Irish Life & Permanent Interim Result Announcement August 27th 2008

Analyst presentation script

Gillian Bowler, Chairman

Slide 2: Forward Looking Statement Good morning ladies & gentlemen – both to those of you here in Dublin and those participating by

way of conference call and video link. You are all very welcome.

Slide 3: 2008 Interim Results Well I know you’ll all agree that we’re meeting today in the context of a difficult and uncertain

business environment.

From the Board’s perspective our priority has been to ensure that the Group responds flexibly

and swiftly to how we find the marketplace today and that we prepare for how we expect it to be

over the coming period. I think the account we present this morning demonstrates that we’ve

done so effectively.

It’s important to say also that the Board is very conscious of the strengths which we bring to the

table in a challenging period like now.

We have two key attributes which are strongly in our favour:

• First - is the sheer strength and breadth of the Group. We have exceptional franchises in

our key markets and a very diverse suite of businesses.

• Secondly we have an exceptionally low risk profile in both our life business – where the

vast bulk of our investment products are unit linked – and in the banking business where

the vast bulk of our lending is secured and where we effectively have, for example, zero

exposure to development loans or to corporate or SME lending.

These facts don’t diminish the challenges we face over the remainder of this year or beyond. But

they do give us confidence in our ability to withstand them. When the market stabilises and when

the strong fundamentals underpinning the Irish economy reassert themselves, we will be strongly

positioned to take full advantage of the opportunities which will emerge.

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Now I’d like to hand you over to Group Chief Executive, Denis Casey, who will take you through

the performance of the Group over the first half of the year.

Denis Casey, CEO

Slide 4 – Business Review Thank you Gillian. Good morning Ladies & Gentlemen.

Well, as the Chairman has said, the business environment today is a very different place than it

was when we presented to you this time last year.

Over the past 12 months, the global financial services industry has been buffeted by a series of

shocks of unprecedented severity and it’s clear that there’s still some way to go before normal

conditions reassert themselves.

And here in Ireland, the downdraft from the global credit crunch has accelerated the slowdown in

our economy.

So these are more difficult times but at Irish life and Permanent we’re well positioned to deal with

these challenges.

Over the past ten years we’ve created outstanding businesses and franchises and today’s results

clearly demonstrate the resilience of those businesses and their capacity to compete successfully

and to operate profitably in an environment which has presented all participants with

unprecedented challenges.

Slide 5: Priorities At the outset of this presentation, it might be helpful to spell out our priorities in the current

environment.

• Firstly we’re determined to continue to develop our franchise in the life and pensions

market.

While the demand for investments and savings has borne the brunt of very weak equity and

property markets in the period, we’ve performed well in respect of protection and pensions.

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Overall pension sales are ahead by 3% buoyed by pensions sold through our Corporate Business

division where sales grew by 12% in the six months.

• Secondly we’re focussed on adapting our banking business to the dislocation in global

credit markets

Our response here has been threefold:

1. we’ve moderated new lending growth, concentrating on our core customer franchises

2. we’re taking actions to broaden our deposit gathering activities

3. and we’re acting to protect our margins by changing intermediary commission terms and

by re-pricing mortgage products to reflect higher funding costs. The slightly better than

expected six month net interest margin at 108 basis points reflects these actions.

• Our third priority has been to put our businesses onto a footing that will ensure we

minimise losses from credit impairments.

Just to remind you we have no exposure and no write downs relating to US sub prime or other

toxic assets and we’re also well placed in that permanent tsb has effectively no exposure to

residential or commercial property development or to the SME sector.

Our Irish Residential Mortgage portfolio is our key area of lending activity – happy to say again –

we continue to have an exceptionally good arrears experience in this book.

In our UK mortgage book, we have seen a pick up in arrears but our experience here continues to

be much better than our UK peer group …and I’ll come back to this later in the presentation.

• Fourth priority has been to adjust our cost base in response to downward pressure on

sales and revenues

We’ve made managing our costs a priority in all of our businesses and we’ve already achieved

substantial savings which you can see flowing through strongly in life in-force earnings in the

period. There’s more work to be done here in the second half of the year.

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• And our final priority has been maintaining and increasing the Group’s capital strength

and flexibility.

Irish Life and Permanent enjoys a strong capital position with exceptional flexibility. Our core Tier

1 Capital ratio in the bank stands at over 10% at end June.

One of the key features of the bank’s capital is the relatively low level of gearing it contains. We

have significant Hybrid Tier 1 and Tier 2 capacity available to us in the bank and this gives us a

high level of comfort at the current time.

The life company, which is generating significant surpluses from its back book, currently only has

a minimal amount of debt (€200 million of tier 2 debt which we raised in 2007).

