loss of income contribution from
Parkrite Limited, the group’s car park management
subsidiary which was sold in December 1999,
together with higher fees and commissions
payable, which are deducted from other income,
as a result of higher new business volumes.
Total administration expenses increased 9% to
€123.7m from €113.8m in 1999 reflecting the
high levels of new business growth achieved. The
underlying cost/income ratio in the banking division
was 58.6% which compares with 55.0% reported
for the year ended 1999. The increase in the cost/
income ratio is primarily due to the lower growth
in net interest income earned in 2000 when
compared to the growth in administration costs.
If the profit earned on the book of bancassurance
business were included, the cost/income ratio
would be 54.4%.
The provision for bad and doubtful debts increased
by €1.1m to €10.7m (1999: €9.6m) as a result
of increased levels of general provision in line with
the growth in the lending portfolio. The group
continues to apply conservative credit criteria in
its lending decisions and overall the loan portfolio
remains of high quality. In this regard, the group
suffered no loss on its residential mortgage
portfolio in the year ended 31 December 2000.
The taxation charge for the year was €13.7m,
representing an effective rate of tax of 20%.
This is lower than the standard rate of corporation
tax principally due to the availability of capital
allowances brought forward from previous years.
Investment earnings in the group’s banking and
other activities represent the return on assets held
outside of its life assurance activities. The return
of €14m after tax in the year ended 31 December
2000 primarily reflects the profit achieved on the
disposal of an investment property. The return of
€6.2m in 1999 represents a profit achieved on the
disposal of equity holdings.
Exceptional items included in the group’s banking
and other activities in the year ended 31 December
2000 comprise €8.7m in respect of the settlement
of outstanding DIRT liabilities referred to previously
and a restructuring charge of €5m (post tax) in
relation to the bank’s business process re-engineering
project “Vision 21”. The €10m of exceptional items
reported in the year ended 31 December 1999
arose due to a restatement of the group’s residual
holding in Almanij (which was previously held
at market value) to cost (€9m), in line with the
group’s accounting policies, together with merger
integration costs of €1m.
Total banking assets increased to €12.8bn
(including €1.4bn of securitised mortgages)
at 31 December 2000 from €11bn (including
€1.1bn of securitised mortgages) at 31 December
1999, an increase of 17.1%.
Life Assurance Activities
Profits from the group’s life assurance activities
are computed on an embedded value basis.
The embedded value of the group’s life business
represents the sum of:
i) the net assets directly attributable to
shareholders
ii) the shareholders’ interest in the surplus assets
in the life assurance funds, and
iii) the present value of shareholder net profits
expected to be earned from the in-force book
of life business.
In the year ended 31 December 2000, the basis
of calculating the embedded value of the group’s
US life operations was changed from a passive to
an active approach in line with the methodology
used in the group’s other life operations. Arising
from this change, the opening discount rate was
adjusted from 9.5% to 8.75%. The effect of the
change was to add €13.8m to the embedded value
and this has been reflected in other experience
variances within reported product earnings.
The risk discount rates used in calculating the
value of in-force business reflect medium term
interest rates, net of tax, plus a risk margin of
4.5%. At 31 December 2000, the discount rates
used to value the life business have been reduced
to reflect the falls in interest rates in the group’s
core markets.
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Group Chief Executive’s Operating & Financial Review
The relevant discount rates used in the embedded
value calculation are:
31 Dec. Rate 31 Dec.
2000 Changes 1999
% % %
Ireland 8.50 0.25 8.75
US 8.00 0.75 8.75*
UK 8.00 0.25 8.25
*As adjusted
The net operating profit of the group’s life
assurance activities consists of product earnings
from the in-force book and sales during the period
plus investment earnings on shareholder assets
attributable to life assurance activities. The effect of
changes in the underlying economic assumptions,
in particular, the discount rate, is added to or
deducted from the net operating profit to give
total embedded value earnings for the period.
The group’s life profits for the year ended
31 December 2000 are summarised below:
2000 1999
€m €m
Profits from life assurance activities
Interest on value of
in-force business 106.2 84.7
Unit linked management
fee variance (6.9) 26.7
Other experience variances
including exceptional items 76.2 29.0
Value of new business 37.0 30.7
Product earnings 212.5 171.1
Investment earnings 4.2 5.9
Operating profit 216.7 177.0
Other (charges)/income (1.0) 7.8
Economic variance 14.3 (25.9)
Total profits 230.0 158.9
Total product earnings in the year to 31 December
2000 increased 24% to €212.5m, from €171.1m
in 1999. Interest on the value of in-force business
increased 25% to €106.2m reflecting strong
growth in the group’s insurance portfolios. Unit
linked management fee variances were negative
at €6.9m in 2000 compared to a positive €26.7m
in 1999 reflecting the weaker investment markets
which prevailed throughout the year.
Other experience variances of €76.2m in the year
ended 31 December 2000 (1999: €29m) include
the following items:
• Positive tax variances of €49.4m (1999:
€11.9m) arising from the legislative enactment
of a reduction in Irish corporation tax rates
to 12.5% on a phased basis by the year
2003 and the release of tax provisions carried
forward from previous years which are no
longer required.
• Positive variances of €13.3m in respect of cost
synergies arising from the merger.
• Negative variances of €17.7m ($16.3m) arising
from changes in the embedded value persistency
and mortality assumptions within the US life
operations to reflect experience trends.
• A positive €13.8m ($12.7m) variance arising
from the cumulative impact of the change in
approach to the embedded value methodology
within the US operation referred to previously.
Excluding these items, experience variances, which
continued to be positive, are in line with 1999 and
reflect actual experience better than assumed.
The strong growth in the value of new business,
which increased 21% to €37m in 2000 against
€30.7m in 1999, was very satisfactory. This
increase was the result of significantly increased
volumes of new business and robust margins,
particularly in the Irish Retail Division.
Excluding the impact of investment markets
on unit linked fee income and the experience
variances set out above, underlying product
earnings for the year ended 31 December 2000
grew by 21%.
Investment earnings in 2000, at €4.2m, compare
with €5.9m for the prior year. This reduction in
earnings is principally due to the lower investment
earnings in the US as a result of poor corporate
bond markets referred to previously.
Other charges of €1m arose during 2000 in
relation to merger integration costs. The other
income which arose in 1999 relates to the
restatement of the embedded value of the Irish
Progressive Group following the merger (positive
€12.3m) and merger integration costs of €4.5m.
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Group Chief Executive’s Operating & Financial Review
The economic variance of €14.3m arising
in the period to 31 December 2000 relates to
the changes in the discount rates noted above,
changes in future investment return assumptions
(in line with changes in the yield on long-term
gilts), together with changes to the assumption
in regard to future long-term inflation (in line with
the movement in the yield on index linked gilts).
The relevant changes to assumptions are set out
in note 41 to the Financial Statements.
The shareholders’ net worth attributable to the
group’s life assurance activities at 31 December
2000 was €150.9m and was invested as follows:
31 Dec. 31 Dec.
2000 1999
€m €m
Property 94.1 78.7
Equities 72.4 73.3
Fixed Interest Securities 146.0 166.4
Deposits 26.1 175.4
Other Assets 111.6 42.8
450.2 536.6
Solvency Margin (299.3) (281.5)
150.9 255.1
The reduction in shareholders’ net worth principally
reflects a payment made by the group’s life
assurance activities to the bank during the year
in respect of the transfer of the value of in-force of
Irish Progressive Group together with the payment
of inter company dividends.
Associated Companies
The return from Allianz Irish Life Holdings, a profit
of €2.4m, reflects the weaker investment markets
which prevailed during the year and which offset
an improved underwriting result. The 1999 out-
turn of €13.7m included the group’s share of
earnings of Irish Intercontinental Bank, Irish Life
Finance Group and K&H Bank, all of which were
sold in 1999.
Capital and Liquidity
The group’s capital and liquidity position remained
strong at 31 December 2000. The Tier 1 and Total
Capital ratios were 11.2% (31 December 1999:
12.3%) while the liquidity ratio within the group’s
banking business was 28% (31 December
1999: 29.2%). The solvency margin in Irish Life
Assurance plc, the group’s main life assurance
company, was covered 2.7 times by available
assets (31 December 1999: 2.8 times).
During the second half of the year, the group
repurchased 7.8m ordinary shares on the open
market for a total consideration of €93.3m as
part of the €150m share buy back programme
announced at the time of the interim results. Of
these shares, 2.6m (value: €28.7m) were cancelled
while the balance of 5.2m shares (value: €64.6m)
have been held as treasury shares. It is intended
to re-issue these treasury shares to the proposed
TSB Employee Share Ownership Plan as part of
the consideration for the acquisition of TSB Bank.
It is the group’s intention to continue with the
rolling share buy back programme until shares to the
total value of €150m are acquired and cancelled.
Dividends
The directors have proposed a final dividend of
27.9 cents. This represents a 12% increase on
the equivalent final dividend paid in 1999 of
25.0 cents. The dividend, subject to shareholders’
approval, will be paid on 29 May 2001 to
shareholders on the register as of 27 April 2001.
This will make a total dividend for the year of
39.0 cents, an increase of 11% on the 1999 total
dividend. The dividend is covered 2.5 times by
operating earnings and represents an approximate
yield of 3.1% on the basis of the share price at the
beginning of March 2001.
Under the provisions of the 1999 Finance Act,
a withholding tax, at the standard rate of income
tax, applies to dividends paid by Irish resident
companies. Exemption from this withholding tax
is available for Irish corporates, Irish pension funds
and most non-residents. However, Irish resident
individuals are subject to the withholding tax and
the final dividend paid to them will be net of tax
at 20%.
Treasury and Credit Risk
Treasury and credit risk throughout the group is
approved and managed in accordance with a set
of clearly defined policy statements and limits
which have been approved by the board.
These policies and limits are designed to safeguard
the group’s assets while permitting sufficient
operational flexibility to ensure that an appropriate
level of return is generated for shareholders.
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Group Chief Executive’s Operating & Financial Review
Treasury Risk Management
The Treasury division within the group’s banking
operations is subject to strict internal control
and reporting procedures which are monitored
by the group’s Assets and Liabilities Committee.
This committee, which operates under terms
of reference which have been approved by the
board, is chaired by the Group Finance Director
and comprises members of senior management
including the Group Chief Executive. All of
Treasury’s activities are subject to limits on the
magnitude and the nature of exposures which
may be undertaken. These limits are set by the
board and are regularly reviewed.
Liquidity Management
One of Treasury’s primary responsibilities is the
management of liquidity within the group. In
carrying out this responsibility, Treasury's principal
objective is to ensure that the group has sufficient
funding available, at an optimal cost, to meet the
operational needs of the group and to adhere to
regulatory and prudential requirements. In this
regard, the group’s liquidity ratio at 31 December
2000 was 28%. This relatively high level of
liquidity reflects the prefunding of expected
future asset growth.
As a consequence of the high level of asset
growth experienced by the group’s banking
operations in 2000, Treasury was particularly active,
raising a total of €1.5bn in the wholesale funding
markets and €1.3bn in the commercial deposit
market. The wholesale markets in which funds
were raised included the medium-term note
issuance (€1.1bn), and the mortgage securitisation
(Stg£300m) markets, in addition to the short-term
interbank market. The range of funding sources
utilised by the group reflects a policy of strategic
diversification to prevent over reliance on any
individual market. The group continues to maintain
high quality, long-term senior debt ratings with
a Moody’s Investors’ Service rating of A1 and an
equivalent rating from Standard and Poor’s of A+.
These high quality credit ratings help to increase
the availability and reduce the cost of wholesale
funds to the group.
As part of its liquidity management responsibilities,
Treasury is also charged with the optimal investment
of the group’s liquid assets. In carrying out this
function, Treasury invest in a range of interest rate
instruments subject to strict board approved limits.
Non Trading Book Exposure Management
Treasury is also responsible for ensuring that
the exposure to movements in interest and foreign
currency exchange rates arising in the non trading
book of the group’s banking operations are
maintained within limits set by the board. The
non trading book comprises the bank’s retail
and corporate deposit books and its loan book
combined with the interbank book, wholesale
funding instruments and the liquid asset investment
portfolio which is managed by Treasury. Interest
rate risk arises due to the fact that, in both the Retail
and Treasury areas, certain assets and liabilities
carry fixed rates (e.g. fixed rate mortgage products).
Foreign currency exchange risk arises due to the
fact that the group's banking operations conduct
business in a range of currencies, principally Euros,
Sterling and US Dollars. Interest and foreign
currency exchange rate exposures arising in the
non trading book are managed on a portfolio, or
total book basis, using a range of conventional
hedging instruments including interest rate and
currency swaps and forward rate agreements.
In managing the exposures arising in the non
trading book, sensitivity analysis is used to
measure and control interest rate risk. This analysis
calculates the financial change in the market
value of equity arising from quantified parallel
movements, up and down, in yield curves across
the entire portfolio of assets and liabilities. In
carrying out the calculation, all relevant assets and
liabilities (including off balance sheet instruments)
in each currency are categorised according to the
remaining term for which they attract a fixed rate
of interest. The net present value of the change
in the value of the assets and liabilities arising
from specified percentage movements in interest
rates at all maturities is calculated. The analysis
is completed for each relevant currency book
separately and the results aggregated. The bank’s
principal non trading book exposures are in Euros,
Sterling and US Dollars.
The model used includes behavioural assumptions
about the various types of assets and liabilities
(particularly those arising from retail transactions)
to which the bank is exposed. These assumptions
are set under the guidance of the Assets and
Liabilities Committee. Although the assumptions
are based on past experience, such experience
may not be reflected in the future.
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Group Chief Executive’s Operating & Financial Review
Furthermore, the results of the calculations
cannot be simply extrapolated to estimate the
impact of interest rate changes which are not
quantified in the sensitivity analysis. For these
reasons, the figures disclosed in note 39 to the
financial statements need to be treated with a
degree of caution.
Within the non trading book, the group accepts a
degree of interest rate and other market price risk,
subject to the market value change arising from
certain prescribed changes in rates as calculated
using the sensitivity analysis remaining within
limits which are set by the board. At 31 December
2000, the market value exposure of the group’s
bank non trading book to a parallel upward shift
of one percent in Euro, Sterling and US Dollar
yield curves was €23.3m (1999: €24.3m).
Further details of the exposures carried in the
bank’s non trading book are set out in note 39
to the financial statements.
Foreign exchange exposures arise in the non
trading book due to the fact that the bank
conducts business in a range of currencies.
All foreign currency positions arising in the
non trading book are transferred to the trading
book as they arise.
Trading Book
In addition to the responsibility for managing
the liquidity and interest rate exposures arising
in the banking operations’ non trading book,
Treasury trades in liquid interest rate and
foreign currency exchange rate instruments,
and derivatives thereof, in order to profit from
short-term changes in market values. Trading
book exposures are subject to strict limits which
have been approved by the board. Interest rate
exposures within the trading book are measured
using sensitivity analysis. The methodology
employed is the same as that utilised in respect
of the non trading book set out above. Foreign
currency exposures are measured by reference
to open positions (the sum of all long and short
positions). All financial instruments held for trading
purposes are clearly designated and are held
separately from other holdings and all trading
positions are marked to market. Further details
of the Treasury trading activities are provided
in note 39 to the financial statements.
David Gantly, David Went, Peter Fitzpatrick.
Diarmuid Bradley, Bruce Maxwell, Denis Casey.
Billy Kane, Kevin Murphy, Niall Saul.
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Group Chief Executive’s Operating & Financial Review
Credit Risk Management
Credit risk throughout the group is approved and
managed in line with a set of clearly defined policy
statements, which have been approved by the board.
Credit activities are monitored and controlled by
the Group Credit Committee which is chaired by
the Group Chief Operating Officer and comprises
members of senior management, including
executive directors.
The Group Credit Committee is responsible for
developing and implementing credit policy within
the context of the overall credit policy approved
by the board. The group credit policy statement
provides for tiered levels of discretion with regard
to acceptance of credit exposures. All exposures
above a certain level require the approval of either
the board or the Group Credit Committee
depending on the size of the exposure. Individual
discretion limits are set by reference to the extent
of the individual’s experience, proven competence
and the nature and scale of lending undertaken
in the relevant business units. Lending proposals
above individual discretion limits are referred
to business unit credit committees, the Group
Credit Department, Group Credit Committee
or the board, as appropriate. The Group Credit
Department is responsible for monitoring
overall credit quality, adherence to credit
policy and carrying out regular portfolio analysis.
Conclusion and Outlook
The excellent results which the group achieved
in 2000 reflect the commitment and dedication
of the group’s management and staff throughout
the year and I would like to extend my thanks
to all those whose hard work made it possible.
I would also like to take this opportunity to
thank our two former Joint Chairmen, John Bourke
and Conor McCarthy as well as Neville Bowen,
Michael Donnelly and Brendan Halligan, all of whom
will retire from the board at the forthcoming annual
general meeting, in addition to John Keogh who
retired in November 2000, for their invaluable
contribution to Irish Permanent plc, Irish Life plc
and Irish Life & Permanent plc over the years.
The economic outlook in the Irish economy, which
is the group’s main focus of operations, continues
to be favourable. Particularly within the Irish retail
financial services marketplace, strong economic
growth, high levels of employment and consumer
confidence allied to favourable demographic trends
present the group with significant opportunities
to continue to improve trading performance.
In addition, the acquisition of TSB will enhance
the group’s ability to take advantage of the
opportunities which these favourable market
conditions will present in the year 2001.
David Went
Group Chief Executive
21 March 2001
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Group Chief Executive’s Operating & Financial Review
Directors’ Report
The directors present their annual report and audited financial statements to the shareholders for the yearended 31 December 2000.
DividendsAn interim dividend of 11.1 cents per share was paid on 13 November 2000. The directors have proposed a final dividend of 27.9 cents which, subject to the approval of shareholders, will be paid on 29 May 2001. The total dividend for the year is 39.0 cents.
Review of the business and likely future developmentsA detailed review of the group’s performance during the year and an indication of likely future developmentsare set out in the Chairman’s statement on pages 6 to 7 and in the Group Chief Executive’s Operating andFinancial Review on pages 8 to 25.
On 8 November 2000, the group made an offer of €430m for the business of TSB. This offer was recommendedto the Minister for Finance by the Trustees of the TSB on 5 December 2000. All necessary regulatory consentshave now been received in respect of this acquisition and completion is now reliant only on the passing ofenabling legislation which, it is anticipated, will occur in April 2001.
Share CapitalUnder the authority granted at the 2000 AGM the company made on the market purchases of 7,757,954 of its own shares being 2.7% of the called up share capital of the company with a nominal value of €2.5m for a total consideration of €93.3m. 2,578,168 of these shares being 0.9% of the called up share capital with a nominal value of €0.8m were subsequently cancelled and the balance of 5,179,786 shares being 1.8% of the called up share capital with a nominal value of €1.7m are being held as treasury shares. It is intended to re-issue these treasury shares to the proposed TSB Employee Share Ownership Plan as part of the considerationfor the acquisition of TSB Bank. 892,904 shares were issued under the group’s share option schemes. In additionthe share capital of the company was redesignated to euros during the period and the nominal value of theordinary shares was redesignated from IR£0.25 shares to €0.32 shares.
DirectorsThe names of the directors, together with a short biographical note on each, appear on pages 4 to 5. Gillian Bowler, Peter Fitzpatrick, Brian McConnell, Kieran McGowan, Kevin Murphy and David Went retire by rotation in accordance with the Articles of Association and being eligible offer themselves for re-election.Denis Casey who was co-opted on the Board on 6 July 2000, now retires in accordance with the Articles ofAssociation and being eligible offers himself for re-election.
John Bourke, Neville Bowen, Michael Donnelly, Brendan Halligan and Conor McCarthy are retiring from theboard at the conclusion of the AGM and are not standing for re-election. John Keogh resigned from the boardon 2 November 2000.
Details of the directors’ and secretary’s interests in the share capital of the company and of transactionsinvolving directors are set out in note 42 to the financial statements.
Interests in the ordinary share of the companyThe directors are aware of the following substantial interests in the issued share capital of the company as at 9 March 2001:
Fidelity International Ltd 8%Zurich Financial Services Group 6%Bank of Ireland Asset Management Ltd. 6%Standard Life 4%Scudder Kemper Investments Inc. 3%
Political DonationsThere were no political donations which require disclosure under the Electoral Act 1997.
Subsidiary and associated undertakingsThe principal subsidiary and associated undertakings and the group’s interest therein are shown in note 46 to the group financial statements.
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Directors’ Report
Branches outside the StateIrish Life & Permanent plc has established branches, within the meaning of Regulation 25 of the EuropeanCommunities (Accounts) Regulations,1993 (which gave effect to EU Council Directive 89/666/EEC), in theUnited Kingdom.
