A drop in investment and product earnings produced a 13 per cent fall in after-tax operating profits to €127.3 million (£100.2 million) at Irish Life and Permanent for the six months to end June.
Chief executive Mr David Went insisted that the group's core businesses performed strongly, blaming the profit fall on weak investment markets and "exceptional positive experience variances" in the first half of 2000.
Underlying product earnings were up 13 per cent when these variances were excluded, he said. He described the outcome as satisfactory "following from the extremely strong out-turn achieved in 2000".
Despite a strong 23 per cent rise in life and pension sales in the Irish market, the results show a 5 per cent fall in after-tax product earnings to €120.5 million. But first-half 2000 product earnings were boosted by a once-off €23.6 million of merger benefits and tax savings.
Key recurring product earnings were up 11 per cent in the core life assurance business and up 20 per cent in banking and other activities, according to Irish Life. The results show a fall in investment earnings to €10 million from €20.2 million, and a greater loss at associate Allianz Irish Life, up to €3.2 million, from €1.5 million.
Shareholders will receive an interim dividend of 13 cents per share, up from 11.1 cents, with the increase indicating the group's confidence for the future, Mr Went said. Group chairman Mr Roy Douglas said the medium- term outlook for financial services was strong and supported by favourable demographics for life, personal and mortgage products.
In the current half and into 2002, the group will benefit from higher-than-expected cost savings and revenue gains from the integration of TSB Bank, which contributed profits of €4.1 million for two months of the first half.
Core life assurance business product earnings were down 11.1 per cent to €91.8, with sales up 21 per cent to €222 million.
In the Irish market, sales were up 23 per cent to €172.6 million, with a 37 per cent rise in the value of new business to €24.2 million. The group reported a strong 240 per cent rise in savings products sales, including Special Savings Incentive Scheme products.
In the US, where the group expects to close the sale of Interstate and First Variable this month and is seeking a buyer for Guarantee Reserve, operating earnings were down to €6.7 million from €6.9 million. In the UK where the City of Westminster book is being run off, after-tax operating profits were down to €2.6 million, from €4 million.
In the banking business, product earnings were up 19.6 per cent to €28.7 million. The rise in earnings reflected increased lending volumes and stable margins. But the banking outcome was flattered by the inclusion of TSB, indicating a flat performance from Irish Permanent. Mr Went said net interest and other income at Irish Permanent increased, but growth was offset by increased commission payments to brokers for mortgage business.
Gross new lending including TSB advances was up 7 per cent, with a 21 per cent rise in residential mortgages, but commercial lending was down on the previous first half, reflecting "a cautious approach", while new car and consumer loans were flat. Sales of life and pension products through the banking division were up 70 per cent to €23.5 million.
Around 86 per cent of group profit after tax was generated in the Irish market, with 9 per cent from the UK and 5 per cent from the US. The life business accounted for 74 per cent of profits with banking including TSB providing 26 per cent. The group will continue with its €150 million share buyback programme - with €115 million still to spend.