Overview of Business Performance - Investis
Overview of Business Performance - Investis
Overview of Business Performance - Investis
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14<br />
<strong>Overview</strong> <strong>of</strong> <strong>Business</strong> <strong>Performance</strong><br />
The CR programme addresses such issues as our values<br />
as a company and how we apply them including, our<br />
standards <strong>of</strong> customer care, our involvement with<br />
local communities and reducing our impact on the<br />
environment. Details <strong>of</strong> our CR initiatives and activities<br />
in 2007 and our plans for 2008 are set out in full detail<br />
in our Corporate Responsibility Report 2007 which is<br />
available on our website at www.irishlifepermanent.ie.<br />
Risk Governance Structure<br />
The board <strong>of</strong> directors approves overall policy in relation<br />
to the types and level <strong>of</strong> risk that the group is permitted<br />
to assume in the implementation <strong>of</strong> its strategic and<br />
business plans.<br />
The Group Risk Committee, which was established<br />
during 2007, is chaired by the Group Chief Executive<br />
and comprises members <strong>of</strong> senior management. It is<br />
the executive committee with overall responsibility<br />
for risk management across the group. The Group Risk<br />
Committee exercises authority delegated by the Board<br />
<strong>of</strong> Directors to set policies in relation to specifi c risk<br />
categories and to monitor total risk levels across the<br />
group, in line with the overall policy approved by the<br />
Board <strong>of</strong> Directors.<br />
The Group Risk Committee, in turn, delegates<br />
responsibility for the monitoring and management <strong>of</strong><br />
specifi c risks to committees accountable to it.<br />
The committees reporting into the Group Risk<br />
Committee include the Group Assets and Liabilities<br />
Committee, the Group Credit Committee, the Group<br />
Operational Risk Committee and the Bank Basel<br />
Review Group. These committees monitor and manage<br />
credit, liquidity, market, insurance and operational risk,<br />
ensuring that the group’s objectives and risk policies<br />
are adhered to. (Refer to note 51 for more detailed<br />
information.)<br />
Corporate Activity<br />
In November 2007, the group consolidated its holding<br />
in Irish Life International by buying out the minority<br />
25% shareholding for a7m.<br />
Basel II (Revised Capital Framework)<br />
Implementation<br />
During the year the group continued with its<br />
preparations for the implementation <strong>of</strong> the new<br />
regulatory requirements <strong>of</strong> Basel II as interpreted in<br />
the EU through the Capital Requirements Directive<br />
(“CRD”). In implementing Basel II, the group has<br />
adopted the Internal Ratings Based (“IRB”) approach<br />
to credit risk and was awarded IRB accreditation in<br />
late 2007. In addition, the group submitted its Internal<br />
Capital Adequacy Assessment Process (“ICAAP”),<br />
which is a process for assessing its overall capital<br />
adequacy in relation to its risk pr<strong>of</strong>i le and a strategy<br />
for maintaining its capital levels, to the Financial<br />
Regulator in June 2007. Implementation <strong>of</strong> CRD<br />
required signifi cant changes to the group’s existing<br />
risk management structures and processes in addition<br />
to changes in the way in which the group’s required<br />
level <strong>of</strong> regulatory capital is computed. The group is<br />
confi dent that the signifi cant investment involved in<br />
Basel II implementation will materially enhance the<br />
sound risk management framework already in place<br />
within the group and will drive signifi cant advantages in<br />
terms <strong>of</strong> risk management and capital effi ciency for the<br />
group.<br />
Further details are set out in note 46 to the accounts.<br />
Capital and Liquidity<br />
The group’s capital ratios remained strong at 31<br />
December 2007. In the bank, the Tier 1 and total<br />
capital ratios were 10.4% (31 December 2006: 10.4%)<br />
compared to a required ratio <strong>of</strong> 9.5%. The solvency<br />
margin in Irish Life Assurance plc, the group’s principal<br />
life assurance business, was covered 1.6 times by<br />
available assets (31 December 2006: 1.8 times).<br />
During the fi rst half <strong>of</strong> 2007 the Irish Financial Regulator<br />
changed the regulations concerning the liquidity<br />
requirements <strong>of</strong> the Irish banking system. Previously<br />
Irish banks were required to meet a minimum 25%<br />
liquidity ratio (IL&P’s liquidity ratio at 31 December<br />
2006 was 26%). Under the new protocol required<br />
liquidity holdings are based upon various cash fl ow<br />
stress tests. The key limits applied are that an institution<br />
must have suffi cient available liquidity to cover 100% <strong>of</strong><br />
outfl ows over the next eight days and 90% <strong>of</strong> outfl ows<br />
over the next month. Throughout the year the group<br />
operated comfortably within these limits.<br />
Details <strong>of</strong> the group’s capital management are set out in<br />
Note 46 to the accounts.<br />
Dividend<br />
The directors have declared a fi nal dividend <strong>of</strong> 52.5<br />
cent per share. Subject to shareholder approval the<br />
dividend will be paid on 28 May 2008 to shareholders<br />
on the register as at 25 April 2008. The ex-dividend date<br />
is 23 April 2008. The fi nal dividend will bring the total<br />
dividend for the year to 75.0 cent, an increase <strong>of</strong> 10.3%<br />
on the 2006 total dividend <strong>of</strong> 68.0 cent. On an IFRS<br />
basis, the dividend is covered 2.2 times by total pr<strong>of</strong>i t.<br />
On the supplementary embedded value basis, the<br />
dividend is covered 2.0 times by total pr<strong>of</strong>i t (2.6 times<br />
at the operating level) and represents an approximate<br />
yield <strong>of</strong> 7.2% on the basis <strong>of</strong> the share price at the end<br />
<strong>of</strong> February 2008.<br />
Supplementary Group Reporting - European<br />
Embedded Value<br />
Irish Life has, since its fl otation in 1991, adopted<br />
embedded value accounting as its primary reporting<br />
basis for its life assurance activities. Despite the<br />
transition to IFRS, the group has continued to provide<br />
supplementary information on this basis, covering both<br />
investment and insurance contracts linked into Life<br />
<strong>Business</strong>. While supporting the stated objectives <strong>of</strong> IFRS