Health, Safety and Welfare at Work Act,1989The well-being of staff is safeguarded through adherence to health and safety standards and the directors are satisfied that these have been applied throughout the year.
EMUThe group has in place a programme designed to address the impact of the euro on the various businesses.Further details are given in the Group Chief Executive’s Operating and Financial Review on page 18.
AuditorsIn accordance with Section 160(2) of the Companies Act, 1963 the Auditors, KPMG, Chartered Accountants,will continue in office.
On behalf of the Board
Roy Douglas David WentChairman Group Chief Executive
Peter Fitzpatrick Sean RyanGroup Finance Director Company Secretary
21 March 2001
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Corporate Governance
The directors endorse the Combined Code which sets out Principles of Good Governance and a Code of BestPractice and which was adopted by the Irish and London Stock Exchanges in 1998.
The directors have developed a code of practice which deals with, among other matters, issues of corporategovernance. This code of practice is designed to ensure that the principles of good governance set out inSection 1 of the Combined Code are applied within the group.
The Board and DirectorsThere is an effective board to lead and control the group. The board has reserved to itself for decision a formalschedule of matters pertaining to the group and its future direction (such as the group’s commercial strategy,major acquisitions and disposals, board membership, executive remuneration, trading and capital budgets, andrisk management policies). All strategic decisions are reserved to the board. Documented rules on managementauthority levels and on matters to be notified to the board are in place, supported by an organisational structurewith clearly defined authority levels and reporting responsibilities.
The board comprises thirteen non-executive and six executive directors. Biographies of each of the directors are set out on pages 4 to 5. The roles of the Chairman and the Group Chief Executive are separated and are clearly defined. Details of transactions with directors are set out in note 42 to the financial statements. As noted therein Monty Hilkowitz may be a beneficiary of a number of discretionary trusts which have indirectshareholding interests in Irish Life International Limited (“ILI”), in addition to having an interest in a number of companies which conduct business with ILI. With the exception of Monty Hilkowitz the board considers thenon-executive directors to be independent of management and free of any business or other relationship whichwould interfere with the exercise of their independent judgement. It should be noted that Roy Douglas, MichaelDonnelly and Patrick Kenny have served as directors of companies in the group for ten years or more and thatRoy Douglas was previously Chief Executive of Irish Permanent and was an executive director of the group until his appointment as Chairman on 17 May 2000. The board has agreed that the senior independent non-executive director shall be the incumbent Chairman of the Finance Committee who is currently Patrick Kenny.
The board meets in accordance with a regular schedule of meetings and also meets on other occasions asconsidered necessary. Full board papers are sent to each director in sufficient time before board meetings andany further papers or information are readily available to all directors on request. The board papers include theminutes of all committee meetings which have been held since the previous board meeting and the chairman of each committee is available to report on the committee’s proceedings at board meetings if appropriate. The board receives formal reports on group compliance procedures at each of its meetings.
Procedures are in place for directors, in furtherance of their duties, to take independent professional advice andtraining, if necessary, at the group’s expense. Appropriate training is arranged for directors on first appointmentand subsequently as necessary. The company secretary is responsible for ensuring that board procedures arefollowed. All directors have direct access to the company secretary.
Board CommitteesThe board has established a number of committees which operate within defined terms of reference. Thesecommittees are the Audit Committee, the Finance Committee, the Remuneration and Compensation Committeeand the Nomination/Chairman’s Committee, all of which are committees of the board. With the exception ofthe Nomination/Chairman’s Committee and the Finance Committee, where the Group Chief Executive is amember, these committees are composed of non-executive directors, all of whom are considered by the boardto be independent. Membership and chairmanship of each committee is reviewed at least every two years.
Audit CommitteeThe Audit Committee comprises Michael Donnelly (Chairman), John Bourke, Roy Douglas, Conor McCarthy,Patrick O’Neill and Muriel Scorer. It provides a link between the board and the auditors, is independent of thegroup’s management and is responsible for approving the appointment of external auditors and for reviewing the scope of the external audit. It also has responsibility for reviewing the group’s annual report, the AppointedActuary’s report and the effectiveness of the group’s internal control systems. The committee monitors thegroup’s compliance and internal audit procedures and considers issues raised and recommendations made by the external auditors and by the internal audit and compliance functions of the group. The committee meets at least annually with the external auditors in confidential session without management being present. Thecommittee also monitors and reviews the group’s risk management process and receives regular reports frommanagement on the findings of the process.
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Corporate Governance
The Finance CommitteeThe Finance Committee comprises Patrick Kenny (Chairman), John Bourke, Roy Douglas, Richard Hooper, Conor McCarthy, Kieran McGowan, Patrick O’Neill and David Went. The committee is responsible forconsidering and making recommendations to the board inter alia on major acquisitions, capital requirements,dividend policy and the group’s annual budgets. The committee also considers and makes recommendations in respect of the group’s credit and treasury policies.
The Remuneration and Compensation CommitteeThe Remuneration and Compensation Committee comprises Gillian Bowler (Chairman), John Bourke, PatrickKenny, Richard Hooper, Conor McCarthy and Patrick O’Neill. It considers all aspects of the executive directors’and senior executives’ remuneration and makes recommendations accordingly to the board. In this regard the Director’s Report on Remuneration is set out on pages 31 to 34. The committee also deals with seniormanagement succession issues.
The Nomination/Chairman’s CommitteeThis committee comprises Roy Douglas (Chairman), John Bourke, Michael Donnelly, Brendan Halligan, ConorMcCarthy, Kieran McGowan, Muriel Scorer and David Went. It serves as a forum for the discussion of issues whicharise in the overall corporate governance of Irish Life & Permanent and is responsible for overseeing theimplementation of best practice procedures in this regard within the group. It is also charged with responsibilityfor bringing recommendations to the board regarding the appointment of new directors. Decisions on boardappointments are taken by the full board. All directors are subject to election by the shareholders at the firstopportunity after their appointment.
It is intended that non-executive directors will automatically retire from the board at the end of a third term ofthree years although at the discretion of the board, this may, in exceptional circumstances, be extended for afurther term of three years. The term of office of the Chairman is normally six years regardless of any previousterm as a director. Under the Articles of Association each director is required to submit themselves toshareholders for re-election to the board every three years.
Directors’ RemunerationThe Directors’ Report on Remuneration is set out on pages 31 to 34.
Relations with ShareholdersThe group has an ongoing programme of meetings between its senior executives, institutional shareholders, analystsand brokers. These meetings, which are governed by procedures designed to ensure that price sensitive informationis not divulged, are wide ranging and are designed to facilitate a two way dialogue based upon the mutualunderstanding of objectives. The annual report is designed, through the Chairman’s Statement and the GroupChief Executive’s Operating and Financial Review, in addition to the detailed financial information contained in the report, to present a balanced and understandable assessment of the group’s position and prospects. Inaddition the company uses its internet website (www.irishlifepermanent.ie) to provide information to investors.The investor relations page is updated with the company’s stock exchange releases and formal presentations toanalysts and investors as they are made.
The directors comply with the Combined Code as it relates to the disclosure of proxy votes, the separation of resolutions and the attendance of Committee Chairmen at the annual general meeting.
Internal ControlThe board has overall responsibility for the group’s system of internal controls and for reviewing its effectiveness.Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, andcan provide only reasonable and not absolute assurance against material mis-statement or loss.
The Combined Code introduced a new requirement for the directors to review the effectiveness of the group’ssystem of internal control. This extends the previous requirement to review the system of internal financialcontrols to cover all controls including:
– Financial– Operational– Compliance and– Risk Management
Formal guidance for directors on the implementation of the new requirements entitled “Internal Control:Guidance for Directors on the Combined Code”, was published in September, 1999 (“the Turnbull guidance”).The board established the procedures necessary to implement the Turnbull guidance during 1999 and the groupachieved full compliance with it during 2000.
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Corporate Governance
The Audit Committee has reviewed the effectiveness of these systems of internal control and reported thereonto the board.
The board has delegated to executive management the planning and implementation of the systems of internalcontrol within an established framework which applies throughout the group.
The directors have responsibility for maintaining a system of internal control which provides reasonable assuranceof effective and efficient operations, internal financial control and compliance with laws and regulations. The boardhas established an ongoing process for identifying, evaluating and managing the significant risks faced by the group.This risk management process was introduced during 1999 and was fully implemented throughout the group during2000. The process is regularly reviewed by the board in accordance with the guidance provided by Turnbull.
The group’s business involves the acceptance and management of a range of risks. The group’s system ofinternal control is designed to provide reasonable, but not absolute, assurance against the risk of material errors, fraud or losses occurring. It is possible that internal controls can be circumvented or overwritten. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time.The group’s key internal control procedures include the following:
– An organisational structure with formally defined lines of responsibility and delegation of authority.
– Established systems and procedures to identify, control and report on key risks. Exposure to these risks ismonitored mainly through the operations of the Group Credit Committee and the Group Assets and LiabilitiesCommittee. Their activities are described in the Group Chief Executive’s Operating and Financial Reviewon pages 22 to 25. The terms of reference of these committees, whose members include executivedirectors and senior management, are reviewed regularly by the Finance Committee of the board.
– Comprehensive budgeting systems are in place with annual financial budgets prepared and approved by the board. Actual results are monitored and there is regular consideration by the board of progresscompared with budgets and forecasts.
– There are clearly defined capital investment control guidelines and procedures set by the board.
– Responsibilities for the management of credit, investment and treasury activities are delegated with limitsto line management. In addition, management has been given responsibility to set policies, proceduresand standards in the areas of finance, legal and regulatory compliance, internal audit, human resourcesand information technology systems and operations.
– The internal audit function, which is centrally controlled, monitors compliance with the group’s policiesand standards and the effectiveness of internal control structures across the group. The work of internalaudit follows a risk based approach and the Group Head of Internal Audit reports to the Chief OperatingOfficer and the Audit Committee.
– Compliance in the group is controlled centrally under the Group Compliance Officer. Divisionalcompliance officers are in place in all of the group’s operating divisions.
– There is a risk management programme in place throughout the group whereby executive managementreviews and monitors the controls in place, both financial and non financial, to manage the risk facingthat business.
The Audit Committee reviews the internal audit, compliance and risk management program. The Group Head of Internal Audit and the Group Compliance Officer report regularly to the Audit Committee. In addition thehead of each operating division and each group function report to the Audit Committee annually under the riskmanagement programme. The Audit Committee also reviews the half year and annual financial statements andthe nature and extent of the external audit. There are formal procedures in place for the external auditors toreport findings and recommendations to the Audit Committee. Significant findings or identified risks areexamined so that appropriate action can be taken.
Going ConcernAfter making appropriate enquiries, the directors consider that the group has adequate resources to continue inbusiness for the foreseeable future. For this reason they continue to adopt the going concern basis in preparingthe financial statements.
Statement of ComplianceThe directors have fully adopted the provisions of the Combined Code. In relation to the provisions requiringthe directors to review the effectiveness of the group’s system of internal control, as noted in the 1999 financialstatements, procedures were put in place during 1999 to facilitate this process and they became fully operationalduring 2000. By 31 December 2000, the group had achieved full compliance with the code.
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Directors’ Report on Remuneration
This report sets out the remuneration policy for the group’s senior executives, including executive directors.
Remuneration and Compensation CommitteeThe members and role of the Remuneration and Compensation Committee are outlined on page 29 of theReport on Corporate Governance.
Remuneration policyIn framing the group’s remuneration policy the board confirms that it has complied with the Combined Code.The group’s policy on senior executive remuneration (including executive directors) is to reward individualscompetitively in order to ensure that the group continues to attract and retain high calibre executives and thatthey are properly motivated to perform in the best interests of the shareholders. The policy is also designed toensure that there are adequate management succession plans in place.
The Remuneration and Compensation Committee makes recommendations to the board on the group’sexecutive remuneration policy taking into account a number of factors, including the comparative market placesin which the group operates and performance relative to these market places. The need to ensure that there is astrong alignment of interest between executives and shareholders is addressed through a combination of annualbonus and share option schemes. In all cases, rewards are subject to stringent performance criteria. Thecommittee obtains external advice on these matters.
Non-Executive DirectorsNon-executive directors are solely remunerated by way of fees in respect of their board membership, full detailsof which fees are set out on page 34.
Executive DirectorsThe remuneration of the executive directors comprises a basic salary, certain benefits, short-term performancebonuses and pension entitlements. In addition, executive directors participate in the group’s employee profitsharing and savings related option scheme and in the group’s share option schemes. Each of these elements is discussed below and details of the total remuneration are set out on pages 32 to 33.
Basic SalaryThe basic salary is reviewed annually having regard to competitive market practice.
BenefitsExecutive directors are entitled to a company car. The group also pays private health insurance on behalf of the executive directors and their families. In addition executive directors may avail of subsidised house purchaseloans. Loans to executive directors up to IR£50,000 are charged at the rate of 2.5% which is the rate of interestapplicable to mortgage loans to Irish Life & Permanent staff. Where applicable, the balance of any mortgage loan in excess of IR£50,000 to an executive director is subject to Irish Permanent’s normal terms and conditionsfor borrowers.
Short-term performance bonusShort-term performance bonus awards in any year are determined by the Remuneration and CompensationCommittee by reference to criteria which are set by the committee and by reference to the overall profitperformance of the group. The awards to each individual may extend up to 60% of basic salary in any onefinancial year.
PensionsThere are a number of pension arrangements in place for executive directors
(i) Irish Permanent Executive Pension Scheme – this is a defined benefit scheme of which Peter Fitzpatrickand Billy Kane are members. Roy Douglas is also a member of this scheme. He retired as an executivedirector on 17 May 2000 and the company ceased contributions from that date. He receives a pensionfrom this scheme.
(ii) Irish Life Assurance plc Pension Scheme – Denis Casey, Brian McConnell and Kevin Murphy are membersof this defined benefit scheme.
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Directors’ Report on Remuneration
The group contributes to both of these pension schemes. Pension benefits are determined solely in relation tobasic salary with the exception of pension benefits for Denis Casey and Kevin Murphy. In accordance with theterms of their contracts of employment when they became employees of the group, Denis Casey’s and KevinMurphy’s annual bonuses are pensionable but are averaged over a number of years to take account of thevariable nature of the payment.
David Went is not a member of any of the group’s defined benefit pension schemes. Instead the group makespayments to a defined contribution scheme for his benefit. As this is a defined contribution arrangement withno capitalisation effect, the board agreed to relate these payments to both salary and annual bonus.
Share option schemesExecutive directors, in common with other senior executives, participate in the group’s share option schemes.Under these schemes the Remuneration and Compensation Committee selects executives to participate in thescheme based on performance criteria. The policy is to grant options to key executives across the group toencourage identification with shareholders’ interests. It is current policy to phase the grant of such options.Options are issued at the market price on the day preceding the date of the grant. Options are exercisable onlyif certain earnings per share performance criteria are met. The aggregate exercise price of options granted underthe share options schemes may not exceed eight times an executive’s emoluments. In total not more than 10%of the issued share capital of the group can be put under option in any ten year period. Options lapse if notexercised within ten years of grant.
The group operates profit sharing schemes and savings related option schemes for all staff in which executivedirectors may participate on the same terms and conditions as all other members of staff. Under the savingsrelated option scheme employees granted an option must enter into a savings contract under which they makea monthly savings contribution for five years. Options may be granted at a discount of up to 25% of the marketprice prevailing at the date preceeding the date of grant. Options granted to date are exercisable between thefifth anniversary of the grant and May 2006 out of the proceeds of the relevant savings scheme.
Directors’ service contractsIn accordance with the recommendation of the Combined Code there are no directors’ services contracts withnotice periods exceeding 12 months or with provisions for pre-determined compensation on termination whichexceeds one year’s salary and benefits in kind.
Directors’ remuneration
Executive Directors’ remuneration and pension benefitsThe remuneration payable (excluding pension contributions by the group) to executive directors who held office for any part of the financial year is as follows:
Other Notes Salary Annual Bonus Benefit in kind remuneration* Total
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999€000 €000 €000 €000 €000 €000 €000 €000 €000 €000
David Went 419 381 251 229 16 21 16 16 702 647Roy Douglas 1 159 329 – 197 12 36 – 1 171 563Denis Casey 2 98 – 59 – 10 – 7 – 174 –Peter Fitzpatrick 263 254 140 127 30 28 2 1 435 410Billy Kane 3 211 135 95 61 2 2 2 1 310 199Brian McConnell 3 224 149 101 67 16 11 14 10 355 237Kevin Murphy 3 211 141 95 42 17 15 13 10 336 208Ronald Butkiewicz – 188 – 47 – 1 – – – 236Peter Ledbetter – 30 – – – 7 – – – 37
1,585 1,607 741 770 103 121 54 39 2,483 2,537
* other remuneration includes amounts payable under the group’s profit share schemes
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Directors’ Report on Remuneration
Notes1. Roy Douglas retired as an executive director on 17 May 2000 and was appointed non-executive
chairman on the same date. The remuneration above relates to the period for which he was an executivedirector. Fees received as non-executive chairman are included under non-executive directors fees below.
2. Denis Casey was appointed a director of Irish Life & Permanent plc on 6 July 2000. The remunerationabove relates to the period since that date.
3. Billy Kane, Brian McConnell, and Kevin Murphy were appointed to the board on 21 April 1999. Their remuneration for 1999 relates to the period since that date.
Aggregate remuneration for executive directors amounted to €2.814m (1999: €2.988m) including pensioncontributions of €331,000 (1999: €451,000)
Normal pension contributions of €244,000 (1999: €219,000) were paid to the defined benefit schemes. In addition €87,000 (1999: €79,000) was paid into a defined contribution scheme on behalf of David Went. In 1999 there were additional contributions of €153,000 in respect of Ronald Butkiewicz.
The directors’ pension benefits under the various defined benefit pension schemes in which they are membersare as follows:
Increase in accrued pension Transfer value of the Total accruedduring the year increase in accrued pension pension
2000 1999 2000 1999 2000 1999€000 €000 €000 €000 €000 €000
Roy Douglas – 25 281 317 135 149Denis Casey 6 – 52 – 87 –Peter Fitzpatrick 12 13 115 116 80 66Billy Kane 7 6 60 51 55 47Brian McConnell 6 4 75 57 116 106Kevin Murphy 8 17 87 187 119 107Ronald Butkiewicz – 9 – 90 – 219Peter Ledbetter – 4 – 46 – 96
39 78 670 864 592 790
Executive Directors’ share optionsAs at
As at Granted Exercised during Market price 31 December Notes 1 January during the year at date 2000
2000* the year Number Price of exercise Number Price**€ € €
David Went 203,974 45,549 – – – 249,523 8.91Roy Douglas 1 118,500 – (118,500) 2.29 10.20 – –Denis Casey 2 127,477 – – – – 127,477 6.52Peter Fitzpatrick 264,310 28,571 (200,000) 2.29 9.85 92,881 6.58Billy Kane 18,648 22,912 – – – 41,560 9.96Brian McConnell 75,419 24,293 – – – 99,712 12.40Kevin Murphy 140,348 22,912 – – – 163,260 5.96
* or at date of appointment if later** weighted average price
1. Roy Douglas was appointed non-executive chairman on 17 May 2000
2. Denis Casey was appointed to the board on 6 July 2000
Options held by executive directors under the share option scheme at 31 December 2000 are exercisable at prices ranging between €2.29 and €14.03 up to 27 March 2010. The market price of the shares at 31 December 2000 was €13.20 and the price range during 2000 was €7.30 to €13.30.
The exercise price of options under the Irish Life plc Group Savings Related Share Scheme is €12.77. No such options were granted in 2000.
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Directors’ Report on Remuneration
Non-Executive Directors’ RemunerationFees paid to non-executive directors are reviewed annually, The current annual fee paid to the chairman is€152,400 while all other non-executive directors currently receive an annual fee of €34,900. Non-executivedirectors who perform additional services outside the normal duties of a director may receive additional fees.The remuneration payable in respect of each non-executive director is as follows:
Notes 2000 1999€000 €000
Roy Douglas 1 76 –John Bourke 2 76 116Conor McCarthy 2 76 108Neville Bowen 33 31Gillian Bowler 33 31Michael Donnelly 3 38 31Brendan Halligan 33 31Monty Hilkowitz 33 31Richard Hooper 33 31Pat Kenny 33 31John Keogh 4 28 31Kieran McGowan 33 24Patrick O’Neill 33 31Muriel Scorer 33 31Eileen Lemass – 7John McCarrick – 9Richard Howlin – 9
591 583
Notes1. Roy Douglas was appointed non-executive chairman on 17 May 2000.
2. John Bourke and Conor McCarthy retired as joint-chairmen on 17 May 2000 but remained as non-executive directors.
3. Michael Donnelly received an additional fee of €4,762 in recognition of the additional workload and responsibilities undertaken by him as Chairman of the Audit Committee.