We have significant scope to use reinsurance financing to fund the life new business strain and

this initiative alone has the capacity to accelerate the transfer of some €250 million of capital to

the bank holding company over the next few years.

In addition, we have the option of securitising the life company’s in-force portfolio and this

represents a further store of potential capital running to hundreds of millions of Euro.

And looking a little further out into the future our latest Solvency 2 quantitative impact study -

QIS4 - is pointing to a potential life company reserve release under the Solvency 2 regime in

excess of €1 billion.

So in a sense our reinsurance financing and securitisation opportunities represent a potential

bridge to accelerate access to a store of surplus capital that we know we have available in the

Group.

So we have a uniquely flexible capital structure with a store of capital which we believe will see us

safely through the current economic cycle.

So these have been our priorities in the period – and our focus on each of these areas has

protected our profitability and allowed us to make good progress in preparing our businesses for

the new environment.

My presentation this morning will give you an overview of our performance for the six

months….and outline the trends in our key business units.

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Peter Fitzpatrick – our Group Finance Director – will then take you through the detail of the

financial performance in the first half of the year after which we will both take questions.

So, let me start with an overview of the performance over the period.

Slide 6: H1 2008 Performance I guess the first thing to say is that the results we’re reporting are very much in line with the

guidance we gave in the Pre Close statement in June.

• Group pre-tax operating profit for the period came in at €300 million.

• Life sales at €294 million are down 16% year on year but well ahead of the overall

market. That’s a good performance, particularly when set against the SSIA bonanza we

enjoyed in H1 2007 and the sharp downturn in investment markets since then.

• We’ve had another great performance in fund management where Irish Life Investment

Managers recorded inflows of over €1 billion during the six months.

• In the bank, loan book growth has been modest, as we predicted. We had growth of 5%

during the period and given the ongoing disruption in global credit markets we’re

targeting low single digit balance sheet growth for the full year. Credit experience across

our loan books continues to be good.

• And very importantly the bank continues to grow its customer base with a further 31,000

new current account customers added in the first half.

So – a robust performance in what has clearly been a more difficult environment.

In our Interim announcement and in the supplementary slides to this presentation we provide

detailed information about the performance in the operating businesses, but I want to give you a

broad picture of how the different parts of the group are performing – the life company, the funds

management business and the banking business.

We’ll start with the life & funds management businesses - the bedrock of the Group - accounting

for about two thirds of the Group’s earnings.

Slide 7: Life & Investment

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In Irish Life over recent years we’ve created three exceptionally strong platforms to drive our life &

investment business:

• Irish Life Retail

• Irish Life Corporate Business

• and ILIM, our funds management business

These businesses now enjoy market shares of over 30% in their respective sectors…making Irish

Life the stand out player in life, pensions and asset management in Ireland.

In 2008 the life market has been buffeted by, firstly, the turmoil in international equity and

property markets which has taken its toll on investor sentiment – and, secondly, by declining

consumer confidence in the face of a weakening Irish economy.

In market conditions like this, the breadth of our product range and distribution reach are key

advantages and while we’ve not been immune to the general trends we have fared better than

the market as a whole over the six months.

In time we’re confident that the underlying fundamentals in this marketplace – strong medium

term economic prospects, positive demographics and a supportive public policy environment for

retirement savings will reassert themselves.

In the meantime, our focus is on strengthening our market position and franchise and on

managing our cost base to protect the profitability of our new business.

Slide 8: Life Sales Total life sales in the period amounted to €294 million – down from €350 million in H1 2007.

Within that total Corporate business sales are up 12% while sales in Retail are down 32%.

Corporate Business is displaying its strong defensive characteristics and is performing well on the

back of continuing strong employment – with the requisite pension funding that you get with that -

and supported by our very strong service and investment management proposition which mean

we’re continuing to gain market share in that business.

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In Irish Life Retail, investment bond sales have been weak, down some 60%, and this has been

the major factor affecting the Retail performance. Retail protection sales were flat for the six

months.

Life margins have held up well – coming in at 18% for the period and overall our life sales

performance has seen us increase our market share in the period to 33%, up from 30% for full

year 2007.

Slide 9: Investment Management Turning then to ILIM.

Our out-performance in fund management has been an important factor underpinning the

strength of the Irish Life franchise over the past decade and ILIM has now established itself as

the clear market leader in the Irish funds management industry with a market share of some 30%

of domestic funds under management.

The business is going from strength to strength winning €1 billion of new inflows over the first six

months and again here the VNB margin performance has been strong at just over 11%. With a

healthy work in progress pipeline going into the second half we expect inflows for the full year to

comfortably exceed €2 billion.

