Irish Life & Permanent (IL&P) has said that new accounting standards to be introduced from January would have cut net profits by 10-20 per cent last year, had they been in force.
The international financial reporting standards (IFRS) will significantly change the way the group formally reports its financial performance.
"The impact will be to increase the reported level of profits arising from the group's banking activities. In respect of its life assurance activities, the impact will be to reduce reported profits," the company said.
In a presentation to analysts in London yesterday, IL&P set out the impact the new accountancy measures would have had on its 2003 reported accounts. They will affect the way the group calculates embedded value profits - or the net present value of future profits from life assurance business it has written.
The changes would have served to depress last year's net profit of €262 million by 10-20 per cent, depending on the final interpretation of the standard.
Under the rules, firms can only embed insurance contracts so the exact impact will depend on what can be classified as insurance contracts and what will be deemed investment contracts.
"Our feeling is... the impact is going to be toward the smaller end of the range, more toward 10 per cent than 20 per cent," finance director Mr Peter Fitzpatrick said.
The standards will also have an impact on the net asset value of the group. Under the rules, IL&P's opening reported net assets at the start of the year would have been €1.6-€1.68 billion compared to an actual position of €2 billion.
But IL&P stressed yesterday that the accountancy changes would not affect the group's statutory profits, its strong capital position or its underlying cash.
"They will have no impact on our ability to pay dividends," Mr Fitzpatrick noted.
He admitted, however, that the new measures would probably increase the complexity of the group accounts and make them less "user friendly".
While Irish Life & Permanent will commence IFRS reporting with its interim results next year, it also plans to continue to produce embedded value accounts.