4. John Keogh resigned from the board on 2 November 2000
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Statement of Directors’ Responsibilities
Company law requires the directors to prepare financial statements for each financial year which, in accordancewith applicable Irish law and accounting standards, give a true and fair view of the state of affairs of thecompany and the group and of the profit or loss for that year. In preparing those financial statements, thedirectors are required to:
– select suitable accounting policies and apply them consistently;
– make judgements and estimates that are reasonable and prudent;
– prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business.
The directors are responsible for keeping proper books of accounts which disclose with reasonable accuracy at any time the financial position of the company and the group and which enable them to ensure that thefinancial statements comply with Companies Acts, 1963 to 1999 and all Regulations to be construed as onewith those Acts. They have general responsibility for taking such steps as are reasonably open to them tosafeguard the assets of the group and to prevent and detect fraud and other irregularities.
On behalf of the Board
Roy Douglas David WentChairman Group Chief Executive
Peter Fitzpatrick Sean RyanGroup Finance Director Company Secretary
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Independent Auditors’ Report to the Shareholders of Irish Life & Permanent plc
We have audited the financial statements on pages 38 to 79.
Respective responsibilities of directors and auditorsThe directors are responsible for preparing the annual report. As described on page 35, this includesresponsibility for preparing the financial statements in accordance with applicable Irish law and accountingstandards. Our responsibilities, as independent auditors, are established in Ireland by statute, the AuditingPractices Board, the Listing Rules of the Irish Stock Exchange and by our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are properlyprepared in accordance with the Companies Acts. As also required by the Acts, we state whether we haveobtained all the information and explanations we require for our audit, whether the company’s balance sheet is in agreement with the books of account and report to you our opinion as to whether:
■ the company has kept proper books of account;
■ the directors’ report is consistent with the financial statements;
■ at the balance sheet date a financial situation existed that may require the company to hold anextraordinary general meeting, on the grounds that the net assets of the company, as shown in thefinancial statements, are less than half of its share capital.
We also report to you if, in our opinion, information specified by law or the Listing Rules regarding directors’remuneration and transactions with the group is not disclosed.
We review whether the statement on page 30 reflects the company’s compliance with the seven provisions of theCombined Code specified for our review by the Irish Stock Exchange, and we report if it does not. We are notrequired to consider whether the board’s statements on internal control cover all risks and controls, or form anopinion on the effectiveness of the group’s corporate governance procedures or its risk and control procedures.
We read the other information contained in the annual report, including the corporate governance statement,and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financialstatements.
Basis of audit opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgements made by thedirectors in the preparation of the financial statements, and of whether the accounting policies are appropriateto the group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or other irregularity or error. In forming ouropinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
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Independent Auditors’ Report to the Shareholders of Irish Life & Permanent plc
OpinionIn our opinion, the financial statements give a true and fair view of the state of affairs of the group and the company as at 31 December 2000 and of the profit of the group for the year then ended and have beenproperly prepared in accordance with the Companies Acts, 1963 to 1999 and all Regulations to be construed as one with those Acts.
We have obtained all the information and explanations we considered necessary for the purposes of our audit.In our opinion, proper books of account have been kept by the company and proper returns, adequate for thepurpose of our audit, have been received from branches not visited by us. The balance sheet of the company is in agreement with the books of account.
In our opinion, the information given in the directors’ report on pages 26 to 27 is consistent with the financialstatements.
The net assets of the company, as stated in the balance sheet on page 45, are more than half of the amount ofits called up share capital and, in our opinion, on that basis there did not exist at 31 December 2000 a financialsituation which, under section 40(1) of the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the company.
Chartered AccountantsRegistered Auditors
21 March 2001
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Group Accounting Policies
(i) Basis of preparationThe consolidated financial statements have been prepared under the historical cost convention in accordancewith the provisions of the Companies Acts, 1963 to 1999, the European Communities (Credit Institutions:Accounts) Regulations, 1992 and comply with applicable financial reporting standards, as modified by therevaluation of certain investments and the inclusion of embedded earnings of life assurance in-force business.
The consolidated profit and loss account and balance sheet follow the format prescribed under the provisions ofthe Companies Acts, 1963 to 1999, and the European Communities (Credit Institutions: Accounts) Regulations,1992, but have been modified where necessary to present a true and fair view of the financial results and positionof the group. Specifically, the formats have been developed having regard to the differences between accountingfor banking and life assurance activities. In this regard, the banking and life assurance activities have been separatelyclassified in the profit and loss account and balance sheet. Where appropriate, information relating to life assuranceactivities has been presented in a manner consistent with the provisions of the European Communities (InsuranceUndertakings: Accounts) Regulations, 1996. A separate profit and loss account for the company is notpresented as permitted by the European Communities (Credit Institutions: Accounts) Regulations, 1992.
(ii) Basis of consolidationThe consolidated financial statements incorporate the financial statements of Irish Life & Permanent plc and its subsidiaries together with the group’s share of the results and relevant reserves of associated companies. The result of subsidiaries acquired other than the combination of Irish Life & Permanent plc and Irish Life plc are included in the consolidated profit and loss account from the date of acquisition.
The combination of the businesses, Irish Life plc and Irish Permanent plc, under the criteria of Financial ReportingStandard No. 6 “Acquisitions and Mergers”, has been included in the consolidated financial statements usingmerger accounting rules. The results and assets and liabilities of companies accounted for under these provisionsare incorporated in the financial statements for prior periods as if these entities had been combined throughoutthese periods. The merger adjustment, which is the difference between the fair value of the shares issued toeffect the merger and the nominal value of the shares acquired, is dealt with on consolidation through reserves.
All inter-group transactions and balances are eliminated on consolidation, save for those balances between lifeassurance activities and banking and other activities, which are presented within the appropriated headingsunder the Credit Institutions and Insurance Undertakings Regulations.
(iii) Embedded valueThe results of life assurance activities have been presented on an embedded value basis. The embedded value isthe sum of the net assets attributable to shareholders and the shareholders’ interest in the value of the in-forcelife assurance business. The shareholders’ interest in the value of the in-force business is included as an asset on the balance sheet and the movement in this asset is reflected in the profit and loss account.
The embedded value profits of the life assurance activities are calculated on an after tax basis and are grossedup for tax at the effective rate of corporation tax applicable in each territory. The excess of the embedded value profit for the financial period over the statutory surplus transferred to shareholders is taken to a non-distributable reserve.
(iv) Shareholders’ value of in-force businessThe shareholders’ value of in-force business is the present value, net of taxation, of future statutory surplusesattributable to shareholders, expected to arise from the life assurance business. This is reduced by the cost ofmaintaining the statutory minimum solvency margin.
The value of in-force business is determined by actuaries employed by the group, in consultation withindependent actuaries. Assumptions regarding future rates of mortality, morbidity, persistency, taxation,investment returns and expense levels are based on the recent experience of the business, taking account of current economic conditions.
The risk discount rate used to calculate the shareholders’ value of in-force business is a combination of adiscount rate to reflect the time value of money and a risk margin to make prudent allowance for the risk thatexperience in future years may differ from the assumptions.
(v) Premium income and claims recognitionPremiums for unit linked policies are accounted for in the same period in which the liabilities arising from those premiums are established. All other premiums, including reinsurance outward premiums, are accounted for when due for payment.
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Group Accounting Policies
Claims are accounted for when paid, or if earlier, on the date when the policy ceases to be included within the calculation of technical provisions.
(vi) Life assurance technical provisionsThe technical provisions include the life assurance provision for the non-linked liabilities, the provisions in respectof linked liabilities and statutory surpluses which have not been allocated to shareholders or policyholders.These provisions are determined by the respective appointed actuaries as part of the annual investigation of the life assurance business. Changes in the technical provisions are included in the profit and loss account.
Statutory surpluses are determined by the appointed actuary of each life assurance subsidiary following theirannual investigation. The boards of directors, acting upon the advice of the appointed actuaries, allocate aproportion of the statutory surplus to policyholders through an appropriation of declared bonuses and transfer a proportion of the statutory surplus to shareholders.
(vii) Income and expense recognitionInterest income and expenses are recognised on an accruals basis. Fees and commissions receivable are recognisedwhen earned.
Expenses are, in general, charged to the profit and loss account as accrued. Commissions paid to intermediariesin respect of certain lending business are charged to the profit and loss account over three years. In certainother cases, expenses incurred in setting up transactions are also deferred and charged to the profit and lossaccount over the lives of the underlying transactions.
(viii) Pension costsThe charge to the profit and loss account in respect of the group’s defined benefit staff pension schemes iscalculated on a basis which spreads the pension costs over the service lives of scheme members on the basis of a level percentage of pensionable pay. Variations from regular costs arising from periodic actuarial valuationsare allocated to operating profit over the expected remaining service lives of the employees.
(ix) Foreign currenciesAssets and liabilities in foreign currencies are translated into Euro at the rates of exchange ruling at the balancesheet date or at the exchange rate in a related forward foreign exchange contract where such a contract exists.
Exchange differences arising from retranslation of opening net assets of overseas subsidiaries and associatedundertakings to closing rate and from the restatement of their results from average to closing rates are taken to reserves.
All other exchange differences are included in the profit and loss account.
(x) InvestmentsThe accounting policies for the various categories of investments are as follows:
Listed Investments
Listed investments included in the group’s life assurance activities and debt securities held for tradingpurposes are stated at market value. Realised and unrealised gains and losses on these investments aretaken to the profit and loss account.
Other listed investments, with the exception of debt securities held as part of the bank’s financialhedging policy, are shown in the balance sheet at the lower of cost or market value.
Debt securities, held as part of the bank’s financial hedging policy, are included in the balance sheet atcost, adjusted for the amortisation to redemption of discounts or premiums on acquisition. Realised profitsor losses on the disposal of such investments are amortised over the estimated life of the underlyingitems being hedged. Unamortised profits or losses at the year end are included in deferred income.
Unlisted Investments
Unlisted investments included in the group’s life assurance activities are shown in the balance sheet at directors’ valuation. Realised and unrealised gains and losses on these investments are taken to the profit and loss account. Other unlisted investments are stated at the lower of cost and directors’valuation.
Investment Properties
All properties held by the group’s life assurance activities are treated as investment properties and are not depreciated. They are revalued annually by external valuers and any surplus or deficit accruing isrecognised in the profit and loss account.
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Group Accounting Policies
Other investment properties are not depreciated and are revalued annually by the directors and at leastevery 3 years by an external valuer. Surpluses on revaluations are taken to a revaluation reserve. Anydeficit or the reversal of a deficit on revaluation is transferred to a revaluation reserve if it is temporary,or to the profit and loss account if it is permanent.
The directors consider that the accounting policy adopted for the valuation of investments, as set out above, is necessary for the accounts to give a true and fair view. The accounting policy departs from the EuropeanCommunities (Credit Institutions: Accounts) Regulations, 1992 to the extent that investment properties are not depreciated and that assets included in the group’s life assurance activities are valued at market value. Thispolicy is appropriate for insurance assets as prescribed in the European Communities (Insurance Undertakings:Accounts) Regulations, 1996 and is in line with market practice in the insurance industry.
(xi) Tangible fixed assetsFreehold premises and leasehold premises with unexpired terms in excess of 50 years are stated at cost. It is thepolicy of the group to maintain these properties in good repair and it is considered that residual values are suchthat depreciation is not significant.
All other tangible assets, including leasehold premises with unexpired terms of less than 50 years, are stated at cost less accumulated depreciation. Depreciation is calculated to write off the costs of such assets over theirestimated useful lives.
(xii) TaxationCorporation tax payable is provided on taxable profits at current taxation rates. Deferred taxation is provided at appropriate rates of corporation tax in respect of material timing differences only to the extent that there is a reasonable probability that a liability or asset will crystallise in the foreseeable future. Allowance is made fordeferred taxation, at appropriate discounted rates, in the technical provisions, in respect of unrealised gains oninvestments held to cover life assurance unit linked liabilities.
(xiii) Provisions for bad and doubtful debtsSpecific provisions for bad and doubtful debts are made as a result of a detailed period end appraisal of riskassets. In addition, general provisions are made to cover risks which, although not specifically identified, areknown from experience to be present in any portfolio of advances. Provisions made during the period, lessexisting provisions no longer required, and recoveries of bad debts previously written off are charged againstprofits.
(xiv) Interests in subsidiary undertakingsInterests in subsidiary undertakings are stated in the company balance sheet at cost, less amounts written offwhere an impairment in value is considered to have occurred.
(xv) GoodwillGoodwill arising on the acquisition of shares in subsidiary and associated undertakings after 31 December 1996is capitalised and amortised on a straight line basis over its estimated useful life. Prior to 31 December 1996goodwill was written off against reserves in the year of acquisition. Goodwill written off against reserves in theyear of acquisition will be charged to the profit and loss account on subsequent disposal of the business towhich it relates.
(xvi) Leasing arrangementsExpenditure on operating leases is charged to the profit and loss account on a straight line basis over the leaseperiod. Leasing income is credited to interest income in proportion to the funds invested, principally using thesum of the digits method.
(xvii) Off balance sheet financial instrumentsOff balance sheet financial instruments are used within the group’s banking activities for hedging purposes andprimarily comprise interest rate swaps, cross currency swaps and future rate agreements. Profits and losses arisingfrom hedging activities are recognised in accordance with the underlying transactions. Within the group’s lifeassurance activities, off balance sheet instruments are valued at the market rates ruling at the balance sheet date.
(xviii) Securitised assetsSecuritised assets are included in the balance sheet at their gross amount less non-recourse funds received onsecuritisation where the group has retained significant rights to benefits and exposure to risk, but where thegroup’s maximum loss is limited to a fixed monetary amount. The income accruing from securitised assets isincluded in net interest income.
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Group Profit and Loss Account year ended 31 December 2000
2000 1999Notes €m €m
Banking and other activities
Interest receivable and similar income 3 668.4 532.1Interest payable and similar charges (485.7) (348.7)
Net interest income 182.7 183.4Fees and commission receivable 8.1 8.0Fees and commission payable (13.4) (10.6)Dealing profits 1.9 1.7Other banking income 18.1 8.7Investment return 4 17.1 (3.5)Income from other activities 4.2 6.8
218.7 194.5
Administrative expenses 5 (130.3) (115.1)Provision for bad and doubtful debts 6 (10.7) (9.6)Deposit interest retention tax settlement 7 (8.7) –
Profit arising from banking and other activities 69.0 69.8
Life assurance activities
Earned premiums 8 3,179.0 2,259.8Investment return 4 660.5 1,654.5Increase in shareholders’ value of in-force business 175.4 177.5Claims incurred 9 (1,821.4) (1,246.9)Change in other technical provisions
Non-unit linked business (74.9) 97.7Unit linked business (1,419.1) (2,348.6)
Operating expenses 5 (407.3) (326.5)Tax attributable to life assurance activities 10 (62.2) (108.6)
Profit arising from life assurance activities after taxation 230.0 158.9
Tax attributable to the profit on life assurance activities including exceptional items 10 9.1 30.6
Profit arising from life assurance activities before taxation 239.1 189.5
Profit arising from operating activities 308.1 259.3
Share of profits of associated undertakings 3.8 16.9
311.9 276.2
Merger transaction costs – (16.7)Profit on disposal of businesses 11 – 106.0
Profit on ordinary activities before taxation 311.9 365.5
Tax on profit on ordinary activities 10 (25.7) (69.1)
1 286.2 296.4
Profit attributable to minority interests (2.0) (2.0)
Profit for the financial year after taxation 284.2 294.4
Dividends 12 (112.8) (101.9)
Profit retained for the year 171.4 192.5
Earnings per share 13 €0.98 €1.02Fully diluted earnings per share 13 €0.98 €1.01
All amounts derive from continuing activities.
On behalf of the Board
Roy Douglas David Went Peter Fitzpatrick Sean RyanChairman Group Chief Executive Group Finance Director Company Secretary
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Group Balance Sheet as at 31 December 2000
2000 1999Notes €m €m
ASSETS
Attributable to banking and other activities
Cash and balances at central banks 25.5 27.0Government bills and other eligible bills 16 – 202.2Loans and advances to credit institutions 17 2,633.4 1,943.5Loans and advances to customers 18 7,896.5 6,506.4
Securitised assets – mortgage assets 1,365.1 1,101.6Less: non recourse funding (1,350.5) (1,088.2)
19 14.6 13.4
Debt securities – listed 16 519.1 727.3Equity shares 20 18.1 18.1Interest in associated undertakings 21 68.3 68.4Investment properties 22 12.8 35.7Tangible fixed assets 23 110.4 122.0Other assets/debtors
– amounts falling due within one year 24 64.9 28.0– amounts falling due after one year 24 – 11.2
Prepayments and accrued income 25 132.4 172.6
Total assets attributable to banking and other activities 11,496.0 9,875.8
Attributable to life assurance activities
InvestmentsInvestment properties 22 155.3 121.1Equity shares and units in unit trusts 20 762.0 844.9Debt and other fixed income securities 26 3,718.2 3,450.4Loans secured by mortgages and policies 153.1 134.3Deposits with credit institutions 193.6 344.3
4,982.2 4,895.0
Assets held to cover linked liabilities 11,974.7 10,536.6
Shareholders’ value of in-force business 1,093.8 905.0
Reinsurer’s share of technical provisions 537.1 367.2
Other assets/debtors– amounts falling due within one year 24 258.6 242.0– amounts falling due after one year 24 64.8 94.3
323.4 336.3
Tangible fixed assets 23 37.7 31.0Cash at bank 78.9 74.5Prepayments and accrued income 96.0 94.7Intangible assets 27 40.4 42.6
Total assets attributable to life assurance activities 19,164.2 17,282.9
Total Assets 30,660.2 27,158.7
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Group Balance Sheet as at 31 December 2000
2000 1999Notes €m €m
LIABILITIES
Attributable to banking and other activities
Deposits by credit institutions 28 575.2 567.8Customer accounts 29 5,999.8 4,658.6Debt securities in issue 30 3,979.8 3,759.9Provision for liabilities and charges 31 19.0 9.5Other liabilities/creditors
– amounts falling due within one year 33 79.3 99.9– amounts falling due after one year 33 81.9 11.2
Accruals and deferred income 34 32.3 43.8Dividends 12 80.5 72.6Subordinated liabilities 35 220.2 204.6
Total liabilities attributable to banking and other activities 11,068.0 9,427.9
Attributable to life assurance activities
Life assurance technical provisions 32 5,252.7 4,876.9Technical provision for linked liabilities 32 11,974.7 10,536.6Provisions for other risks and charges – 13.6
Other liabilities/creditors– amounts falling due within one year 33 307.1 334.5
Accruals and deferred income 34 37.6 31.7
Total liabilities attributable to life assurance activities 17,572.1 15,793.3
Capital and reserves
Share capital 36 92.3 92.1Share premium 36 42.6 40.2Non-distributable reserve 37 1,412.2 1,206.9Other capital reserves 36 0.3 (0.5)Profit and loss account 37 461.3 589.1
Shareholders’ funds attributable to equity interests 1 2,008.7 1,927.8
Equity minority interests – life assurance activities 11.4 9.7
Total Liabilities 30,660.2 27,158.7
On behalf of the Board
Roy Douglas David Went Peter Fitzpatrick Sean RyanChairman Group Chief Executive Group Finance Director Company Secretary
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Group Off Balance Sheet Memorandum Items as at 31 December 2000
2000 1999Notes €m €m
Contingent Liabilities
Guarantees and assets pledged as collateral security 6.9 7.9Other contingent liabilities – 0.2
43 6.9 8.1
Commitments 43 11.0 9.7
Statement of Total Recognised Gains & Losses year ended 31 December 2000
2000 1999€m €m
Profit for the financial year 284.2 294.4
Exchange adjustments on investment in overseas subsidiaries net of exchange adjustments on related foreign currency borrowings 0.1 47.7
Total recognised gains and losses relating to the year 284.3 342.1
Reconciliation of Movement in Shareholders’ Funds year ended 31 December 2000
2000 1999€m €m
At 1 January 1,927.8 1,672.0Total recognised gains and losses 284.3 342.1Dividends paid and proposed (112.8) (101.9)Amounts added back in respect of scrip dividends – 8.9Issue of share capital 2.7 6.7Shares repurchased and cancelled (28.7) –Shares repurchased and held as treasury shares (64.6) –
At 31 December 2,008.7 1,927.8
On behalf of the Board
Roy Douglas David Went Peter Fitzpatrick Sean RyanChairman Group Chief Executive Group Finance Director Company Secretary
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Company Balance Sheet as at 31 December 2000
2000 1999Notes €m €m
Assets
Cash and balances at central banks 22.7 23.1Government bills and other eligible bills 16 – 202.2Loans and advances to credit institutions 17 2,512.3 1,716.0Loans and advances to customers 18 7,774.0 6,448.5
Securitised assets – mortgage assets 483.9 579.2Less: non recourse funding (472.8) (568.0)
19 11.1 11.2
Debt securities – listed 16 524.7 722.3Investment in subsidiary undertakings 21 2,847.8 2,881.9Investment properties 22 12.8 35.7Tangible fixed assets 23 104.5 116.3Other assets/debtors 24 100.2 147.1Prepayments and accrued income 25 126.4 169.4
Total Assets 14,036.5 12,473.7
Liabilities
Deposits by credit institutions 28 596.4 571.8Customer accounts 29 8,989.7 8,104.3Debt securities in issue 30 1,039.2 406.2Deferred taxation 31 0.2 –Other liabilities/creditors 33 100.8 28.9Accruals and deferred income 34 22.6 32.5Dividends 12 80.5 72.6Subordinated liabilities 35 220.2 204.6
11,049.6 9,420.9
Capital and reserves
Share capital 36 92.3 92.1Share premium 36 2,740.6 2,738.2Capital redemption reserves 37 0.8 –Profit and loss account 37 153.2 222.5
2,986.9 3,052.8
Total Liabilities 14,036.5 12,473.7
Company Off Balance Sheet Memorandum Items as at 31 December 2000
2000 1999Notes €m €m
Contingent Liabilities
Guarantees 43 3,009.1 3,487.6
On behalf of the Board
Roy Douglas David Went Peter Fitzpatrick Sean RyanChairman Group Chief Executive Group Finance Director Company Secretary
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Group Cash Flow Statement year ended 31 December 2000
2000 1999Notes €m €m
Net cash inflow from banking and other activities 38 44.7 46.1
Net cash inflow from life assurance activities 38 124.4 32.4
Net cash inflow from operating activities 169.1 78.5
Dividends received from associated undertakings 2.5 5.4
Returns on investment and servicing of financeInterest paid on subordinated liabilities (19.0) (17.9)
TaxationTax paid (10.2) (15.2)
Capital expenditure and financial investmentPurchase of tangible fixed assets (13.5) (16.7)Sale of tangible fixed assets 21.0 2.3Sale of investment property 39.7 –Sale of equity investments – 7.5
Acquisitions and disposalsDisposal of subsidiary and associated undertakings – 127.8
Purchase of associated undertaking from life assurance activities – (59.7)
Merger transaction costs – (16.7)
Equity dividends paid (104.9) (77.8)
Financing 38Shares issued 2.7 6.7Shares repurchased and cancelled (28.7) –Shares repurchased and held as treasury shares (64.6) –Issue of subordinated liabilities 9.9 –
Increase in cash and cash equivalents 4.0 24.2
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Notes to the Group Financial Statements year ended 31 December 2000
1. Segmental analysis
(a) Geographical analysis of profit after taxation
2000
Other Ireland USA UK International Total
€m €m €m €m €m
Life assurance activities (b) 200.6 12.8 16.6 – 230.0Banking and other activities 41.1 – 12.4 – 53.5Other investment earnings (i) 14.0 – – – 14.0Restructuring charges (ii) (5.0) – – – (5.0)Deposit interest retention tax settlement (8.7) – – – (8.7)
242.0 12.8 29.0 – 283.8
Associated undertakings 2.4 – – – 2.4
244.4 12.8 29.0 – 286.2
1999
Other Ireland USA UK International Total
€m €m €m €m €m
Life assurance activities (b) 119.2 23.4 16.3 – 158.9Banking and other activities 48.5 – 7.4 – 55.9Other investment earnings 6.2 – – – 6.2Restructuring charges (ii) (1.0) – – – (1.0)Exceptional investment charges (iii) (9.0) – – – (9.0)
163.9 23.4 23.7 – 211.0
Associated undertakings 16.2 – – (2.5) 13.7
180.1 23.4 23.7 (2.5) 224.7
Merger transaction costs (16.7) – – – (16.7)Profit on disposal of businesses 88.4 – – – 88.4
251.8 23.4 23.7 (2.5) 296.4
(i) Other investment earnings include a €13.7m (€16.8m before tax) profit on disposal of investment properties.