Falling investment markets have had an impact on ILIM’s funds under management which stood

at €30 billion at end June, down from €33.8 billion at the beginning of the year.

The outlook for ILIM remains exceptionally strong. With an unrivalled reputation for innovation

and consistent performance we’re confident that it will be the dominant player in asset

management in Ireland for the foreseeable future.

Slide 10: Retail Banking The next few slides look at our banking business – permanent tsb.

There are a few introductory points I want to make before we go into the detail of the bank’s

performance.

The first thing I want to emphasise again is the low risk nature of our loan book in permanent tsb:

• No property development lending.

• No business banking to speak of.

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• Minimal amounts of unsecured personal lending.

Our loan book is heavily skewed to the residential mortgage market….and while that market will

face tougher times …we’re confident that our low risk loan portfolio is an important differentiator

in the current environment.

The second point I want to emphasise is that our asset quality remains very strong….the level of

arrears in the Irish mortgage book remain at historic lows …and CHL, our specialist UK buy to let

business, is continuing to outperform its peer group in that market.

The third point worth reminding you is that we have successfully completed our 2008 long term

debt refinancing programme. That was the major debt refinancing programme for the bank on our

medium term horizon and it’s now done and dusted.

And the last point I want to make is that in this environment, we’ve consciously repositioned the

bank around its core franchises in Ireland which we see as:

• Residential mortgages for owner occupiers

• New car finance – where we’re the number one player

• Personal lending for our core customer base

• Continuing to build out our presence in the current account arena

• And of course accelerating our deposit gathering and developing our bancassurance

business

Slide 11: Bank Loan Book This next slide breaks out the bank’s loan book.

The loan book has grown by some 5% over the first 6 months, with gross new lending in the

period totalling €5.1 billion – a reduction of 19% on the equivalent period in 2007. For the year as

a whole we’re targeting low single digit balance sheet growth and that’s down to two factors.

Firstly new lending activity has reduced as we’ve responded to the continuing credit crunch by

withdrawing from a number of market sectors and product lines. As you’re aware we suspended

new lending in CHL in March and in Ireland we’re concentrating new lending activity on owner

occupiers rather than investors.

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And of course from the demand perspective, we expect customer appetite for mortgage

borrowing to remain subdued for the balance of the year as sentiment in the housing market

remains weak.

Within our overall loan portfolio we have some €2.4 billion of commercial loans – secured by first

charge mortgages on completed property. There is no development exposure here.

And finally its worth pointing out the very small proportion of our loan book which is in the form of

unsecured lending – typically credit cards, term loans and overdrafts for our growing retail

customer base which accounts for around 2% of total lending.

Slide 12: Lending Credit Quality- ROI This next slide looks at credit quality in Ireland which is of course our key lending market.

The major point from this slide – and this isn’t the first time we’ve stressed this – is that there has

been NO significant change in our arrears position in the Irish residential mortgage book over the

past six months.

The graph on this slide shows the rising number of mortgage cases on our books over the past

five years or so and maps against that the steady decline in the number of cases in arrears.

We acknowledge that our experience in this area will be impacted as the economy weakens. We

think unemployment levels will be the key barometer for us and for that reason we’ve taken the

precautionary steps of tightening our lending criteria and of committing extra resources to our

collections teams and to credit management.

In our consumer finance portfolio, we have noticed a small pick-up in the number of arrears cases

- we’re monitoring this carefully and taking proactive early steps to address those cases and so

far that seems to be having the desired impact with customers.

So [as you’d expect] we’re monitoring the credit situation very carefully. We’re alert to the

changing environment but the customer behaviour changes to this point have been pretty

marginal.

Slide 13: Lending Quality – UK Turning then to look at credit quality in the UK.

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The key message here is that while we’re seeing an increase in arrears cases in CHL, this is from

an exceptionally low base and our experience remains consistently better than that of the overall

UK buy to let market.

At end June we had 341 buy to let cases more than 90 days overdue out of a total UK buy-to-let

loan book of some 44,000 cases.

We believe that we’re benefiting from the fact that CHL has concentrated its lending on the

professional landlord sector and that we largely avoided exposure to inner city new build

apartments and to the amateur investor. We therefore expect that this portfolio can continue to

outperform its UK peer group as we work through the cycle.

CHL remains closed to new business.

Slide 14: Customer AcquisitionI mentioned earlier that one of our areas of focus in the bank continues to be customer acquisition

through Current Accounts as we seek to extend our retail banking franchise.

As many of you will know, permanent tsb has led the shake-up of the current account market over

the past five years.

Through 2007 and into this year the competitive landscape changed considerably in this space.

