Irish Life and Permanent has reported a 31 per cent rise in pre-tax profits to €355 million last year, but is braced for a difficult 12 months in 2003, particularly if stock markets remain weak.
The banking and life assurance group's profits are slightly better than analysts had been predicting although it has changed the basis on which it reports its figures to a pre-tax basis, creating some confusion.
After-tax profits were €290 million, significantly ahead of analysts' estimates of more than €270 million. The group's shares climbed 8 cent to €8.95 on the back of the figures.
The strong performance contrasts with the difficulties being experienced by many European insurers, some of which have warned of a decline in dividends as the continued decline of stock market valuations hits profits. In contrast, Irish Life and Permanent has announced a 10 per cent increase in its dividend to 47.5 cents per share and has pledged to at least match or improve on this in 2003, depending on the rate of growth in the business.
"Looking forward, it's clear that the market as a whole expects a more challenging environment for retail life and pensions businesses in the current year and we share that sentiment. We do believe, however, that we are well positioned to make the most of the opportunities which will remain in the Irish market," chief executive, Mr David Went, said yesterday.
The group's performance was boosted by a number of exceptional contributions. These include a profit of €103.2 million on the sale of its industrial branch business to Royal Liver last year. It also realised a profit of €30.3 million from the sale of a number of branches around the Republic following the merger of Irish Permanent and TSB.
Profits at its life assurance and pensions business rose by 13 per cent to €220 million with sales of Government-backed special savings incentive accounts (SSIAs) offsetting the downturn in demand for investment products.
New business made a contribution of €58.2 million, with the group reporting SSIA sales of €102 million and a 25 per cent increase in total new business sales to €417.6 million.
Profits at Permanent TSB Bank rose by 7 per cent to €97.4 million. During 2002, the bank said its loan book grew by 13 per cent to €1.7 billion with new loans issued up 25 per cent to €4.5 billion.
The bank, which is the biggest provider of mortgages in the Irish market, reported a 16 per cent increase in its mortgage book to €1.4 billion and estimates its market share at 24 per cent. Its fee income was affected by its decision to bear the cost of mortgage indemnity guarantee bonds for mortgage customers last year. Car loans and commercial loans grew by 2 per cent and 7 per cent respectively during the year.
The group says it has no concerns in relation to credit quality and has made generous provisions for any potential deterioration. During 2002 it wrote off bad debts worth €5.4 million, compared with €5.2 million in the previous year.
Its profit margin on its banking activities reduced from 1.9 per cent to 1.8 per cent reflecting the decline in interest rates last year.
Expenses associated with the integration of TSB and Irish Permanent increased to €244.4 million, with the group reporting progress in terms of the cost synergies being generated. An associated company, Allianz-Irish Life, contributed €29 million, compared with €6.8 million in the previous year.