(ii) Restructuring charges of €5.0m (€6.6m before tax) represent the costs incurred to date on arestructuring exercise currently being undertaken in the group’s banking operations. The charge in 1999 is the banking operations’ share of the restructuring costs incurred by the group following themerger of Irish Permanent and Irish Life.
(iii) Exceptional investment charges in 1999 comprise of the restatement at cost of the group’s investment inAlmanij of €9.0m (€11.2m before tax). Prior to the merger, Irish Life’s investment in Almanij was carriedat market value. In line with the merged group’s accounting policy for equity investments not associatedwith life assurance activities, this was restated at cost in 1999.
(iv) Income from banking and other activities includes €7.9m (€9.8m before tax) profit on disposal of owneroccupied properties.
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Notes to the Group Financial Statements year ended 31 December 2000
1. Segmental analysis (continued)
(b) Analysis of profit on life assurance activities after taxation
2000
Ireland USA UK Total€m €m €m €m
In-force businessInterest on value of in-force business 66.1 31.9 8.2 106.2Unit linked management fee variance (3.1) (1.5) (2.3) (6.9)Other experience variances including exceptional items (i) 96.0 (26.9) 7.1 76.2
Value of new business 33.5 1.7 1.8 37.0
Product earnings 192.5 5.2 14.8 212.5Investment earnings 5.6 (3.2) 1.8 4.2
Operating earnings 198.1 2.0 16.6 216.7Merger/Restructuring variances (ii) (1.0) – – (1.0)Economic variance (iii) 3.5 10.8 – 14.3
200.6 12.8 16.6 230.0
1999
Ireland USA UK Total€m €m €m €m
In-force businessInterest on value of in-force business 50.3 26.3 8.1 84.7Unit linked management fee variance 22.4 1.7 2.6 26.7Other experience variances including exceptional items (i) 32.8 (6.7) 2.9 29.0
Value of new business 28.1 0.8 1.8 30.7
Product earnings 133.6 22.1 15.4 171.1Investment earnings 2.6 1.3 2.0 5.9
Operating earnings 136.2 23.4 17.4 177.0Merger/Restructuring variances (ii) 7.8 – – 7.8Economic variance (iii) (24.8) – (1.1) (25.9)
119.2 23.4 16.3 158.9
(i) Other experience variances in Ireland include €49.4m in respect of tax of which €43.0m is an exceptionalprofit relating to the capitalisation of the effect of the future value of the reduction in Irish corporation taxrates to 12.5% in 2003. 1999 included €14.9m arising from the reduction in the tax rates from 28% to 24%.
Other experience variances in USA include losses of €17.7m arising from changes to the expected futurepersistency and mortality experience and an exceptional profit of €13.8m arising from the cumulativeeffect at 1 January 2000 of the change in the embedded methodology used in the US from a passive to an active approach.
(ii) Merger/restructuring variances comprise €1.0m (€1.3m before tax) costs incurred by the life business on restructuring of the group following the merger.
The 1999 variances comprise €12.3m (€14.6m before tax) increase in profit due to the alignment of the actuarial assumptions of the merged group less €4.5m (€6.2m before tax) costs incurred by the life business on restructuring of the group following the merger.
(iii) The economic variance is the effect of changes in the interest rate and future investment returnassumptions during the year. Changes in methodology are included in other experience variances.
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Notes to the Group Financial Statements year ended 31 December 2000
1. Segmental analysis (continued)
(c) Segmental analysis of shareholders’ net assets
2000 1999€m €m
Life assuranceIreland 971.1 899.6US 465.3 451.3UK 144.3 129.0
1,580.7 1,479.9
Banking and other activitiesIreland 307.6 339.3UK 52.1 40.2
359.7 379.5
Associated undertakings 68.3 68.4
2,008.7 1,927.8
Life assurance assets of €1,580.7m (1999: €1,479.9m) are analysed as follows:
2000 1999€m €m
Shareholders’ net assets (life assurance activities)Property 94.1 78.7Equities 72.4 73.3Fixed interest 146.0 166.4Deposits 26.1 175.4Other assets 111.6 42.8Solvency capital attributable to shareholders (299.3) (281.5)
150.9 255.1
Shareholders’ value of in-force business 1,389.4 1,182.2Goodwill on acquisitions 40.4 42.6
1,580.7 1,479.9
The value of in-force business includes the solvency capital attributable to shareholders €299.3m (1999: €281.5m). The value of in-force has been reduced by minority interests of €3.7m (1999: €4.3m).
Shareholders’ value of in-force is net of a deduction of €54.1m (1999: €56.4m) in respect of the cost of maintaining the solvency margin.
2. New life assurance business
2000 1999€m €m
Full valueIreland
Recurring 134.0 104.6Single 1,858.9 1,268.2
USARecurring 69.0 51.4Single 200.4 169.5
United KingdomRecurring 2.6 2.9Single 14.7 10.6
2,279.6 1,607.2
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Notes to the Group Financial Statements year ended 31 December 2000
2. New life assurance business (continued)
2000 1999€m €m
Annual premium equivalentIreland 319.9 231.5USA 89.0 68.4UK 4.1 3.9
413.0 303.8
Annual premium equivalent is calculated by weighting single premium business written at 10% of premium and annual premium business written at 100% of premium.
3. Interest receivable and similar income
2000 1999€m €m
Loans and advances to customers 401.2 314.0Loans and advances to credit institutions 141.0 137.3Debt securities – investments 67.9 40.2Lease and instalment finance 58.3 40.6
668.4 532.1
4. Investment return
(a) Attributable to banking and other activities
2000 1999€m €m
Investment income 0.3 0.5Realised gains 16.8 7.2Unrealised losses – (11.2)
17.1 (3.5)
Realised gains in 2000 comprised of a profit on the disposal of an investment property held. 1999 unrealised losses related to the restatement at cost of the group’s investment in Almanij.
(b) Attributable to life assurance activities 2000 1999€m €m
Income from investments 685.7 575.1Realised and unrealised gains (9.1) 1,094.5Investment expenses and charges (16.1) (15.1)
660.5 1,654.5
5. Operating and administrative expenses 2000 1999€m €m
Banking and other activities 130.3 115.1Life assurance activities 407.3 326.5
537.6 441.6
Attributable to banking and other activitiesBanking – operating expenses 114.0 104.2Corporate costs 6.5 5.9Other activities 3.2 3.7Restructuring costs 6.6 1.3
130.3 115.1
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Notes to the Group Financial Statements year ended 31 December 2000
5. Operating and administrative expenses (continued)
2000 1999€m €m
Attributable to life assurance activitiesLife assurance operating expenses 257.4 204.7Acquisition expenses 137.9 105.3Corporate costs 3.6 4.0Restructuring costs 1.3 6.2Euro and Year 2000 conversion costs 7.1 6.3
407.3 326.5
Operating expenses include the following: 2000 1999€m €m
Auditors’ remuneration (including VAT)– Audit services 1.1 1.0– Non-audit services 2.2 1.6
Depreciation 25.4 23.5
Operating lease rentals – land & buildings 1.1 1.1
6. Provision for bad and doubtful debts
Group Company
2000 1999 2000 1999€m €m €m €m
Opening balance 32.7 25.7 18.9 15.0Charged to the profit and loss account 10.7 9.6 4.4 5.1Amounts written off (2.5) (2.6) (0.7) (1.2)
At 31 December 40.9 32.7 22.6 18.9
The closing balance is made up as follows:Specific 10.7 7.5 2.1 1.7General 30.2 25.2 20.5 17.2
Total 40.9 32.7 22.6 18.9
The analysis of the group’s provisions for bad and doubtful debts by category of loans and advances to customers is as follows:
2000Specific General Total
€m €m €m
Residential mortgage loans 1.8 16.2 18.0Commercial mortgage loans 3.8 4.7 8.5Other loans 5.1 9.3 14.4
Closing provision at 31 December 2000 10.7 30.2 40.9
1999Specific General Total
€m €m €m
Residential mortgage loans 1.3 13.7 15.0Commercial mortgage loans 2.6 3.9 6.5Other loans 3.6 7.6 11.2
Closing provision at 31 December 1999 7.5 25.2 32.7
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Notes to the Group Financial Statements year ended 31 December 2000
7. Deposit Interest Retention Tax (“DIRT”)
DIRT is a withholding tax which Irish financial institutions are required to deduct from interest paid ondeposits. Interest may be paid in certain circumstances without such withholding tax, including wherethe deposit is made by a non-resident, a company, a charity or a pension fund and a declaration of thekind required has been made to the financial institution. During the period 1986 to 1999 Irish Life &Permanent remitted over €380m to the Revenue in DIRT payments.
The Irish Life & Permanent Group’s policy and practice has always been to account for its DIRT obligationsin accordance with the law and with Revenue practice.
Following an enquiry in 1999, into the administration of DIRT by financial institutions in the Republic ofIreland by the Public Accounts Committee of Dáil Éireann, the Revenue Commissioners undertook auditsof the historic compliance with all aspects of the administration for DIRT in all of the major financialinstitutions in the State, including the Irish Life & Permanent Group. This audit was completed during the first half of 2000. The group made an agreed payment of €8.6m to the Revenue Commissioners as a final settlement of all outstanding DIRT liabilities of Irish Permanent for the period from April 1986 toApril 1999. The total settlement comprised €4.3m of additional DIRT and €4.3m in interest and penalties.
The audit of Guinness & Mahon (Ireland) Limited, a group subsidiary, is ongoing and a payment onaccount of €0.1m has been made in respect of this company.
The total payments made in relation to this issue during the year ended 31 December 2000, of €8.7m,have been included in the results for the period.
8. Earned Premiums 2000 1999€m €m
Gross premiums writtenAnalysed by class of business:
Individual premiumsRecurring 663.6 590.3Single 1,180.2 808.5
Premiums under group contractsRecurring 232.7 191.7Single 1,148.2 711.1
3,224.7 2,301.6
Analysed by type of contract:Unit linked contracts 2,605.2 1,762.4Non-unit linked contracts 619.5 539.2
3,224.7 2,301.6
Analysed by geographic area:Ireland 2,700.7 1,857.3USA 425.8 348.0United Kingdom 98.2 96.3
3,224.7 2,301.6
Outward reinsurance premiums (45.7) (41.8)
Earned premiums, net of reinsurance 3,179.0 2,259.8
9. Claims incurred 2000 1999€m €m
Analysed by type of claim:Death and disability benefits 210.3 169.6Maturities 181.2 124.6Encashments and commutations:
– Individual policies 901.8 618.3– Group policies 123.3 74.6
Annuities 135.8 131.9Investment business 269.0 127.9
1,821.4 1,246.9
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Notes to the Group Financial Statements year ended 31 December 2000
10. Taxation
(a) Tax attributable to life assurance activities
Tax attributable to life assurance is analysed below and includes amounts in respect of policyholders and the notional tax on the change in shareholders’ value of in-force business which is calculated with reference to the effective corporation tax rate applicable in each of the relevant territories.
2000 1999€m €m
Corporation taxation 57.7 108.4Franked investment income – 2.5Overseas tax 7.0 16.3Deferred taxation (19.5) (54.5)Duties and levies 11.4 9.7Notional tax on change in shareholders’ value of in-force business 48.6 41.1Exceptional tax credit on change in shareholders’ value of in-force business (i) (43.0) (14.9)
62.2 108.6
(b) Tax attributable to profit on ordinary activities is analysed as follows:
2000 1999€m €m
Tax attributable to profit on life assurance activitiesTax attributable to profit on life assurance activities before exceptional credit 52.1 45.5Exceptional tax credit on change in shareholders’ value of in-force business (i) (43.0) (14.9)
9.1 30.6
Corporation tax on banking and other activities 5.7 30.9Deferred taxation on banking and other activities 9.5 4.9Tax attributable to the group’s share of profits of associated undertakings 1.4 2.7
25.7 69.1
(i) Exceptional tax credit on shareholders’ value of in-force business arises from the capitalisation of theeffect of the future value of the legislative enactment of a phased reduction in Irish Corporation tax ratesfrom 24% in 2000 to 12.5% in 2003. The credit in 1999 arises from the reduction in tax rates from 28%to 24%.
11. Disposal of businesses
In 1999 the group disposed of its car park management subsidiary Parkrite. The group arranged todispose of its equity and loan interests in its associates Irish Intercontinental Bank Ltd. and Irish LifeFinance Group Ltd and its Hungarian associated companies, Kereskedelmi és Hitelbank Rt. and K&HEletbiztosito Rt.
The following profits on disposal before taxation arose as part of those transactions in 1999:€m
Parkrite 8.7Irish Intercontinental Bank Ltd. 86.7Irish Life Finance Group Ltd. 7.0Kereskedelmi es Hitelbank Rt. 3.6
106.0
12. Dividends on equity shares 2000 1999€m €m
Dividends – interim paid 32.3 29.3Dividends – final proposed 80.5 72.6
112.8 101.9
The interim dividend paid in 2000 was 11.1 cents per share (1999: 10.1 cents). The proposed finaldividend is 27.9 cents per share (1999: 25.0 cents).
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Notes to the Group Financial Statements year ended 31 December 2000
13. Earnings per share
The calculation of basic and diluted earnings per share (“EPS”) is based on the earnings for the periodand the weighted average number of shares as follows:
2000 1999
Earnings €284.2m €294.4m
Weighted average ordinary shares in issue and ranking for dividend (used in the calculation of basic EPS) 289,490,347 289,557,612
Weighted average of potential dilutive ordinary shares arising from the group’s share option schemes 1,085,011 1,449,895
Weighted average number of ordinary shares used in the calculation of diluted EPS 290,575,358 291,007,507
14. Employment
2000 1999€m €m
Staff costs (including executive directors) for the year were:Wages and salaries* 176.2 154.9Social Insurance 15.8 13.5Pension costs 8.6 8.2
200.6 176.6
* Including commission paid to sales staff
Average number of staff (including executive directors) employed during the year:
2000 1999
Ireland 3,916 3,626USA 447 390UK 142 145
4,505 4,161
Life assurance 2,664 2,386Banking 1,642 1,567Investment management 119 111Other 80 97
4,505 4,161
Information concerning individual directors’ emoluments is given on pages 32 to 33 of these financial statements.
15. Pensions and related benefits
The group operates a number of pension schemes covering Irish, UK and US employees. The mainschemes are defined benefit schemes, with the UK and US schemes being partially defined contribution.All of the defined benefit schemes are funded by the payment of contributions to separately administeredtrust funds. The pension costs and provisions are assessed in accordance with the advice of independentqualified actuaries. Valuations are carried out every three years by independent actuarial consultants. Theactuarial reports are available for inspection by members of the scheme and are not for public inspection.Details of the group’s principal schemes are outlined below.
The Irish Life Assurance scheme was last valued at 30 September 1998 using the attained age method.The valuation assumes that the rate of investment return will exceed the rate of increase in salaries by1.5% and the rate of pension increases by 4%. The market value of the assets of the scheme amountedto €429.8m at the valuation date. The actuarial value of the assets was sufficient to cover 142% of thebenefits accruing to members, after allowing for future increases in pensions and earnings.
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Notes to the Group Financial Statements year ended 31 December 2000
15. Pensions and related benefits (continued)
The Irish Permanent scheme was valued at 1 January 1997 based on the projected unit method offunding. The next scheme review will be completed in the current year. The 1997 valuation assumed that investment returns would exceed the increase in pensionable earnings by 2%. The market value ofthe assets of the scheme amounted to €24.8m at the date of valuation. The actuarial value of the assetswas sufficient to cover 96% of the benefits accruing to members, after allowing for future increases inpensions and earnings.
The Irish Progressive scheme was valued at 30 June 1999 based on the projected unit method offunding. The valuation assumed that investment returns would exceed the increase in pensionableearnings by 3%. The market value of the assets of the scheme amounted to €24.6m at the date ofvaluation. The actuarial value of the assets was sufficient to cover 131% of the benefits accruing tomembers, after allowing for future increases in pensions and earnings.
The City of Westminster scheme was valued at 30 September 1998 using the attained age method. Themarket value of the assets of the scheme amounted to Stg£13.0m at the valuation date. The actuarialvalue of the assets was sufficient to cover 165% of the benefits accruing to members, after allowing for future increases in pensions and earnings.
The US schemes were valued at 31 December 1999. The market value of the assets amounted toUS$5.5m at the valuation date, and the actuarial value of the assets was sufficient to cover 102% of the benefits accruing to members, after allowing for future increases in pensions and earnings.
All of the schemes are funded in excess of 100% on a current funding basis.
The pension charge for the year was €8.6m (1999: €8.2m).