All of our competitors are now emulating our zero transaction charge offering and our credit

interest offering for current accounts. However permanent tsb continues to enjoy a unique

customer service advantage in this arena – an advantage that’s consistently highlighted by

independent consumer research.

We continue to set the pace here and during the first six months, we recruited over 31,000 brand

new Current Account customers to permanent tsb.

That figure is in line with the record numbers recruited in the same period a year ago and

demonstrates our capacity to maintain our advantage in this area.

With over half a million customers, permanent tsb now has a very significant presence in the

current account market and this expanding customer base represents fuel for future growth in the

bank.

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So that’s an overview of the performance for the six months …..

More challenging times for sure but a robust outcome which underlines our strength and diversity

and the resilience of our business model.

Now I’m going to hand you over to Peter Fitzpatrick who will take us through the details of the

financial performance.

Peter –

Peter Fitzpatrick, Group Finance Director

Slide 15: Financial Review Good morning and again welcome.

My speaking agenda for this morning is captured on this chart.

Firstly, I want to drill down into the detail of the Operating Profits for the Group and, as Denis has

said, a flattish performance for our Life and Banking divisions is a pretty good result in the current

environment.

The bottom line this year has been heavily impacted by short term investment fluctuations, we

need to put these into the longer term context.

Thirdly, we will dwell on funding - but again our term funding needs of €3bln have been

completed and this takes care of 2008 and our needs for 2009 are much more modest.

We continue to enjoy a robust quality of assets within all of our loan portfolios. Impairment

charges are coming off a very low base and the increase in the half year charge for 2008 includes

a prudent increase in provisions which I will explain.

I will add some more detail to what Denis has said about capital and emphasise the point that we

have a number of safety nets in the area of capital, just as we have in our funding base and I

want to explain these to you. Finally, that will bring us into sharing our views on the dividend.

Slide 16: Group Profit After Tax

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So moving on to the summary of Group Profit after tax.

Operating profit is analysed in more detail on the next chart, but in general, the Life and Banking

businesses are coming in with virtually flat growth compared to Half 1 2007. Our share of Allianz’s

earnings, reflecting the poor performance of the investment markets, is lower than we expected

and is indeed the major factor in taking the reduction in pre-tax earnings to 7% below the

previous half year. That gives us €300m in operating profit, and more of this in a while.

Short term investment fluctuations reflect the embedded value impact of the under performance

of the investment and property markets versus our assumptions in respect of the first six months

of this year. The outcome was a negative €230m compared to a €21m positive for the prior

period and reflects the average fall in value experienced by the investment markets in the first six

months this year together with revaluation losses of around €44m relating to property, mainly

owner-occupied. Having said that, hopefully the half year has seen the worst of the downturn in

markets.

The €230m can be analysed with around two thirds being a reduction in the value of in force and

around one third of the total being charged against net worth as we will see in a later slide on

capital.

The final point to make on STIFs is that our long term assumptions for investment returns should

produce a zero fluctuation over time. If we go back over the last 5 years or so, our cumulative

investment variance nets out at €99m negative and that would not provoke a revision of

assumptions, despite the sharp set back this year.

Economic assumption changes were €8m negative principally reflecting an increase in the risk

discount rate from 7.8% at the end of 2007 to 8.2% at the mid year. That has been driven by an

increase in interest rates.

Lastly, on this chart, the taxation charge looks high on pre-tax earnings relative to 2007 and

reflects the fact that negative short term investment fluctuations do not attract a full tax deduction.

Taxation is therefore better considered at operating profit level.

Slide 17: Group Operating Profit So, turning next to those operating profits of €300m. As I said earlier, Life and Banking

combined are close to flat on 2007, down €6m. Life earnings are €175m, down 10% on the

previous half year, substantially relating to lower value of new earnings as we will see in a later

analysis.

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Banking has shown a growth of 12% or €13m to €124m for the half year. The disposal of our

“held to maturity” portfolio in Quarter 1 generated a profit of €29m and this has proven to be

valuable in sheltering us from the worst of the impact of higher funding costs.

Allianz suffered from the effects of falling investment markets - these are mark to market losses

which again, hopefully, will not recur in the second half of the year and which have masked a

pretty reasonable result in the underwriting account.

Taxation on operating profits excluding Allianz is coming in at an effective rate of 12%, which is

the same as in 2007. The Allianz number reported on this slide is already net of tax.

That stable tax rate year on year allows the 7% reduction in pre-tax earnings to flow through to

the post tax line and produces €264m in profits and E.P.S. of 96 cent.

Slide 18: Life Operating Profit Turning now to some of the detail of operating profit, starting with the Life business.

