Overview of Business Performance - Investis
Overview of Business Performance - Investis
Overview of Business Performance - Investis
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
<strong>Overview</strong> <strong>of</strong> <strong>Business</strong> <strong>Performance</strong><br />
including ILIM, were 2.0% in 2007 (2006: 2.4%).<br />
The PVNBP margin is calculated as follows:<br />
2007 2006<br />
% %<br />
Life 2.9 3.1<br />
Investment (ILIM) 0.7 1.1<br />
2.0 2.4<br />
The internal rate <strong>of</strong> return achieved on new business<br />
sales, excluding ILIM, was 13.3% which compares to<br />
12.1% achieved in 2006. The average payback period 3<br />
across the group’s life product set was 6 years. The<br />
consolidated internal rate <strong>of</strong> return achieved on<br />
new business sales, including ILIM, was 14.3% which<br />
compares to 13.2% achieved in 2006.<br />
In-force <strong>Business</strong><br />
The expected in-force return represents the unwind <strong>of</strong><br />
the risk discount rate and the growth in these pr<strong>of</strong>i ts<br />
refl ect very strong underlying growth in the portfolio.<br />
The expected return on the net worth, which relates to<br />
earnings on shareholder assets calculated by reference<br />
to the assumed long term rate <strong>of</strong> return on property<br />
and equities and the actual return on short term cash,<br />
increased to a29m from a26m mainly due to a higher<br />
yield achieved on cash assets as euro rates increased.<br />
Experience variances continue to be positive at a10m<br />
compared to a14m in 2006 with particularly strong risk<br />
experience achieved in both mortality and morbidity.<br />
Assumption changes, largely refl ecting continued unit<br />
cost productivity gains and good risk experience, were<br />
a positive a35m compared to a17m in 2006. Overall the<br />
assumptions underlying the embedded value continue<br />
to be prudent.<br />
Costs<br />
Costs within the life company continue to be tightly<br />
managed. Overall, costs grew 7% to a225m in 2007 from<br />
a210m with the principal driver <strong>of</strong> this growth being<br />
underlying salary infl ation.<br />
Banking Operating Review<br />
permanent tsb, the group’s banking division has a<br />
strategic objective <strong>of</strong> becoming the leading provider<br />
<strong>of</strong> personal banking services in Ireland. The bank<br />
continues to follow a multichannel distribution strategy<br />
incorporating a broadly based branch and agency<br />
network, a direct sales force and extensive broker<br />
support supplemented by telephone and internet<br />
banking facilities.<br />
A major focus for the bank in 2007 was the continued<br />
implementation <strong>of</strong> its ambition to make permanent<br />
tsb the largest retail bank in Ireland through<br />
aggressively targeting the current account market as<br />
part <strong>of</strong> its customer acquisition strategy. In 2007, the<br />
3<br />
Payback period is calculated as the number <strong>of</strong> years it takes to recover<br />
initial outlay.<br />
bank continued to increase the total customer base<br />
notwithstanding vigorous competition from other banks<br />
promoting similiar product <strong>of</strong>ferings. 2007 also saw<br />
the bank defend its market share in the Irish mortgage<br />
market, protecting substantially all <strong>of</strong> the market<br />
share gains it won in 2006 notwithstanding the fi ercely<br />
competitive mortgage market place throughout 2007.<br />
Notwithstanding the slowdown in the Irish housing<br />
market in 2007 and the impact <strong>of</strong> credit market<br />
turbulence the group’s banking business performed<br />
extremely well with underlying pre-tax pr<strong>of</strong>i ts growing<br />
14% before the exceptional provision <strong>of</strong> a11.7m in<br />
respect <strong>of</strong> solicitor fraud case previously noted.<br />
Although gross new lending declined by 3% to a12.4bln<br />
from the a12.9bln achieved in 2006 principally due to<br />
a reduction <strong>of</strong> 19% in new Irish residential mortgages,<br />
total asset balances grew 16% to a39.2bln (2006:<br />
a33.8bln).<br />
Lending Growth<br />
Total loans and receivables to customers increased 16%<br />
to a39.2bln (2006: a33.8bln) which represents a very<br />
strong performance given the economic backdrop.<br />
The growth in the balances over principal business lines<br />
was as follows:<br />
2007 2006 Growth<br />
bbln abln %<br />
Mortgage lending ROI * 26.3 23.1 14<br />
Consumer fi nance 2.3 2.0 15<br />
Commercial lending 2.3 1.9 24<br />
30.9 27.0 15<br />
Mortgage lending - UK (£Stg)* 6.1 4.6 31<br />
Total lending - am 39.2 33.8 16<br />
* including securitised mortgages<br />
After ten years <strong>of</strong> spectacular growth the Irish housing<br />
market slowed in 2007. Overall, a total <strong>of</strong> over 78,000<br />
new units were completed in 2007, a 16.5% reduction<br />
on the record levels achieved in 2006, while average<br />
house prices came back some 6% - 7% in the calendar<br />
year. Refl ecting this s<strong>of</strong>tening in the market, gross new<br />
Irish mortgages issued by the group at a7.0bln showed a<br />
reduction <strong>of</strong> 19% on the record levels <strong>of</strong> a8.7bln issued<br />
in 2006.<br />
Against this backdrop Irish residential mortgages<br />
outstanding increased 14% to a26.3bln compared to<br />
a23.1bln at year end 2006 with part <strong>of</strong> the increase<br />
in the portfolio being due to a reduction in the<br />
level <strong>of</strong> early redemption activity (notwithstanding<br />
some extremely aggressive switcher <strong>of</strong>ferings from<br />
competitors), refl ecting management actions in this<br />
area.<br />
19