16. Government bills, other eligible bills and debt securities
Group Company2000 1999 2000 1999
€m €m €m €m
Government bills and other eligible bills – 202.2 – 202.2Debt securities – listed 519.1 727.3 524.7 722.3
519.1 929.5 524.7 924.5
Issued by public bodiesInvestment securities
Government bills and other eligible bills – 202.2 – 202.2Government securities 394.3 588.2 394.3 579.3
394.3 790.4 394.3 781.5
Other securitiesGovernment securities 11.3 – 11.3 –
Issued by other borrowersInvestment securities
Banks and building societies 113.5 132.4 119.1 128.2Other debt securities – 6.7 – 14.8
113.5 139.1 119.1 143.0
Total 519.1 929.5 524.7 924.5
Market Value 516.5 920.6 522.0 915.5
The analysis of the maturity of the Government bills, other eligible bills and debt securities is as follows:
Due within one year 221.3 353.3 209.8 344.4Due after one year 297.8 576.2 314.9 580.1
519.1 929.5 524.7 924.5
Debt securities held for dealing purposes, included as other securities above, are stated at market value.The balance of debt securities, included as investment securities above, are held as financial fixed assets.
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Notes to the Group Financial Statements year ended 31 December 2000
16. Government bills, other eligible bills and debt securities (continued)
The movement in debt securities held as financial fixed assets is as follows:Group Company
Cost Discount/ Carrying Cost Discount/ Carrying(Premium) Value (Premium) Value
At 1 January 2000 929.8 (0.3) 929.5 924.7 (0.2) 924.5Additions 2,712.6 – 2,712.6 2,712.6 – 2,712.6Disposals and redemptions (3,139.6) (0.6) (3,140.2) (3,129.0) (0.6) (3,129.6)Amortisation for the year – 1.5 1.5 – 1.5 1.5Foreign currency translation 4.4 – 4.4 4.4 – 4.4
At 31 December 2000 507.2 0.6 507.8 512.7 0.7 513.4
17. Loans and advances to credit institutions Group Company
2000 1999 2000 1999€m €m €m €m
Loans and advances to credit institutions 2,633.4 1,943.5 2,512.3 1,716.0
2,633.4 1,943.5 2,512.3 1,716.0
Maturity analysis:Repayable on demand 56.3 50.8 48.7 40.8Repayable in not more than three months 2,302.7 1,642.2 2,431.0 1,636.0Repayable in more than three months but not more than one year 32.6 33.1 32.6 32.9Repayable in more than one year but not more than two years 114.1 6.3 – 6.3Repayable in more than two years but not more than five years 127.7 211.1 – –Repayable in more than five years – – – –
2,633.4 1,943.5 2,512.3 1,716.0
For the purpose of this analysis, where amounts are repayable by instalment each such instalment is treated as a separate loan.
18. Loans and advances to customers Group Company2000 1999 2000 1999
€m €m €m €m
Residential mortgage loans 6,126.7 5,150.9 5,547.7 4,492.4Commercial mortgage loans 905.8 752.4 769.2 608.5Due from subsidiary undertakings – – 1,307.5 1,305.5Other loans 730.8 573.6 16.4 15.3Money market funds 133.2 29.5 133.2 26.8
7,896.5 6,506.4 7,774.0 6,448.5
Maturity analysis of loans and advances to customersRepayable in not more than three months 446.6 273.6 203.8 93.2Repayable in more than three months but not more than one year 334.1 321.2 193.6 181.0Repayable in more than one year but not more than two years 434.8 392.5 265.8 243.7Repayable in more than two years but not more than five years 1,085.4 940.3 835.6 765.8Repayable in more than five years 5,636.5 4,611.5 6,297.8 5,183.7
7,937.4 6,539.1 7,796.6 6,467.4Provision for bad debts (40.9) (32.7) (22.6) (18.9)
7,896.5 6,506.4 7,774.0 6,448.5
For the purpose of this analysis, where amounts are repayable by instalment each such instalment istreated as a separate loan. Net investments in finance lease and instalment advances amounted to€714m (1999: €552m). Money market funds represent secured gilt repurchase agreements.
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Notes to the Group Financial Statements year ended 31 December 2000
19. Securitised Assets
As at 31 December 2000, the group had advances secured on residential property subject to non-recoursefunding. In accordance with Financial Reporting Standard 5 “Reporting the Substance of Transactions”,securitised mortgages have been included in the balance sheet using a linked presentation, whereby the non-recourse element of the funding is shown as a deduction from the mortgage balance.
The group sold pools of mortgages of Stg£400m to Auburn Securities 1 plc in November 1998, ofIR£472m to Fastnet Securities 1 plc in November 1999, and of Stg£300m to Auburn Securities 2 plc inJuly 2000. These companies issued Mortgage Backed Floating Rate Notes to finance the purchase ofthese mortgage pools.
Under the terms of these securitisations, the rights of the providers of the related funds are limited to the mortgage loans in the securitised portfolios and any related income generated by the portfolios,without recourse to Irish Life & Permanent plc. Irish Life & Permanent plc is not obliged to support anylosses in respect of the mortgages subject to the non-recourse funding nor does it intend to do so. Duringthe term of the transactions, any amounts realised from the portfolios in excess of that due to the providersof the funding, less any related administrative costs, will be paid to Irish Life & Permanent plc. The providersof these fundings have agreed in writing (subject to the customary warranties and covenants) that they willseek repayment of the finance, as to both principal and interest, only to the extent that sufficient funds aregenerated by the mortgages and related security, and that they will not seek recourse in any other form.
Auburn Securities 1 plc and Auburn Securities 2 plc have hedged their interest rate exposure to fixed ratemortgages by entering into interest rate swap agreements with Capital Home Loans Limited, a subsidiaryundertaking of the group. Fastnet Securities 1 plc have similar hedging arrangements in place with IrishLife & Permanent plc.
An analysis of the loans involved where the linked presentation has been used in the balance sheet is as follows:
2000 1999Non- Non-
Gross recourse Gross recourseloans funding Net loans funding Net
Group €m €m €m €m €m €m
Auburn Securities 1 plc 423.3 421.4 1.9 522.4 520.2 2.2Fastnet Securities 1 plc 483.9 472.8 11.1 579.2 568.0 11.2Auburn Securities 2 plc 457.9 456.3 1.6 – – –
1,365.1 1,350.5 14.6 1,101.6 1,088.2 13.4
2000 1999Non- Non-
Gross recourse Gross recourseloans funding Net loans funding Net
Company €m €m €m €m €m €m
Fastnet Securities 1 plc 483.9 472.8 11.1 579.2 568.0 11.2
The summarised profit and loss account for the income earned by the group from these securitisedassets, and which is included in net interest income, is as follows:
2000 1999€m €m
Interest income 109.4 51.2Interest expense (101.1) (44.8)Operating expenses (0.6) (0.6)
Net income 7.7 5.8
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Notes to the Group Financial Statements year ended 31 December 2000
20. Equity shares and units in unit trusts
2000 2000 1999 1999Market Historical Market Historical
value cost value cost€m €m €m €m
Attributable to banking and other activitiesListed – held for investment purposes 25.9 18.1 29.9 18.1
Attributable to life assurance activitiesListed 659.0 621.2 749.4 701.2Unlisted 103.0 70.4 95.5 47.3
762.0 691.6 844.9 748.5
All listed investments are listed on a recognised stock exchange.
21. Interests in associated and subsidiary undertakings
(a) Group’s interest in associated undertakings
2000 2000 1999 1999Carrying Historical Carrying Historical
value cost value cost€m €m €m €m
Shares in associated undertakings 68.3 22.6 68.4 22.6
68.3 22.6 68.4 22.6
Share of net assets€m
At 1 January 2000 68.4Share of associates’ profits 3.8Share of tax on associates’ profits (1.4)Dividends received from associates (2.5)
At 31 December 2000 68.3
The group’s share of post acquisition reserves of associated undertakings amounted to €43.0m at 31 December 2000 (1999: €43.1m).
(b) Company’s interest in subsidiary undertakings
2000 1999€m €m
Credit institutionsOpening balance 17.6 17.6Additions – –
At 31 December 17.6 17.6
OthersOpening balance 2,864.3 108.7Additions – 2,759.9Repayments of dividends/loans (34.1) (4.3)
At 31 December 2,830.2 2,864.3
2,847.8 2,881.9
Analysed asEquity 2,841.2 2,875.3Loans 6.6 6.6
2,847.8 2,881.9
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Notes to the Group Financial Statements year ended 31 December 2000
22. Investment properties
2000 2000 1999 1999Current Historical Current Historical
value cost value cost€m €m €m €m
(a) Attributable to banking and other activities
Investment properties 12.8 12.8 35.7 35.7
12.8 12.8 35.7 35.7
(b) Attributable to life assurance activities
Investment properties 87.1 50.9 66.5 39.6Properties occupied by the group 68.2 35.0 54.6 33.0
155.3 85.9 121.1 72.6
(c) Company
Investment properties 12.8 12.8 35.7 35.7
12.8 12.8 35.7 35.7
In accordance with the group’s accounting policies, investment properties held by life assurance activities have been revalued by independent third party valuers at 31 December 2000 on the basis of open market value. Investment properties held by banking and other activities have been valuedexternally within the last three years. The directors are satisfied that these valuations are in line with the historical cost of the assets and that no impairment of value has incurred in the interim.
23. Tangible Fixed Assets
(a) GroupOffice and
Land and Computer Motor Buildings Equipment Vehicles Total
€m €m €m €m
Net book value at 31 December 2000Banking and other activities 70.2 36.2 4.0 110.4Life assurance activities – 32.3 5.4 37.7
70.2 68.5 9.4 148.1
CostAt 1 January 2000 97.5 230.0 13.0 340.5Additions 0.3 25.3 6.9 32.5Disposals (10.0) (1.2) (4.1) (15.3)Exchange adjustment – 1.0 – 1.0
At 31 December 2000 87.8 255.1 15.8 358.7
DepreciationAt 1 January 2000 15.5 166.6 5.4 187.5Provided 2.1 20.3 3.0 25.4Disposals – (0.8) (2.0) (2.8)Exchange adjustment – 0.5 – 0.5
At 31 December 2000 17.6 186.6 6.4 210.6
Net book value at 31 December 2000 70.2 68.5 9.4 148.1
Net book value at 31 December 1999 82.0 63.4 7.6 153.0
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Notes to the Group Financial Statements year ended 31 December 2000
23. Tangible Fixed Assets (continued)
(b) Company
Office and Land and Computer Motor Buildings Equipment Vehicles Total
€m €m €m €m
CostAt 1 January 2000 95.7 117.2 4.8 217.7Additions 0.3 9.7 1.3 11.3Disposals (9.8) (1.2) (1.3) (12.3)
At 31 December 2000 86.2 125.7 4.8 216.7
DepreciationAt 1 January 2000 15.3 84.3 1.8 101.4Provided 2.1 9.2 0.7 12.0Disposals – (0.6) (0.6) (1.2)
At 31 December 2000 17.4 92.9 1.9 112.2
Net book value at 31 December 2000 68.8 32.8 2.9 104.5
Net book value at 31 December 1999 80.4 32.9 3.0 116.3
The net book value of land and buildings is analysed as follows:
Group Company2000 1999 2000 1999
€m €m €m €m
Freehold 64.7 71.6 63.3 70.0Leasehold
– Long Leasehold 4.6 9.4 4.6 9.5– Short Leasehold 0.9 1.0 0.9 0.9
70.2 82.0 68.8 80.4
Amount subject to depreciation 5.5 5.1 5.5 5.1Amount not subject to depreciation 64.7 76.9 63.3 75.3
70.2 82.0 68.8 80.4
24. Other assets/debtors
2000 1999€m €m
(a) Attributable to banking and other activities
Amounts falling due within one yearAmounts due from group undertakings: life assurance activities 63.2 27.3Other debtors 1.7 0.7
64.9 28.0
Amounts falling due after one yearOther debtors – 11.2
64.9 39.2
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Notes to the Group Financial Statements year ended 31 December 2000
24. Other assets/debtors (continued)
(b) Attributable to life assurance activities 2000 1999€m €m
Amounts falling due within one yearInvestment balances 4.0 –Amounts due from group undertakings: banking and other activities 24.3 19.5Other debtors 108.9 133.4Policyholders 95.0 71.2Intermediaries 26.4 17.9
258.6 242.0
Amounts falling due after one yearPension scheme surplus 56.2 53.9Other debtors 8.6 40.4
64.8 94.3
323.4 336.3
(c) Company
Amounts falling due within one yearAmounts due from subsidiary undertakings 100.2 147.1
100.2 147.1
25. Prepayments and accrued income
Commissions paid to intermediaries in respect of certain lending business are charged to the profit andloss account over three years which is a prudent estimate of the period over which the related revenue isexpected to be earned. Prepayments and accrued income include €18.9m in respect of deferred commissionat 31 December 2000 (1999: €13.7m). The movement in deferred commission is as follows:
Group Company2000 1999 2000 1999
€m €m €m €m
At 1 January 13.7 8.8 11.3 7.7Commission incurred during the year 14.5 11.5 11.5 8.9Commission amortised to profit and loss during the year (9.3) (6.6) (7.6) (5.3)
At 31 December 18.9 13.7 15.2 11.3
26. Debt and other fixed income securities 2000 1999Market Historical Market Historical
value cost value cost€m €m €m €m
Attributable to life assurance activitiesListed 3,367.8 3,364.4 3,000.9 3,159.4Unlisted 350.4 351.6 449.5 356.6
3,718.2 3,716.0 3,450.4 3,516.0
27. Intangible assets Net book Cost Amortisation value
Goodwill on acquisition of subsidiary undertakings €m €m €m
At 1 January 2000 44.7 (2.1) 42.6Charge for year – (2.2) (2.2)
At 31 December 2000 44.7 (4.3) 40.4
Goodwill is written off on the straight line basis over twenty years being the estimated useful economiclives of the assets acquired.
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Notes to the Group Financial Statements year ended 31 December 2000
28. Deposits by credit institutions Group Company
2000 1999 2000 1999€m €m €m €m
Deposits by credit institutions 575.2 567.8 555.6 539.2Due to subsidiary undertaking – – 40.8 32.6
575.2 567.8 596.4 571.8
Maturity analysis:Repayable on demand 0.5 1.0 – –Repayable in not more than three months 527.0 334.0 556.8 347.0Repayable in more than three months but not more than one year 0.9 20.3 – 20.3Repayable in more than one year but not more than two years 26.7 204.5 25.1 204.5Repayable in more than two years but not more than five years 20.1 – 14.5 –Repayable in more than five years – 8.0 – –
575.2 567.8 596.4 571.8
29. Customer accounts Group Company
2000 1999 2000 1999€m €m €m €m
Customer accounts 5767.8 4,231.7 5780.8 3,853.1Due to group undertakings: life assurance activities 232.0 426.9 232.0 426.9Due to subsidiary undertakings – – 2,976.9 3,824.3
5,999.8 4,658.6 8,989.7 8,104.3
Maturity analysisRepayable on demand 1,104.5 1,113.0 1,095.7 1,050.6Repayable in not more than three months 4,005.4 2,736.4 4,139.6 3,748.8Repayable in more than three months but not more than one year 528.2 395.7 1,071.6 792.0Repayable in more than one year but not more than two years 188.7 211.7 395.7 450.9Repayable in more than two years but not more than five years 173.0 180.8 1,469.4 1,329.2Repayable in more than five years – 21.0 817.7 732.8
5,999.8 4,658.6 8,989.7 8,104.3
30. Debt securities in issue Group Company
2000 1999 2000 1999€m €m €m €m
Bonds and medium term notes 3,979.8 3,759.9 1,039.2 406.2
3,979.8 3,759.9 1,039.2 406.2
Maturity analysisRepayable within one year 739.1 1,331.0 53.8 –Repayable in more than one year but not more than two years 526.1 210.5 322.8 –Repayable in more than two years but not more than five years 1,529.8 1,476.5 255.8 359.7Repayable in more than five years 1,184.8 741.9 406.8 46.5
3,979.8 3,759.9 1,039.2 406.2
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Notes to the Group Financial Statements year ended 31 December 2000
31. Provisions for liabilities/other risks and charges
Deferred taxation
Banking Lifeand other assurance
Group activities activities€m €m
At 1 January 2000 9.5 13.6Charge for period 9.5 (19.5)Exchange movements – (0.1)
At 31 December 2000 19.0 (6.0)
The composition of the amounts provided for deferred taxation is as follows:
Capital allowances 10.7 1.4Other timing differences 8.3 (7.4)
19.0 (6.0)
Deferred taxation of €13.3m (1999: €15.5m) on capital allowances claimed has not been provided as the timing differences are not expected to reverse in the foreseeable future and, accordingly, no liabilityis expected to arise.
Deferred tax asset of €6.0m in life assurance activities is included in other debtors.
Deferred taxation is not provided on earnings retained by overseas group companies where there is, at present, no intention to remit those earnings to Ireland.
Company €m
At 1 January 2000 –Charge for period 0.2
At 31 December 2000 0.2
32. Technical Provisions Life Technicalassurance provisionstechnical for linked
provisions liabilities€m €m
At 1 January 2000 4,876.9 10,536.6Change in provisions 246.3 1,419.1Exchange movements 129.5 19.0
At 31 December 2000 5,252.7 11,974.7
33. Other liabilities/creditors 2000 1999€m €m
(a) Attributable to banking and other activities
Amounts falling due within one yearPAYE 2.7 2.0Corporation tax 8.5 27.3Amounts due to group undertakings: life assurance activities 24.3 19.5Other creditors 43.8 51.1
79.3 99.9
Amounts falling due after one yearAmounts due under repurchase agreements 81.9 –Other creditors – 11.2
81.9 11.2
161.2 111.1
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Notes to the Group Financial Statements year ended 31 December 2000
33. Other liabilities/creditors (continued) 2000 1999€m €m
(b) Attributable to life assurance activities
Amounts falling due within one yearPremiums on deposit 27.7 18.7Credit Institutions – 24.9Bank overdraft 32.7 39.1Investment balances 5.6 0.4PAYE 1.9 2.5Corporation tax 55.4 115.0Other taxation 12.7 4.1Amounts due to group undertakings: life assurance activities 63.2 27.3Other creditors 107.9 102.5
307.1 334.5
(c) Company
Amounts falling due within one yearPAYE 2.2 1.9Corporation tax 1.0 8.2Other creditors 15.7 18.8
18.9 28.9
Amounts falling due after one yearAmounts due under repurchase agreements 81.9 –
100.8 28.9
34. Accruals and deferred income 2000 1999€m €m
(a) Attributable to banking and other activities
Accrued expenses 20.3 24.8Deferred income (i) 12.0 19.0
32.3 43.8
(b) Attributable to life assurance activities
Accrued expenses 37.6 31.7
37.6 31.7
(c) Company
Accrued expenses 11.4 14.5Deferred income (i) 11.2 18.0
22.6 32.5
(i) Deferred income can be analysed as follows: Group Company2000 1999 2000 1999
€m €m €m €m
Opening balance 19.0 22.5 18.0 21.2Net gains deferred on disposals during the year 2.5 4.5 2.0 4.0Release to profit and loss account (9.5) (8.0) (8.8) (7.2)
At 31 December 12.0 19.0 11.2 18.0
Deferred income represents the unamortised portion of realised gains and losses on the sale of listeddebt securities and forward rate agreements held for hedging purposes.
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Notes to the Group Financial Statements year ended 31 December 2000
35. Subordinated liabilities Group Company2000 1999 2000 1999
€m €m €m €m
Stg£80m 9.79% fixed rate loan repayable in 2022 128.7 129.2 128.7 129.2US$50m 7.73% perpetual fixed rate loan note 53.8 50.3 53.8 50.3US$25m 7.53% fixed rate loan repayable in 2012 27.7 25.1 27.7 25.1€10m 6.5% fixed rate loan repayable in 2012 10.0 – 10.0 –
220.2 204.6 220.2 204.6
The above loan notes, where appropriate, are matched by sterling and US dollar swap contracts or liquidassets and are subordinated in right of payment to other creditors. €105.5m (1999: €103.0m) ranks asTier 2 capital for capital adequacy purposes.
