Strong growth in investment earnings, including contributions from associated companies, boosted profits after tax at Irish Life by 28 per cent to £62.6 million for the six months to the end of June. But profits from the sale of life assurance products fell, reflecting the impact of the five-month dispute with sales staff, exceptional charges and tighter margins in competitive markets.
Life assurance sales were flat in the Irish market, depressed by the dispute which managing director Mr David Kingston said reduced the value of new business by about £2 million. Overall he described the outcome as a "very good financial performance".
The latest results include a initial three-month contribution from the £100 million US acquisition, Guaranteed Reserve. It added £3 million to first-half profits.
In strong markets, group investment earnings jumped from £12 million to £32 million. This £20 million increase is after a £5.7 million charge for new technology needed to change group investment management strategy.
Associated companies, including Irish Intercontinental Bank where Irish Life has a 25 per cent stake, Irish Life Finance (50 per cent-owned) and the AGF-Irish Life general insurance operation (30 per cent-owned), contributed £10.6 million of investment earnings, up from £3.7 million.
Property investments, including some revaluations, contributed £9 million, up from £5 million.
The strongest investment return came from Almanij, the quoted Belgian holding company and main Kredietbank shareholder, in which Irish Life has a 2 per cent stake. It chipped in £14.5 million, up from £2 million. The dispute with its Irish sales staff depressed sales in the period, according to Mr Kingston. Sales in the Irish market were flat. Measured on the adjusted premium equivalent (APE) basis - 10 per cent of single premiums plus total annual premiums - sales in the Irish market slipped to £35 million from £35.3 million. Single or lump sum premiums were flat at £106.4 million while regular, or recurring, premium income was flat at £24.4 million.
The Irish sales figures show the impact of the dispute. APE sales on the retail life market, which the field sales team serves, were down from £13.3 million to £10.5 million and retail pension sales fell from £4.4 million to £3.4 million. A breakdown of the Irish sales figures shows that "investment only" products was the only category where sales increased - up from £24 million to £33.9 million - though there were some small improvements in areas of corporate pension business. Results at Irish Life are made up of profits from the sale of life assurance policies and investment earnings. Product earnings - profits generated from the sale of life assurance and investment products - rose to £40.2 million from £36.8 million. Exceptional charges of £10 million for the dispute, special development projects, training and strengthening reserves reduced product earnings to £30.2 million. Earnings from existing business - policies with existing customers - rose to £34.5 million from £30.2 million before the exceptional charges. But earnings from new business - policies sold in the period - dropped from £6.6 million to £5.7 million. Sales growth in the US and lower costs in Britain helped to reduce the impact of a weak performance in the domestic market.
A geographical breakdown of first-half profits shows that Ireland, which includes the International Financial Services Centre business, Irish Life International, generated profits of £27.8 million. Exceptional charges reduced profits to £17.8 million, down from £29.2 million, and to 28 per cent of group profits from 60 per cent. Profits from existing policies rose to £23 million from £22.7 million, before the exceptional charge. Profits from new business fell from £5.1 million to £2.9 million. In the US profits jumped from £4.6 million to £9.5 million with a strong performance from its Interstate operation. Guaranteed Reserve, included for three months, contributed £3 million. But profits at First Variable were below expectations.
The US market accounted for 15 per cent of group profits, up from 9.4 per cent. Existing policies generated profits of £6.2 million, up from £4.2 million and new business generated profits of £2 million, up from £700,000. In Britain, profits rose to £6.9 million, or 15 per cent of group profits, from £4.3 million or 8.8 per cent. The increase in profits reflects cost and efficiency measures taken over the past year and the impact of stronger sterling. Profits from existing business improved to £5.3 million from £3.3 million.
With earnings per share of 20.01p, up from 15.81p, shareholders are to get a 9.9 per cent increase in their net interim dividend to 3.9p per share.
At the end of June, Irish Life's embedded value - a measure of worth which includes the value of business in force and the net worth of the group - was £829 million, up from £758 million.
