After-tax profits at Irish Life & Permanent would have been 14 per cent lower last year if the group had reported under new accounting standards that have since come into force.
Irish Life & Permanent said yesterday that its reported profits would have been €353 million in 2004 if it had adopted International Financial Reporting Standards (IFRS). This compares to the €411 million that was actually reported for last year.
Under the European Embedded Value (EEV) methodology, another new standard, reported profits would have been 4 per cent higher at €427 million.
Irish Life & Permanent will report its results under both standards from now on.
IFRS has been introduced for all EU-listed companies, while Irish Life & Permanent argues that results under the EEV methodology will better reflect the performance of its life business.
Irish Life and Permanent's group finance director, Peter Fitzpatrick, pointed out yesterday that neither shift will have an impact on the group's underlying capital structure. In particular, he said, the group's "fundamental economics and cash flows" will be unaffected.
The main factor driving last year's reported profits lower under IFRS was the definition of insurance contracts. The standard means that accounting for investment contracts can no longer be done on an embedded value basis.
This means that profits can not be taken for products up front where they are actually earned over a period of years. Under IFRS, such profits must be deferred until when they are actually received.
Almost 90 per cent of Irish Life & Permanent's business is classified as "investment" rather than "insurance".
This change would have taken €58 million off reported profits last year.
Yesterday's update also showed that shareholders' equity at Irish Life & Permanent would have been 21 per cent lower at €1.8 billion last year under IFRS.
Analysts took comfort from the statement, which was broadly in line with their expectations on both EEV and IFRS fronts. David Odlum at NCB noted that his fundamental view of the stock remains unchanged in light of "the strength of Irish Life & Permanent's business franchise".
Irish Life & Permanent's shares were strong yesterday, rising by 22 cent to €14.72.