36. Called up share capital, share premium, merger reserve and other capital reserves
Number Share Share Merger CapitalGroup of Shares Capital Premium Reserve Reserves
€m €m €m €m
At 1 January 2000 290,209,728 92.1 40.2 (21.2) 20.7Shares issued during the year 892,904 0.3 2.4 – –Conversion of shares to Euros – 0.7 – – –Shares repurchased and cancelled (2,578,168) (0.8) – – 0.8
At 31 December 2000 288,524,464 92.3 42.6 (21.2) 21.5
Number of Share Share CapitalCompany Shares Capital Premium Reserves
€m €m €mAuthorisedOrdinary Shares of €0.32 each 400,000,000 128.0 – –€ preference shares 300,000,000 300.0 – –US$ preference shares 200,000,000 214.9 – –Stg£ preference shares 100,000,000 160.2 – –
Issued and fully paid ordinary shares of €0.32 eachAt 1 January 2000 290,209,728 92.1 2,738.2 –Shares issued during the year 892,904 0.3 2.4 –Conversion of shares to Euros – 0.7 – –Shares repurchased and cancelled (2,578,168) (0.8) – 0.8
At 31 December 2000 288,524,464 92.3 2,740.6 0.8
During the year the group purchased on the market 7,757,954 shares for a total consideration of €93.3m of which 2,578,168 shares were cancelled and the balance of 5,179,786 shares have been held as treasury shares. It is intended to re-issue these shares to the proposed TSB employee shareownership plan as part of the consideration for the acquisition of TSB Bank. The cost of the sharescancelled (€28.7m) has been written off reserves and the nominal value of the shares (€0.8m) has been transferred to a capital redemption reserve. The cost of the treasury shares €64.6m (nominal value €1.7m) is shown as a deduction from reserves.
At the Annual General Meeting held on 17 May 2000, the authorised share capital of the company,namely IR£100m, divided into 400m ordinary shares of IR£0.25 each was redenominated, converted and rounded to €126,973,807.84 divided into 400m ordinary shares of €0.3174345196 each and the authorised non-cumulative preference share capital of the company, namely IR£100m, divided into 100m non cumulative preference shares of IR£1 each was redenominated, converted and rounded to €126,973,807.84 divided into 100m non cumulative preference shares of €1.2697380784 each.Following those redenominations, the par value of each issued and unissued ordinary share was adjustedby way of renominalisation and increased to €0.32 and the par value of each unissued non-cumulativepreference share was adjusted by way of renominalisation and decreased to €1.
The cost of the renominalisation of ordinary shares, amounting to €0.7m, has been charged to revenuereserves in the group and company.
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Notes to the Group Financial Statements year ended 31 December 2000
36. Called up share capital, share premium, merger reserve and other capital reserves (continued)
During 2000, the company issued 892,904 ordinary shares of €0.32 each with a nominal value of €0.3m for cash of €2.7m as a result of the exercise of options under the group’s share options schemes.
The merger reserve is the difference between the shares issued by Irish Permanent plc and the nominalvalue of the issued share capital of Irish Life plc on the merger of the companies. The share premiumarising on the shares issued in connection with the merger has been classified with the merger reserverather than with the other share premium in existence in the company.
Capital reserves in the group represents the share premium (€20.7m) of Irish Life plc at the date of themerger and €0.8m capital redemption reserve arising from the repurchase and cancellation of shares. In the company capital reserves consist of €0.8m capital redemption reserve.
37. Revenue reserves
(a) GroupProfit and loss Non-distributable
account reserves2000 1999 2000 1999
€m €m €m €m
At 1 January 589.1 368.4 1,206.9 1,178.5Profit retained for the year 171.4 192.5 – –Transfer (to)/from non-distributable reserves (205.2) 19.3 205.2 (19.3)Conversion of shares to euros (0.7) – – –Shares repurchased and cancelled (28.7) – – –Amounts added back in respect of scrip dividends – 8.9 – –Exchange adjustment on net investment in overseas subsidiaries – – 0.1 47.7
525.9 589.1 1,412.2 1,206.9
Shares repurchased and held as treasury shares (64.6) – – –
At 31 December 461.3 589.1 1,412.2 1,206.9
(b) CompanyProfit and loss
account
2000 1999€m €m
At 1 January 222.5 192.8Profit for the year 137.5 131.6Dividends (112.8) (101.9)Conversion of shares to euros (0.7) –Shares repurchased and cancelled (28.7) –
217.8 222.5
Shares repurchased and held as treasury shares (64.6) –
At 31 December 153.2 222.5
38. Notes to the consolidated cash flow statement
The group’s cashflow statement sets out the cashflows generated from both banking and other activities and life assurance activities. Cash generated from life assurance activities represents surplusesattributable to shareholders declared and paid out of life assurance activities to banking and otheractivities, net of amounts reinvested in life activities by banking and other activities.
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Notes to the Group Financial Statements year ended 31 December 2000
38. Notes to the consolidated cash flow statement (continued)2000 1999
€m €m(a) Reconciliation of operating profit to net operating cash flows
Profit arising from operating activities 308.1 259.3less: operating profit from life assurance activities (239.1) (189.5)
Operating profit from banking & other activities 69.0 69.8
Provision for bad and doubtful debts 10.7 9.6Depreciation and amortisation (34.4) (11.3)Profit on sale of equity investments – (7.2)Profit on sale of investment properties (16.8) –Revaluation of equity investments – 11.2Decrease/(Increase) in prepayments and accrued income 70.9 (30.4)Increase in creditors and accruals 42.4 28.4Interest on debt securities in issue 255.5 169.0Interest on subordinated loans 19.2 18.0Profit on sale of debt securities held for trading (1.7) (1.7)Profit on disposal of fixed assets (9.8) –Foreign currency translation adjustments (1.0) (1.2)
Net cashflow from banking & other trading activities 404.0 254.2
Increase in customer accounts 1,333.3 388.5Decrease in government bills and other eligible bills 202.2 (140.4)(Increase) in loans and advances to customers (1,402.6) (1,152.9)Decrease in listed debt securities 207.0 91.0Increase in deposits by credit institutions 6.0 (534.8)(Decrease)/increase in debt securities in issue (117.3) 1,221.5(Increase) in intercompany balances with life assurance activities (31.1) (4.9)(Increase) in loans and advances to credit institutions (556.8) (76.1)
Net cash flow from banking & other operating activities 44.7 46.1
(b) Analysis of cashflow from life assurance activities2000 1999
€m €m
Premiums received 3,164.2 2,264.1Claims paid (1,816.7) (1,298.9)Net portfolio investment (1,196.0) (1,001.6)Other cashflows (22.7) 100.6
Net cashflow 128.8 64.2
Retained in life business (4.4) (31.8)
Transferred from life assurance activities 124.4 32.4
(c) Analysis of the balances on cash as shown in the balance sheet
1 January Cashflow 31 December2000 2000
€m €m €m
Cash and balances at Central Banks 27.0 (1.5) 25.5Loans and advances to credit institutions repayable on demand 50.8 5.5 56.3
77.8 4.0 81.8
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Notes to the Group Financial Statements year ended 31 December 2000
38. Notes to the consolidated cash flow statement (continued)
(d) Analysis of changes in financing
Share Capital & SubordinatedShare Premium Liabilities
€m €m
At 1 January 2000 132.3 204.6Cashflow movementsShares issued under share option schemes 2.7 –Shares repurchased and cancelled (28.7) –Issue of subordinated liabilities – 9.9
(26.0) 9.9
Non cash movementsShares cancelled, dealt with through revenue reserves 28.7 –Transfer to capital redemption reserve fund (0.8) –Conversion of shares to euros 0.7 –
28.6 –
Effect of foreign exchange differences – 5.7
At 31 December 2000 134.9 220.2
39. Derivatives and Financial Instruments
Arising in the normal course of business within its banking operations, the group is a party to varioustypes of financial instruments including derivative contracts. These financial instruments are used for thepurposes of managing liquidity, reducing interest and foreign currency exchange rate exposures and togenerate incremental income for the group.
Details of the objectives and policies which are in place in regard to the group’s use of financialinstruments, including derivatives, within its banking operations are set out on pages 22 to 25 of theOperating and Financial Review. Holdings of these financial instruments involve, to varying degrees,exposure to loss in the event of a default by a counterparty (“credit risk”) and exposure to changes in interest and exchange rates (“market risk”). With regard to credit risk all contracts in respect offinancial instruments have been entered into with premium grade counterparties. It is expected thatthese counterparties will be able to meet their obligations under these contracts as they fall due. In relation to market risk, details of the group’s exposures within its banking operations are provided below in accordance with the provisions of FRS 13 “Derivatives and other Financial Instruments”.
The disclosures set out below concern the banking and other activities of the group only (save for the analysis of structural foreign currency exposures at note 39(f)) as FRS13 does not apply to lifeassurance operations.
(a) Interest Rate Sensitivity Gap Analysis – Non Trading Book
An element of the earnings within the group’s banking operations is derived from the controlledmismatching of the dates upon which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates upon which the instruments mature. The tablesbelow summarise these repricing mismatches in the banking operations Euro, Sterling and US Dollar non-trading books as at 31 December 2000 which are the principal operating currencies of the group’sbanking operations. For the principal categories of assets and liabilities, items are allocated to time bandsby reference to the earlier of the next contractual interest rate repricing date and the maturity date. A net liability position in a particular time period (i.e. more liabilities than assets reprice in that period)indicates an exposure to a rise in interest rates, although the actual financial impact will depend upon a number of factors, including the extent to which repayments are made earlier or later than the contracteddate and variations in interest rate sensitivity within repricing periods and among different currencies.
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Notes to the Group Financial Statements year ended 31 December 2000
39. Derivatives and Financial Instruments (continued)
Interest Rate Repricing – euro
As at 31 December 2000
Over three Over six Over one mths but mths but year but
Not more not more not more not more Over Nonthan three than six than one than five five interest
mths mths year years years bearing Total€m €m €m €m €m €m €m
Assets:Cash and balances at central banks 26 – – – – – 26Government bills – – – – – – –Loans/advances to credit institutions 681 – 16 – – – 697Loans/advances to customers 4,399 341 954 1,469 87 – 7,250Debt securities – listed 2 – 192 208 – – 402Other assets – – – – – 332 332
Total assets (A) 5,108 341 1,162 1,677 87 332 8,707
Liabilities:Deposits by credit institutions (230) – – (37) – (2) (269)Customer accounts (3,314) (133) (160) (328) (18) (58) (4,011)Debt securities in issue (986) (36) (63) (213) (224) (30) (1,552)Other liabilities – – – – – (288) (288)Subordinated liabilities – – – – (10) – (10)
Total liabilities (B) (4,530) (169) (223) (578) (252) (378) (6,130)
Off balance sheet items (C) (1,999) (172) 197 (441) 262 – (2,153)
Interest rate repricing gap (1,421) – 1,136 658 97 (46)
(A) + (B) + (C)
Cumulative interest rate repricing gap (1,421) (1,421) (285) 373 470 424
At 31 December 1999 Interest rate repricing gap 288 418 (570) (52) 156 202
Cumulative interest rate repricing gap 288 706 136 84 240 442
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Notes to the Group Financial Statements year ended 31 December 2000
39. Derivatives and Financial Instruments (continued)
Interest Rate Repricing – Sterling
As at 31 December 2000
Over three Over six Over one mths but mths but year but
Not more not more not more not more Over Nonthan three than six than one than five five interest
mths mths year years years bearing Total€m €m €m €m €m €m €m
Assets:Loans/advances to credit institutions 1,517 – – 242 – – 1,759Loans/advances to customers 410 4 19 172 56 – 661Debt securities – listed 75 – 2 13 – – 90Other assets – – – – – 45 45
Total assets (A) 2,002 4 21 427 56 45 2,555
Liabilities:Deposits by credit institutions (220) (20) (18) – – (3) (261)Customer accounts (1,650) (142) (92) (3) – (23) (1,910)Debt securities in issue (799) – – (284) (29) (6) (1,118)Other liabilities – – – – – (5) (5)Subordinated liabilities – – – (128) – (1) (129)
Total liabilities (B) (2,669) (162) (110) (415) (29) (38) (3,423)
Off balance sheet items (C) (119) 171 471 349 (3) – 869
Interest rate repricing gap (786) 13 382 361 24 7
(A) + (B) + (C)
Cumulative interest rate repricing gap (786) (773) (391) (30) (6) 1
At 31 December 1999 Interest rate repricing gap (1,142) (341) 342 1,034 104 1
Cumulative interest rate repricing gap (1,142) (1,483) (1,141) (107) (3) (2)
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Notes to the Group Financial Statements year ended 31 December 2000
39. Derivatives and Financial Instruments (continued)
Interest Rate Repricing – US Dollar
As at 31 December 2000
Over three Over six Over one mths but mths but year but
Not more not more not more not more Over Nonthan three than six than one than five five interest
mths mths year years years bearing Total€m €m €m €m €m €m €m
Assets:Loans/advances to credit institutions 161 16 – – – – 177Debt securities – listed 27 – – – – – 27Other assets – – – – – 30 30
Total assets (A) 188 16 – – – 30 234
Liabilities:Deposits by credit institutions (43) – – – – (2) (45)Customer accounts (70) (4) (5) – – – (79)Debt securities in issue (936) (312) – (12) (40) (10) (1,310)Other liabilities – – – – – – –Subordinated liabilities – – – – (80) (1) (81)
Total liabilities (B) (1,049) (316) (5) (12) (120) (13) (1,515)
Off balance sheet items (C) 1,193 845 (442) (418) 102 – 1,280
Interest rate sensitivity gap 332 545 (447) (430) (18) 17
(A) + (B) + (C)
Cumulative interest rate repricing gap 332 877 430 – (18) (1)
At 31 December 1999 Interest rate repricing gap (1,483) (109) 1,461 69 33 10
Cumulative interest rate repricing gap (1,483) (1,592) (131) (62) (29) (19)
The tables above show actual on balance sheet values and net off balance sheet amounts. The offbalance sheet amounts include the impact of derivatives used to hedge positions in the non-tradingbooks. Derivatives are contracts and agreements whose value is derived from one or more underlyingindices or asset values inherent in the contract agreement. In managing the group’s banking exposures to interest rate and foreign currency exchange rates a range of derivative instruments are used whichallow the group to modify the pricing and maturity characteristics of assets and liabilities. Theseinstruments primarily include future rate agreements, interest rate swaps and cross currency swaps.Profits and losses arising on derivative instruments held for these purposes are released to the profit and loss account in accordance with the underlying transactions.
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Notes to the Group Financial Statements year ended 31 December 2000
39. Derivatives and Financial Instruments (continued)
The notional principal amounts, risk weighted amounts and the replacement cost of derivativeinstruments, included in the tables above, are set out below.
2000 1999€m €m
Exchange rate contractsNotional principal amount 6,438 5,966Risk weighted amount 74 57Replacement cost 372 287
Interest rate contractsNotional principal amount 19,528 13,433Risk weighted amount 45 36Replacement cost 226 181
The risk weighted amounts shown above are calculated in accordance with Central Bank of Irelandguidelines on capital adequacy.
The replacement cost amounts shown are calculated by stating all contracts with a positive value at market value, with an adjustment to allow for future credit exposures.
The following table analyses the above derivative contracts by remaining maturity:
2000 1999Notional Replacement Notional Replacement
Principal Amt Cost Principal Amt Cost€m €m €m €m
Exchange rate contractsDerivatives maturing:
Up to 1 year 4,893 206 5,296 219Up to 5 years 490 25 109 7Greater then 5 years 1,055 141 561 61
6,438 372 5,966 287
Interest rate contractsDerivatives maturing:
Up to 1 year 9,025 55 4,759 38Up to 5 years 8,498 118 7,307 105Greater then 5 years 2,005 53 1,367 38
19,528 226 13,433 181
The above tables exclude trading assets of the group’s banking operations and assets and liabilitiesdenominated in currencies other than Euro, Sterling and US Dollars, which are not material. The grouphas no material prepayment or option type exposures in the non trading book.
(b) Hedging
As explained on page 23 the Operating and Financial Review, within the banking operations non tradingbook the group uses hedging instruments and techniques to reduce interest rate and foreign exchangerate risk. The instruments utilised include both on and off balance sheet instruments. The principal onbalance sheet instruments comprise government gilts and debt securities and the principal off balancesheet instruments comprise interest rate swaps, cross-currency swaps and future rate agreements. Gainsor losses on financial instruments used for hedging purposes are recognised in line with the underlyingexposures which are being hedged. The net gains on instruments used for hedging as at 31 December2000 which have been deferred were €12.0m (1999: €19.0m). Of these the net gains expected to bereleased from the profit and loss account in the year ended 31 December 2001 are €4.3m and inaccounting periods thereafter are €7.7m.
The net gains released to the profit and loss account in the year ended 31 December, 2000 which arosein previous years were €7.7m and the net gains arising in the year ended 31 December 2000 whichwere not recognised in that year were €0.7m.
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Notes to the Group Financial Statements year ended 31 December 2000
39. Derivatives and Financial Instruments (continued)
(c) Trading Book
As noted on page 24 of the Operating and Financial Review, Group Treasury, in accordance with strict limits set by the Board, trades in financial instruments, including derivatives, in order to profit from short-term changes in market values. Derivative instruments traded in 2000 were limited to forwardrate agreements and financial futures. The use of derivative instruments for trading purposes is minimal.
At 31 December 2000 the market value of interest rate instruments and derivatives held in the trading book was €11 million (1999: € Nil) while the peak trading position held during the year ended 31 December 2000 was €18.0m. The foreign exchange rate position held in the trading book at 31 December 2000 was €0.5m (1999: €19m) while the peak position held during the year was€22m. The peak trading positions disclosed above are based on calculations prepared at the end of each business day, including the balance sheet date. The exposure during the course of a single day may be substantially different to this end of day figure and there is no reason why the end of day figure should be representative of the figure at other times of the day. Intra-day positions are subject to Board approved limits.
The net gain from trading in financial assets and financial liabilities shown as dealing profits in the profit and loss account for the year ended 31 December, 2000 of €1.9m (1999: €1.7 million) may be analysed as follows:
2000 1999€m €m
Debt securities 1.7 1.3Futures and forward rate agreements (0.3) 0.4Foreign exchange 0.5 –
1.9 1.7
(d) Fair Value of Financial Assets and Financial Liabilities
Set out in the table below is a comparison by category of the book value and fair values of all the financialassets and financial liabilities held by the Group’s banking and other operations at 31 December 2000.
Financial Instruments held for non-trading purposes:
2000 1999Book Value Fair Value Book Value Fair Value
€m €m €m €m
AssetsCash and balances at Central Bank 25.5 25.5 27.0 27.0Government bills – – 202.2 202.3Loans and advances to credit institutions 2,633.4 2,664.4 1,943.5 1,954.4Loans and advances to customers 7,911.1 7,949.0 6,519.8 6,571.1Debt securities – listed 519.1 516.0 727.3 718.3Equity shares – listed 18.1 25.9 18.1 29.9Other assets 64.9 64.9 39.2 39.2Prepayments and accrued income 132.4 132.4 172.6 172.6
Total Assets 11,304.5 11,378.1 9,649.7 9,714.8
LiabilitiesDeposits by Credit Institutions 575.2 583.0 567.8 572.5Customer accounts 5,999.8 6,025.0 4,658.6 4,655.1Debt securities in issue 3,979.8 4,007.0 3,759.9 3,760.2Other liabilities 161.2 159.9 111.1 111.1Accruals & deferred income 32.3 32.3 43.8 43.8Provisions for liabilities & charges 19.0 19.0 72.6 72.6Dividends 80.5 80.5 9.5 9.5Subordinated liabilities 220.2 243.0 204.6 210.3
Total liabilities 11,068.0 11,149.7 9,427.9 9,435.1
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Notes to the Group Financial Statements year ended 31 December 2000
39. Derivatives and Financial Instruments (continued)
Derivative financial instruments held for non trading purposes:2000 1999
Fair Value Fair Value€m €m
Interest rate swaps (46.0) (50.1)Forward rate agreements (2.0) (12.7)Cross currency swaps 34.0 (2.6)Foreign exchange contracts 1.0 1.1
(13.0) (64.3)
Market values have been used to determine the fair value of all Government bills, listed debt securitiesissued and held, equity shares, interest rate and foreign currency swaps and forward foreign currencycontracts. The fair values of all other items have been calculated by discounting expected future cashflows at prevailing interest rates.
(e) Trading Foreign Currency Exposures
As noted on page 23 of the Operating and Financial Review currency exposures generated by financialassets and liabilities in the Banking operations non trading book are transferred to the trading book as they arise. These exposures which are transactional in nature, give rise to net currency gains andlosses which are recognised in the profit and loss account. Such exposures, within the group’s bankingoperations, are entirely confined to Treasury and are controlled by limits on open positions, which arepermitted to be held.
(f) Structural Foreign Currency Exposures
Irish Life & Permanent has overseas operations principally in the USA and the UK. The main operating(or ‘functional’) currencies of its operations are therefore Euro, Sterling and US dollars. As the groupprepares its consolidated financial statements in Euros it follows that the group’s consolidated balancesheet is affected by movements in the exchange rates between these functional currencies and the Euro.These currency exposures are referred to as structural currency exposures. Translation gains and lossesarising from these exposures are recognised in the statement of total recognised gains and losses.
The group mitigates the effect of these exposures by financing a significant proportion of its netinvestment in its overseas operations with borrowings in the same currencies as the functional currenciesinvolved. Currency swaps are also used to match the currency of some of its other borrowings to thefunctional currencies involved and these are reflected in the summary of exposures given below.
The group’s structural currency exposures as at 31 December 2000 were as follows:
Borrowings in functional currency
Functional currency Net investment in of overseas operation Remaining structuralof operation involved overseas operations for hedging purposes currency exposure
€m €m €m
US Dollar 518.0 509.1 8.9Sterling 203.6 194.1 9.5
Total 721.6 703.2 18.4
40. Options to subscribe for shares
The group operates a number of share option schemes. Options under the group share option schemeare normally exercisable between three and ten years from the date of grant, except in the case of optionsgranted under the employee saving related share scheme, which are exercisable five years from the dateof grant. As at 31 December 2000, the total number of options outstanding under these schemes was5,429,506 which is equivalent to 1.9% of the issued share capital of the company (1999: 1.6%) at prices ranging from €2.29 to €14.01 exercisable under normal conditions, up to year 2010. The optionschemes allow for not more than 10% of the issued share capital of the company to be put underoptions in any ten year period.
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Notes to the Group Financial Statements year ended 31 December 2000
41. Technical provisions, value of in-force business, embedded value profits
(a) Technical provisions
(i) Ireland and UK business
The life assurance provisions for non-linked liabilities are determined in accordance with theappropriate regulations using the net premium method. The provisions in respect of linked liabilitiesinclude the value of the units deemed allocated at the valuation date. The non-unit related provisionsfor linked business are determined by cash flow methods.
The principal assumptions used to calculate the technical provisions are as follows:
Interest rates gross of tax 2000 1999Regular premium business non profit 3.00% to 3.50% 3.50% to 4.00%
with profit 1.25% to 2.25% 1.25% to 2.25%Single premium business non profit 3.50% to 5.11% 3.25% to 5.50%
Mortality ratesLives assured 80% A67/70 ultimate, adjusted to reflect the likely impact of AIDS.Annuitants 85% PMA 80 (c=1999) males
95% PFA 80 (c=1999) femaleswith future mortality rates projected to improve by 3.0% p.a.(males) and 1.5% p.a.(females)
Disability rates Inception 175% CMIR (7)Termination 20% to 110% DTS rates
Serious illness rates 150% IC94 with 2% p.a. future deterioration
All the tables referred to are published tables of mortality or disability.
Expense ratesExpenses are implicitly reserved through the use of the net premium method. Expense assumptionsused in the cash flow testing for non-unit related provisions for linked business are based on currentexperience plus an appropriate margin.
(ii) US business
The life assurance provisions are determined in accordance with the appropriate regulations using thecommissioners reserve valuation method (CRVM) for life assurance policies and the commissionersannuity reserve valuation method (CARVM) for annuity policies.
Interest rates gross of tax 2000 1999Life assurance business 4.0% to 6.0% 4.0% to 6.0%Annuity business 5.5% to 7.0% 5.5% to 7.0%
Mortality ratesLives assured 1958 CSO and 1980 CSOAnnuitants 1971 IAM and 1983 IAM
The tables above refer to US published tables of mortality.
Expense ratesExpenses are implicitly reserved through the use of the commissioners method.
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Notes to the Group Financial Statements year ended 31 December 2000
41. Technical provisions, value of in-force business, embedded value profits (continued)
(b) Value of in-force business
The principal assumptions used in the calculation of shareholders’ value of in-force business include the following:
Ireland US UK2000 1999 2000 1999 2000 1999
% % % % % %
Risk discount rate (after tax) 8.5 8.75 8.0 8.75 8.0 8.25
Investment returns (before tax)non linked/fixed annuity 4.7 to 5.6 3.75 to 5.9 7.0 to 7.25 7.0 to 7.5 4.75 5.25unit linked/variable annuity 6.4 6.6 7.5 8.0 6.5 6.8
Expense inflation 4.25 3.75 3.0 3.0 2.50 3.25
Assumptions made for demographic factors such as mortality and morbidity are based on publishedtables of rates adjusted in line with the experience of the companies concerned. Assumptions in respectof withdrawals and expense levels are based on the experience of the companies concerned. Economicassumptions are based on a long term view of economic activity using external economic conditions at the balance sheet date as a starting point.
Allowance is made for taxation by using models which reflect the relevant taxation regimes affectingdifferent classes of products; no credit is taken in respect of any reductions of taxes which may derivefrom expenses attributable to future business.
As stated in note 1(b) the embedded value methodology in the US was changed from a passive to a active approach which reduced the risk discount rate at end 1999 from 9.5% to 8.75%.
The tax assumption used for Ireland reflects the reductions in corporation tax rates to 12.5% in 2003.
(c) Embedded value profits
The embedded value profit is analysed into four categories:
– a contribution from in-force business at the beginning of the year, comprising interest at the risk discount rate on the value of in-force business together with the effect of any deviation in experiencecompared to assumptions.
– a contribution from new business, comprising the excess amount of the value added after providing for the return equal to the risk discount rate on capital employed in writing new business.
– investment earnings on the net assets attributable to shareholders.
– an economic variance, comprising the effect of changes in interest rates and future investment returnassumptions, which is sensitive to economic conditions.
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Notes to the Group Financial Statements year ended 31 December 2000
42. Shareholdings of and transactions with directors
(a) Directors’ and company secretary’s interests
Number of beneficial ordinary shares heldAt 31 December 2000 At 1 January 2000*
Ordinary Ordinary Shares Options Shares Options
Roy Douglas 425,498 – 306,998 118,500David Went 58,344 249,523 38,856 203,974John Bourke 17,225 – 17,225 –Gillian Bowler 5,259 – 5,259 –Denis Casey 13,149 127,477 13,149 127,477Michael Donnelly 1,905 – 1,905 –Peter Fitzpatrick 238,078 92,881 37,083 264,310Brendan Halligan 4,475 – 4,475 –Monty Hilkowitz 24,834 – 24,834 –Richard Hooper 6,442 – 6,442 –Billy Kane 24,145 41,560 123,150 18,648Patrick Kenny 1,358 – 1,358 –Conor McCarthy 7,531 – 7,531 –Brian McConnell 16,488 99,712 – 75,419Kevin Murphy 9,084 163,260 7,596 140,348Patrick O’Neill 13,725 – 13,725 –Muriel Scorer 52,250 – 52,250 –Sean Ryan (Company Secretary) 74,498 67,593 45,628 80,467
* Or date of appointment if later
In addition Sean Ryan, as chairman of the Trustees of the Irish Life Staff Benefits scheme, has a non-beneficial interest in a total of 2,583,645 shares.
There have been no changes to the above since 31 December 2000.
(b) Transactions with directors
Irish Life International Limited (“ILI”) is owned 60.9% by Irish Life plc, 25% by Fedsure Holdings Limited and 14.1% by Anvil Holdings Limited (“Anvil”). Anvil is owned by a number of discretionarytrusts, under one of which Monty Hilkowitz, a director of Irish Life & Permanent plc, may be abeneficiary. Irish Life plc has entered into a shareholders’ agreement covering the ownership andmanagement of ILI. This agreement superseded a joint venture between Irish Life plc and Anvil.
Monty Hilkowitz has an interest in a number of companies which conduct business with ILI. The totalvalue of payments made in the ordinary course of business by ILI to these companies in 2000 was€1,184,319 (1999: €266,221).
As at 31 December 2000, the group had advanced loans of €689,000 to six directors. At 31 December1999, there were loans of €661,000 to five directors.
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Notes to the Group Financial Statements year ended 31 December 2000
43. Other contingent liabilities and commitments 2000 1999
Risk RiskContract weighted Contract weighted
Group amount amount amount amount€m €m €m €m
Contingent LiabilitiesGuarantees and irrevocable letters of credit 6.9 6.9 7.9 7.9Performance bonds, VAT guarantees andother transaction related contingencies – – 0.2 0.1
6.9 6.9 8.1 8.0
CommitmentsUndrawn formal stand-by facilities, credit lines and other commitments to lend:
– Less than one year 11.0 11.0 9.7 9.7
11.0 11.0 9.7 9.7
CompanyThe amount of contingent liabilities in the parent company at 31 December 2000 was €3,009.1m (1999: €3,487.6m). This amount relates to the guarantees given by the company on behalf of subsidiarycompanies.
44. Shares held by subsidiaries
At 31 December 2000, Irish Life Assurance plc held 6.9m ordinary shares in Irish Life & Permanent plcrepresenting 2.4% of the issued share capital. These shares are held on behalf of policyholders andinvestment clients.
45. Post balance sheet event – Trustee Savings Bank (“TSB”)
On 8 November 2000, the group made an offer of €430m for the business of TSB. This offer wasrecommended to the Minister for Finance by the Trustees of the TSB on 5 December 2000.
All necessary regulatory consents have now been received in respect of this acquisition and completion is now reliant only on passing of enabling legislation which, it is anticipated, will occur in April 2001.
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Notes to the Group Financial Statements year ended 31 December 2000
46. Principal subsidiary and associated undertakings
(a) Principal subsidiary undertakingsIncorporated in/ % of ordinaryRegistered office shares held
Irish Life plc* Ireland 100
Banking:Irish Permanent Finance Limited* Ireland 100Guinness & Mahon (Ireland) Limited* Ireland 100Irish Permanent Treasury plc* Ireland 100Capital Home Loans Limited* UK 100Irish Permanent (IOM) Limited* Isle of Man 100
Life assurance:Irish Life Assurance plc Ireland 100Interstate Assurance Company USA 100First Variable Life Insurance Company USA 100Guarantee Reserve Life Insurance Company USA 100City of Westminster Assurance Company Limited UK 100Cornmarket Investment Brokers Limited Ireland 75Irish Life International Limited Ireland 61
Investment Management:Irish Life Investment Managers Limited Ireland 100Irish Life Investment Managers (US) Limited Ireland 100
* held directly through Irish Life & Permanent plc.
The principal country of operation of each company is the country in which it is incorporated with the exception of Irish Life International Limited which operates internationally.
The registered office of Irish Life & Permanent plc is: Irish Life Centre, Lower Abbey Street, Dublin 1.
(b) Principal associated undertakings
Total issued equity/debt capital % holding
Allianz – Irish Life Holdings plc 22,381,383 ordinary IR£1 shares 30.4Incorporated, registered and operating as a general insurance company in Ireland(held by Irish Life Irish Holdings) 672,025 preference IR£1 shares –
47. Foreign currency translation
The principal rates of exchange used in the preparation of the financial statements are as follows:
2000 1999Closing Average Closing Average
Rate Rate Rate Rate
€/Stg£ 0.6241 0.6080 0.6217 0.6556€/US$ 0.9305 0.9193 1.0046 1.0586
48. Comparative figures
Comparative figures have been reclassified where necessary on the same basis as those for the current year.
49. Approval of financial statements
The financial statements were approved by the board on 21 March 2001.
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Additional Information year ended 31 December 2000
Funds under management2000 1999
€m €m
IrelandLinked and non-linked funds 12,496.1 11,036.7Segregated client assets 1,230.8 2,024.6
13,726.9 13,061.3
USA 2,198.8 2,113.6UK 1,722.3 1,810.2Other 1,055.6 935.4
4,976.7 4,859.2
18,703.6 17,920.5
Five year review
2000 1999 1998 1997 1996€ € € € €
Earnings per share 0.98 1.02 0.85 0.74 0.59
€m €m €m €m €m
Operating earnings 286.6 252.8 209.1 226.9 161.3Other (charges)/income & economic variances (0.4) 43.6 35.4 (16.2) 5.5Minority interest (2.0) (2.0) (0.2) (0.5) 0.1
Profit after taxation 284.2 294.4 244.3 210.2 166.9
Shareholders’ funds 2,008.7 1,927.8 1,672.0 1,508.5 1,274.4
New life assurance business (full value)Ireland 1,992.9 1,372.8 834.5 490.1 388.0USA 269.5 221.0 167.0 257.9 165.0UK 17.2 13.4 13.8 14.9 13.1
2,279.6 1,607.2 1,015.3 762.9 566.1
Investment management 403.0 237.1 302.9 138.9 44.1
2,682.6 1,844.3 1,318.2 901.8 610.2
Analysis of holdings of ordinary shares at 5 March 2001Shareholders Shares
Number Percent Number Percent
Size of shareholding1-1,000 147,069 94.84% 49,115,534 17.02%1,001-5,000 7,135 4.60% 12,803,531 4.44%5,001-10,000 411 0.27% 2,841,131 0.98%10,001-50,000 281 0.18% 6,121,977 2.12%50,001-100,000 49 0.03% 3,566,551 1.24%100,001-1,000,000 92 0.06% 32,436,431 11.24%Over 1,000,000 30 0.02% 181,639,309 62.95%
155,067 288,524,464
Investor Relations
Investment analysts who require further information should contact: Barry Walsh, Head of Investor Relations, Irish Life & Permanent plc, Irish Life Centre, Dublin 1.Telephone: +353 (1) 704 2678 E-mail: [email protected]
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Business Addresses
Ireland
Head Office:Irish Life Centre, Lower Abbey Street, Dublin 1. (Registered Office)Telephone 01 704 2000 Facsimile 01 704 1900Website www.irishlifepermanent.ie
Irish Life Assurance plc:Irish Life Centre, Lower Abbey Street, Dublin 1.Telephone 01 704 2000 Facsimile 01 704 1900Website www.irishlife.ie
Irish Permanent:56-59 St. Stephen’s Green, Dublin 2.Telephone 01 661 5577Website www.irishpermanent.ie
Irish Life International Limited:Irish Life Centre, Lower Abbey Street, Dublin 1.Telephone 01 704 1500 Facsimile 01 704 1922Website www.irishlife-intl.com
Irish Life Investment Managers Limited:Beresford Court, Beresford Place, Dublin 1.Telephone 01 704 1200 Facsimile 01 704 1903Website www.ilim.com
IPSI: 100 Mount Street, Dublin 2.Telephone 01 704 1200 Facsimile 01 856 3391Website www.ipsi.ie
Irish Permanent Finance:56-59 St. Stephen’s Green, Dublin 2.Telephone 01 661 6470 Facsimile 01 661 6441Website www.autopoint.ie
United KingdomCapital Home Loans Limited:Admiral House, Fleet, Hampshire, GU13 8YA.Telephone 1 252 812271 Facsimile 1 252 811826Website www.chlmortgages.co.uk
City of Westminister Assurance Company Limited:Platinum Centre, Victoria Street, St Alban’s, Hertfordshire, AL1 3TF.Telephone 1 727 817 000 Facsimile 1 727 847 788
United States of AmericaIlona Financial Group, Inc.:2211 York Road, Suite 202, Oak Brook, Illinois 60523.Telephone 630 571 4562 Facsimile 630 571 4578Website www.ilonafinancial.com
Interstate Assurance Company:4200 University Avenue, West Des Moines, Iowa 50266.Telephone 515 440 2501 Facsimile 515 440 3325
First Variable Life Assurance Company:2122 York Road, Oak Brook, Illinois 60523.Telephone 630 684 9200 Facsimile 630 684 9301
Guarantee Reserve Life Insurance Company:530 River Oaks West, Calumet City, Illinois 60409.
Telephone 773 375 7800 Facsimile 708 891 8886
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Chairman’s Letter
17th April, 2001
Dear Shareholder,
The notice of the Annual General Meeting (“AGM”) to be held on Monday, 28th May 2001 in TheBurlington Hotel, Upper Leeson Street, Dublin 4 is set out on pages 88 to 90 of this annual report.In addition to the ordinary business of the AGM (resolutions 1 to 5 inclusive), there are several itemsof special business (resolutions 6 to 11 inclusive) which are explained below.
Authorities being sought from the Shareholders
(a) Renewal of authority to allow the Company and/or any subsidiary to purchase the Company’s own shares and to fix the re-issue price of Treasury Shares
Shareholders are being asked in resolution 6 to authorise the Company, until the earlier of the dateof the next AGM or 27th August, 2002, to make market purchases of up to 28,853,967 OrdinaryShares (being 10% of the Company’s issued share capital as at 21st March, 2001) and to fix the re-issue price of any such shares if re-issued at a later date. Shares purchased by the Company underthis authority may be cancelled or held as Treasury Shares which may be re-issued. The Directorsshall only exercise this power if they consider it to be in the best interests of shareholders generally.The minimum and maximum prices which may be paid for a purchase of the Company’s own sharesand for a re-issue of shares purchased by the Company and not cancelled shall be those prices setout in Articles 50 (b) and 50 (d) respectively of the Articles of Association of the Company.
A total of 5,414,294 options to subscribe for Ordinary Shares were outstanding as at 21st March,2001. At the same date, these options represented 1.9% of the then issued Ordinary Share capitaland will represent 2.1% of such share capital if the full authority to buy back Ordinary Shares is used.
(b) Renewal of authority to disapply statutory pre-emption rights
In resolution 7, shareholders are being asked to renew, until the earlier of the next AGM or theexpiration of 15 months from the passing of this resolution, the authority to disapply the strictstatutory pre-emption provisions in the event of a rights issue, or any other issue of equity securitiesfor cash up to an aggregate nominal amount of 5% of the nominal value of the Company’s issuedshare capital. The disapplication will cover a maximum of 14,426,983 Ordinary Shares.
The Irish Life & Permanent Approved Share Option Scheme, 2001
Resolution 8 seeks the approval of the shareholders for a new Revenue Approved share option scheme.
The Board has decided, based on recommendations of the Remuneration and CompensationCommittee (the “Committee”) to introduce, subject to the approval of the shareholders of theCompany, a new option scheme which will operate in conjunction with the Irish Life & PermanentPerformance Option Plan 2000. The proposed new option scheme seeks to take advantage of theprovisions to be enacted in the Finance Act, 2001 which are expected to permit companies to grantoptions to their employees subject to revenue approval, without such employees incurring a chargeto income tax on the exercise of such options.
The new option scheme is intended to reward, retain and motivate employees of the Company andto align their interests with the interests of shareholders. The Committee consulted the IrishAssociation of Investment Managers (IAIM) during the development of the scheme, and the IAIMhas indicated its agreement to its terms. Approval for the new option scheme has been sought fromthe Revenue Commissioners and is awaited.
The principal features of the new option scheme are set out in Appendix A to this letter on pages84 and 85.
The Irish Life & Permanent Group Profit Sharing Scheme, 2001
Resolution 9 seeks the approval of the shareholders for a new Revenue Approved group profitsharing scheme.
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The Irish Life & Permanent Group Profit Sharing Scheme, 2001 (continued)
Since the merger of Irish Life and Irish Permanent, it has been the objective of the Committee toestablish a common framework to aid the sharing, by certain employees and full-time directors ofthe Company and its participating subsidiaries, in the profits of the Company. It is proposed that thenew profit sharing scheme will replace the Irish Permanent plc 1994 Employee Share OwnershipPlan and the Irish Life plc Irish Employee Profit Sharing Scheme.
Again, the new profit sharing scheme is intended to reward, retain and motivate employees and toalign their interests with the interests of shareholders. The Committee consulted the IAIM duringthe development of the scheme, and the IAIM has indicated its agreement to its terms. The approvalof the Revenue Commissioners for the new profit sharing scheme has been sought and is awaited.
The principal features of the new profit sharing scheme are set out in Appendix B to this letter onpages 86 and 87.
Amendments to the Company’s Irish 1999 Savings Related Share Scheme and the Irish Life& Permanent Performance Option Plan, 2000
Resolution 10 seeks the approval of the members to amend the Company’s Irish 1999 SavingsRelated Share Scheme and the Irish Life & Permanent Performance Option Plan, 2000.
The amendments proposed in respect of the Savings Related Share Scheme and the PerformanceOption Plan will provide additional scope to the Company to issue new Shares and to place Sharesunder option in light of the introduction of the new Revenue Approved Share Option Scheme for whichapproval is now sought from shareholders and also in light of the adoption of the employee shareownership trust and associated profit sharing scheme in connection with the Company’s acquisition ofTSB Bank. The revised provisions are within the Guidelines of, and have been approved by, the IAIM.
Documents for Inspection
Copies of the Company’s proposed new option scheme and the proposed rules and draft Trust Deed ofthe Company’s new profit sharing scheme and of the full terms of the proposed amendments to theCompany’s Irish 1999 Savings Related Share Scheme and to the Irish Life & Permanent PerformanceOption Plan, 2000 will be available for inspection at the registered office of the Company and at the officesof A&L Goodbody Solicitors at the International Financial Services Centre, North Wall Quay, Dublin 1 andalso at its offices at Augustine House, Austin Friars, London, EC2N 2HA, during normal business hours onany weekday (Saturdays and Public Holidays excluded) from the date of despatch of this letter until theconclusion of the AGM and at the place of the AGM for at least 15 minutes prior to and during the AGM.
Payment to Director
As announced in November 2000, Mr. William Kane is retiring as a Director and as an employee ofthe Company. This will take effect from the end of May 2001. Resolution 11 seeks shareholderapproval of a payment proposed to be made to him in connection with his retirement.
Recommendation
The Directors are satisfied that the resolutions set out in the Notice of AGM are in the best interestsof the Company and its shareholders as a whole. Accordingly, your Directors unanimouslyrecommend that you vote in favour of each of the resolutions to be proposed at the AGM as theyintend to do in respect of their own beneficial holdings.
Yours faithfully,
Roy DouglasChairman
Chairman’s Letter
Chairman’s Letter
Appendix A Principal features of the Irish Life & Permanent Approved Share Option Scheme 2001 (“the OptionScheme”)
The Irish Life & Permanent Approved Share Option Scheme 2001 (“the Option Scheme”) provides for thedelivery of fully paid ordinary shares in Irish Life & Permanent plc (“the Company”) to employees and full-timedirectors of the Company and its participating subsidiaries. The Option Scheme will be structured so as toqualify as an Approved Share Option Scheme pursuant to the Taxes Consolidation Act, 1997 (as amended).Approval for the Option Scheme has been sought from the Revenue Commissioners and is awaited. It isproposed that the Option Scheme will operate in conjunction with the Irish Life & Permanent PerformanceOption Plan 2000.
Basis of the Option Scheme
Options become exercisable after 3 years following grant and provided the Company meets certainperformance conditions as set out below. There is the facility for the Company to set further additionalconditions of exercise. During the 10 year life span of the Option Scheme, up to 15% of new shares may beplaced under option through the Option Scheme and all other share incentive arrangements operated by theCompany under which shares are subscribed. This reflects IAIM guidelines which permit options to be grantedover 15% of shares under broadly based employee share schemes, with IAIM approval. No option may beexercised more than 10 years after the date of grant. Shares are acquired by the option holders on exercise ofan option. The option price reflects the market value of the shares for the dealing day immediately precedingthe date of grant. The option price shall be the lower of the price, if any, shown in the Irish Stock ExchangeDaily Official List at which bargains in the shares were last recorded, or, where bargains in the shares other thenthose done at special prices were recorded in the Daily Official List, the price at which those were recorded or, if more than one was recorded, a price half way between the highest and lowest of such prices.
Participation in the Option Scheme
Participation in the Scheme is open to all employees and full-time directors of the Company and its participatingsubsidiaries to which the Option Scheme is extended, subject to a continuous service qualification period set by the Directors of the Company, such period not to exceed 3 years. Under the Option Scheme in any year theCompany may set aside up to 30% of the total number of shares in respect of which options may be grantedfor key employees. The remaining 70% will be granted on similar terms to the remaining eligible employees.
An employee or director will be regarded as a key employee if he has specialist skills, qualifications and relevantexperience which are vital to the future success of the Company. A key employee must be certified as such tothe Revenue Commissioners.
EPS Performance Conditions
Options will become exercisable provided certain Earnings Per Share (EPS) performance conditions (and anyapplicable extra targets) are met by the Company.
Options will become exercisable where there is EPS growth during any 3 year measurement period equal to or exceeding the increase in the Consumer Price Index plus 5% compounded over that 3 year period and anyapplicable extra target is met.
Options lapse to the extent that the relevant performance conditions are not met.
Individual Limits
The market value at the date of grant of the share capital over which options are granted to an individual under the Option Scheme and under the Irish Life & Permanent Performance Option Plan 2000, plus thosealready exercised under both schemes, may not exceed four times annual remuneration. Options granted under the Irish Life & Permanent Performance Option Plan 2000 which have lapsed and options granted under that scheme subject to a five year performance measurement period are excluded from this limit.
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Appendix A (continued)
Aggregate Dilution Limits
In the 10 year period following adoption of the Option Scheme by the Company, up to 15% of the Company’sshares may be placed under option or issued under the Option Scheme and all other share incentive schemesoperated by the Company. Additionally, to enable a regular flow of option grants, over any 3 year period thenumber of shares which may be placed under option or issued under the Option Scheme and all other shareincentive schemes operated by the Company may not exceed 4.5% of the Company’s ordinary shares.
There are exemptions from the above limits in respect of shares issued by the Company: (a) pursuant to theemployee share ownership trust and associated approved profit sharing scheme adopted by the Company inconnection with its acquisition of TSB Bank, and (b) pursuant to the Company’s 1999 Share Option Schemeintroduced as part of the merger solely to enable the Company to roll over options granted by Irish Life.
Takeover and reconstruction
In the event of an acquiring company obtaining control of the Company, with the agreement of the participant,replacement options may be issued in substitution for options granted under the Option Scheme. Options willnot become exercisable by virtue of a change in control.
Leaving Service
Any unexercised options will automatically lapse in the event of the option holder leaving the service of theCompany or its participating subsidiaries, except in the circumstances set out in the succeeding paragraph orwhere the cessation of service is due to the death of the option holder. In that event, the performance targetand any further conditions attaching to the option will fall away and the option may be exercised by thepersonal representatives of the option holder up to a maximum period of 12 months after the death.
If an employee leaves the service of the Company or any participating subsidiary by reason of retirement (other than on normal retirement age), redundancy, health reasons or due to the fact that the business for whichhe works is being sold, the option may, if the relevant committee of the Board at its discretion so determines, be exercised within a period of six months commencing three months before such individual leaves service and terminating three months after such individual leaves service. If an employee leaves employment due to retirement on normal retirement age, then the option may be exercised within a period of six monthscommencing three months prior to such retirement and terminating three months after such retirement.
Alterations
The Option Scheme permits the Board to alter its terms, subject to Revenue approval. Any material amendmentto the benefit of participants relating to eligibility, share issue limits, individual limits, takeover of the Company,capitalisation issue, rights issues or other variations of the share capital requires the prior sanction of theCompany in general meeting (except for minor amendments to benefit the administration of the OptionScheme, to take account of the change in legislation or to obtain or maintain favourable tax, exchange controlor regulatory treatment for participants in the Option Scheme or for the Company or its subsidiaries).
Administration
The Option Scheme will be administered by a duly constituted committee of the Board.
Application for admission of new shares issued under the Option Scheme will be made to the official lists of the Irish Stock Exchange and the London Stock Exchange.
Options are non-transferable (except on the death of the option holder) and cannot be cancelled. Any benefitsreceived under the Option Scheme are not pensionable.
In the opinion of the directors the adoption of the Option Scheme is in the best interests of the shareholders as a whole and they intend to vote in favour of the resolution proposing the adoption of the Option Scheme in respect of their own shareholdings.
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Chairman’s Letter
Appendix BPrincipal features of the Irish Life & Permanent 2001 Group Profit Sharing Scheme (“the Profit SharingScheme”)
The Irish Life & Permanent 2001 Group Profit Sharing Scheme (“the Profit Sharing Scheme”) provides for thedelivery of fully paid ordinary shares in Irish Life & Permanent plc (“the Company”) to employees and full-timedirectors of the Company and its participating subsidiaries. The Profit Sharing Scheme will be approved by theRevenue Commissioners as a profit sharing scheme meeting the requirements set out in the Taxes ConsolidationAct, 1997 (as amended). The approval of the Revenue Commissioners for the Profit Sharing Scheme has beensought and is awaited. It is proposed that the Profit Sharing Scheme will replace the Irish Permanent plc 1994Employee Share Ownership Plan and the Irish Life plc Irish Employee Profit Sharing Scheme.
The Profit Sharing Scheme is established by way of a Trust Deed and a set of Rules which the Company mustexecute under seal and which will appoint the trustees of the Profit Sharing Scheme (“the Trustees”). Whenshares are allocated to individuals participating in the Profit Sharing Scheme, provided those shares remainregistered in the name of the Trustees for a period set by legislation, at the end of that period the individual will receive the shares without a charge to income tax. At all times, there will be at least one Trustee who isunconnected with the Company.
Acquisition of Shares
Shares are acquired by the Trustees out of funds provided by the Company and its participating subsidiaries.Shares may be acquired by way of subscription or purchase on a stock exchange or from other shareholders.Where the Trustees subscribe for shares, the subscription price will, where shares are also purchased on a stock exchange, be the same as such purchase price. Where shares are not purchased on a stock exchange the subscription price shall be the lower of the price, if any, shown in the Irish Stock Exchange Daily Official List at which bargains in the shares were last recorded, or, where bargains in the shares other than those doneat special prices were recorded in the Daily Official List, the price at which those were recorded or, if more thanone was recorded, a price half way between the highest and lowest of such prices.
Participation in the Profit Sharing Scheme
Participation in the Profit Sharing Scheme is open to all employees and full-time directors of the Company andits subsidiaries to which the Profit Sharing Scheme is extended. Before being allowed to participate in the ProfitSharing Scheme, an individual must have been in the service of the Company, or one of its subsidiaries for acontinuous period of 12 months on the 31st December in the year prior to which the offer under the ProfitSharing Scheme is being made or such other date as the Board may determine. Further eligibility criteria applyto employees who have given notice or are leaving through redundancy.
Funds made available by the Company and participating subsidiaries to finance the acquisition of Shares underthe Profit Sharing Scheme may comprise of one or both of the following elements:
1. monies made available by the Company out of Group Profits (as defined in the Profit Sharing Scheme).This amount may not exceed 5% of the pre-tax profits for the relevant trading period of the Companyand its subsidiaries; and
2. the amount of any non-discretionary cash bonus payable to the individual concerned.
In addition, at the discretion of the Board, employees can be granted the option to forgo salary up to the lower of 7.5% of salary, or the amount made available under 1 and 2 above, in order to finance the acquisitionof additional shares.
Any benefits received under the Profit Sharing Scheme are not pensionable.
Individual Limits
The Taxes Consolidation Act, 1997 provides a limit on the value of shares which can be acquired by anyindividual in any tax year pursuant to a Revenue approved profit sharing scheme. Generally this limit isIR£10,000 per tax year. However, for the tax year commencing 6th April, 2001 and ending 31st December,2001 the limit is IR£7,400.
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Appendix B (continued)
Overall Profit Sharing Scheme Limits
In the 10 year period following adoption of the Profit Sharing Scheme by the Company (subject as set outbelow), 15% of the Company’s shares may be subscribed under the Profit Sharing Scheme and all other shareincentive schemes operated by the Company. Additionally, to enable a regular flow of subscription of shares,over any 3 year period the number of shares which may be subscribed under the Profit Sharing Scheme and all other share incentive schemes operated by the Company may not exceed 4.5% of the Company’s ordinary shares.
There are exceptions to the above limits in respect of shares issued (a) by the Company pursuant to theemployee share ownership trust and associated approved profit sharing scheme adopted by the Company inconnection with its acquisition of TSB Bank, and (b) by the Company pursuant to the Company’s 1999 ShareOption Scheme introduced as part of the merger solely to enable the Company to roll over options granted by Irish Life.
In any one year not more than 1% of the ordinary shares of the Company for the time being in issue may be issued for the purposes of the Profit Sharing Scheme.
In any year not more than 5% of the Group Profit can be allocated to the Profit Sharing Scheme for theacquisition of Shares.
Alterations
The Board has power to make alterations to the Profit Sharing Scheme, except that where an amendment willoperate to the advantage of Participants the prior sanction of the Company in general meeting shall be required(except for minor amendments to benefit the administration of the Profit Sharing Scheme, to take account ofthe change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment forparticipants in the Profit Sharing Scheme or for the Company or its subsidiaries).
In the opinion of the Directors, the adoption of the Profit Sharing Scheme is in the best interests of theshareholders as a whole and they intend to vote in favour of the resolution proposing the adoption of the Profit Sharing Scheme in respect of their own shareholdings.
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Notice of Meeting
NOTICE is hereby given that that seventh Annual General Meeting of the Company will be held at The Burlington Hotel, Upper Leeson Street, Dublin 4 on Monday, 28th May 2001 at 11.30 a.m. for thefollowing purposes:
Ordinary Business
1. To receive and consider the accounts for the year ended 31 December 2000 and the reports of theDirectors and Auditors thereon.
2. To declare a final dividend on the Ordinary Shares in the capital of the Company for the year ended 31 December 2000.
3. To re-appoint the following Directors who retire in accordance with the Articles of Association and, being eligible, offer themselves for re-appointment:
(a) Gillian Bowler (e) Kevin Murphy(b) Peter Fitzpatrick (f) David Went(c) Brian McConnell (g) Denis Casey(d) Kieran McGowan
4. (a) Subject to completion of the acquisition by the Company of the assets and undertaking of TSB Bankpursuant to an Order made by the Minister for Finance under Section 57 (inserted by the TrusteeSavings Banks Act, 2001) of the Trustee Savings Banks Act, 1989, and subject to the appointment of Harry Lorton as an additional Director of the Company following the completion of suchacquisition, to re-appoint him as a Director of the Company.
(b) Subject to completion of the acquisition by the Company of the assets and undertaking of TSB Bankpursuant to an Order made by the Minister for Finance under Section 57 (inserted by the TrusteeSavings Banks Act, 2001) of the Trustee Savings Banks Act, 1989, and subject to the appointment of Finbar Sheehan as an additional Director of the Company following the completion of suchacquisition, to re-appoint him as a Director of the Company.
5. To authorise the Directors to fix the remuneration of the Auditors.
Special Business
To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions:
6. That the Company and/or any subsidiary (as such expression is defined by Section 155 of the CompaniesAct, 1963) of the Company be generally authorised to make market purchases (as defined by Section212 of the Companies Act, 1990) of the Company’s Ordinary Shares on such terms and conditions andin such manner as the Directors, or as the case may be, the Directors of such subsidiary, may from timeto time determine in accordance with and subject to the provisions of the Companies Act, 1990 and tothe restrictions and provisions set out in Articles 50(b) and 50(c) of the Articles of Association of theCompany PROVIDED that the maximum aggregate number of Ordinary Shares authorised to be acquiredpursuant to this resolution shall be 28,853,967 Ordinary Shares; and for the purposes of Section 209 ofthe Companies Act, 1990, the re-issue price range at which any Treasury Share (as defined by the saidSection 209) for the time being held by the Company may be re-issued off-market shall be the pricerange set out in Article 50(d) of the Articles of Association of the Company.
The authorities hereby conferred shall expire at the close of business on the earlier of the date of thenext Annual General Meeting of the Company or 27th August, 2002 unless, in any such case, previouslyvaried, revoked or renewed in accordance with the provisions of the Companies Act, 1990.
7. That the Directors are hereby empowered pursuant to section 23 and section 24(1) of the Companies(Amendment) Act, 1983 to allot equity securities within the meaning of the said section 23 for cashpursuant to the authority to allot relevant securities conferred on the Directors by resolution No. 8passed by the members at the Annual General Meeting of the Company held on 17th May, 2000, as if sub-section 1 of the said section 23 did not apply to any such allotment provided that this powershall be limited to the allotment of equity securities:
(a) in connection with a rights issue in favour of shareholders where the equity securities are issuedproportionately to the respective numbers of shares held by such shareholders but subject to suchexclusions as the Directors may deem fit to deal with fractional entitlements or legal and practicalproblems arising in or in respect of any territory; and
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Notice of Meeting
(b) otherwise than in pursuance of (a) above, up to an aggregate nominal value of €4,616,635 (which is equivalent to IR£3,635,896), (representing 5% of the issued Ordinary Share capital of the Company as at 21st March, 2001),
and shall, unless previously renewed, revoked or varied by special resolution of the Company in generalmeeting, expire 15 months from the passing of this resolution or, if earlier, on the close of business onthe date of the next annual general meeting of the Company, save that the Company may, before suchexpiry, make an offer or agreement which would or might require equity securities to be allotted aftersuch expiry and the Directors may allot equity securities in pursuance of any such offer or agreement as if the power hereby conferred had not expired. Any powers conferred on the Directors to allot equitysecurities in accordance with the said sections 23 and 24(1) in force immediately before this resolution is passed shall be revoked upon the coming into effect of this resolution.
To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions:
8. That the Irish Life & Permanent Approved Share Option Scheme, 2001 (“the Option Scheme”)substantially in the form as described in Appendix A to the Chairman’s letter to the shareholders of the Company accompanying this Notice and approved by the Directors of the Company on 21st March,2001 and produced at this meeting (and for the purposes of identification initialled by the Chairmanhereof) be and is hereby approved, subject to such modifications, if any, as may be required to secureapproval of the Option Scheme by the Revenue Commissioners pursuant to the Taxes Consolidation Act,1997 (as amended) and the Directors of the Company be and are hereby authorised to adopt and enterinto the Option Scheme, subject to any such modifications as aforesaid, and to grant options under theOption Scheme and to execute all documents and to do all acts and things as may be necessary anddesirable to give effect to this resolution.
9. That the Irish Life & Permanent 2001 Group Profit Sharing Scheme (“the Profit Sharing Scheme”)substantially in the form as described in Appendix B to the Chairman’s letter to the shareholders of theCompany accompanying this Notice and approved by the Directors of the Company on 21st March,2001 and produced to this meeting (and for the purposes of identification initialled by the Chairman) beand is hereby approved subject to such modifications, if any, as may be required to secure approval ofthe Profit Sharing Scheme by the Revenue Commissioners pursuant to the Taxes Consolidation Act, 1997(as amended) and the Directors of the Company be and are hereby authorised to enter into the ProfitSharing Scheme, subject to any such modifications as aforesaid, and to execute all documents and to do all acts and things as may be necessary or desirable to give effect to this resolution.
10. That the amendments (an explanation of which is set forth in the Chairman’s letter accompanying thisnotice of meeting) proposed in respect of each of the Irish Life & Permanent Performance Option Plan,2000 (the “Plan”) and the Company’s Irish 1999 Savings Related Share Scheme (the “Scheme”):
(i) to exclude from the limitations prescribed by the Plan and the Scheme on the amount of OrdinaryShares which may be issued by the Company, Ordinary Shares in the Company which may be issuedunder the employee share ownership trust and associated approved profit sharing scheme to beadopted by the Company in conjunction with its acquisition of TSB Bank, and
(ii) to increase the number of Ordinary Shares which may be issued or placed under option pursuant to the proposed Revenue Approved Share Option Scheme, 2001 and subscribed under the proposedRevenue Approved Profit Sharing Scheme, in each case in any ten year period (when aggregated withthe number of Ordinary Shares which may be issued or placed under option pursuant to the Plan andthe Scheme and under all other share incentive, profit sharing schemes and option schemes adoptedby the Company) to 15% of the Ordinary Shares of the Company for the time being in issue, and
(iii) to increase the number of Ordinary Shares which may be issued or placed under option pursuant to the proposed Revenue Approved Share Option Scheme, 2001 and subscribed under the proposedRevenue Approved Profit Sharing Scheme, in each case in any three year period (when aggregatedwith the number of Ordinary Shares which may be issued or placed under option pursuant to the Plan and the Scheme and under all other share incentive, profit sharing schemes and option schemes adopted by the Company) to 4.5% of the Ordinary Shares of the Company for the time being in issue,
be and they are hereby approved and that the Directors be and they are hereby authorised to give effect thereto.
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Notice of Meeting
11. That the Company hereby approves the payment of IR£316,396 to Mr. William Kane as consideration for or in connection with his retirement from the office of Director of the Company.
By order of the Board
Sean A. RyanSecretary
Registered Office:Irish Life Centre, Lower Abbey Street, Dublin 1
21st March, 2001
Notes:
1. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend,speak and vote instead of him. A proxy need not be a member of the Company.
2. To be valid, the form of proxy duly completed and executed together with any authority under which itis executed or a copy of such authority certified notarially or by a solicitor practising in the Republic ofIreland must be deposited at the registered office of the Company at the Irish Life Centre, Lower AbbeyStreet, Dublin 1 or (at the member’s option) at the offices of the Company’s Registrar, Capita CorporateRegistrars plc, Unit 5, Manor Street Business Park, Manor Street, Dublin 7, Ireland, in either case, not less than 48 hours before the time appointed for the Annual General Meeting.
3. In the case of a corporation, the form of proxy must be either executed under seal or signed on itsbehalf by a duly authorised officer or attorney.
4. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy,shall be accepted to the exclusion of the votes of the other joint holder(s) and, for this purpose, seniorityshall be determined by the order in which the names stand in the register of members of the Company.
5. Completing and returning a form of proxy will not preclude a member from attending and voting at themeeting should he so wish.
6. The Company, pursuant to Regulation 14 of the Companies Act, 1990 (Uncertificated Securities)Regulations, 1996 specifies that only those shareholders registered in the register of members of theCompany as at 11.30 a.m. on 26th May, 2001 (or in the case of an adjournment as at 48 hours beforethe time of the adjourned meeting) shall be entitled to attend and vote at the meeting in respect of thenumber of shares registered in their names at the time. Changes to entries in the register after that timewill be disregarded in determining the right of any person to attend and/or vote at the meeting.
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