Pre-tax earnings at €175m are down 10% on the Half 1 2007 level.

In force earnings are pretty well flat period on period but new business earnings are down by

21%, largely as a result of a lower level of sales in 2008.

Denis has already outlined that overall life sales fell 16% with a 32% fall in Retail versus an

increase of 12% in our Corporate business division . New business earnings contain assumptions

which are sensitive to the achievement of sales volumes and, absent that growth, Retail new

business earnings saw a disproportionate reduction. On the other hand our Corporate business

enjoyed both volume growth and a business mix which was positive for margins.

The overall result was a life new business margin of 18% in the period versus 19.5% in the same

period in 2007. Apart from the volume impact, the reduction also reflects the increase in the risk

discount rate in 2008 over 2007 and this would have accounted for approximately 35 bps of the

150bps margin contraction.

In terms of the return on the capital invested in new business, the first half new business

generated an IRR of 13.2% - down slightly on 2007 reflecting the relatively higher mix of risk

business – and with a payback period of 6 and a half years.

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In force earnings of €110m are analysed on this chart. The total expected return has grown to

€82m - this reflects the growth in the in force business, which is unwinding at a slightly higher

risk discount rate than in 2007.

Experience variances continue to be positive overall. They have reduced from €21m to €7m in

the current year and this reduction is largely driven by persistency. This is spread over a wide

range of products with nothing dramatic emerging by way of trend in any single product which

would prompt a rebasing of assumptions.

Other experience lines, particularly risk and expenses, continue to show positive outcomes.

At the half year, we have capitalised positive expense variances within our Retail and Corporate

Business Divisions reflecting strong management action relating to costs and this has produced

earnings of €21m.

Taken together, experience variances and assumption changes are €28m positive for the current

half year and this illustrates both the conservative underlying assumptions and proactive

management in respect of the in force business. Over the last 5 years we have benefited to the

extent of €236m from these lines and this is a trend which we expect to see continuing going

forward.

Slide 19: Life Costs Operating costs, which exclude sales commissions, are €111m for the half year within our Life

and Investment businesses. That is virtually flat on the corresponding period in 2007 and

reflects a real reduction, period on period, of some 6%. Cost management has received a strong

focus within our Life businesses in the past and we have seen the tangible benefits coming

through our embedded value earnings. In the current more challenging environment,

management is totally engaged and committed to driving further reductions in our cost lines.

Slide 20: Banking Operating Profit Pre-tax operating profit for the bank in the half year totals €124m, an increase of 12%. Income

has grown by 10% reflecting the profit of €29m on disposal of our held to maturity investment

portfolio.

Within total income, net interest income is close to flat period on period, reflecting growth in the

loan portfolios since June 2007 being offset by higher funding costs which started to have an

impact in second half of last year.

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This has produced a lower margin in the half year of 108 bps compared to the full year 2007

margin of 117 bps and I will analyse this movement in a moment.

Other income is down by €2m on 2007, essentially reflecting lower cross selling opportunities

arising from lower loan growth.

Trading income, excluding the €29m of profits on the disposal of the held to maturity portfolio, is

flat period on period.

Expenses at €155m disclose an increase of €5m. For reasons of capital efficiency, the bank

completed a sale and leaseback on its Head Office which has the effect of increasing the bank’s

costs. Excluding this, the bank expense growth in the period is minimal in absolute terms and

given wage inflation represents a reduction in real terms. In the case of the bank, as with the Life

business, cost management is at the top of our agenda both for the remainder of this year and

going into 2009.

Lastly, as I said in my introduction, impairment charges are coming off a low base but have

almost doubled as we increase our collective provisions in respect of consumer finance and

specific provisions in relation to our UK mortgage portfolio. I have more detail on this in a later

chart, but first, let me return to the margin analysis to which I referred earlier.

Slide 21: Net Interest Margin The movement in the margin from 117 bps to 108 bps is set out on this slide. Higher funding

costs have reduced the margin by 11 bps. In the first six months of 2008, this reflects the

substantially wider Euribor spreads which ranged anywhere up to 100 bps over the official ECB

base rate. The 11 bps is net of whatever we recovered by way of passing these higher costs

onto our customers.

The better returns on our deposit base together with a full six month impact of the revised liquidity

protocol introduced in 2007, gave a 5 bps positive contribution to margins.

Looking out to the full year to incorporate the €3bn of term funding recently completed at an

average spread of 115 bps, and if we assume that Euribor spreads stay at their current high level,

we should expect a full year margin in the region of 98 to 100 bps.

Slide 22: Bank Funding

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Following on my comments about term funding, I have analysed our overall funding position on

this chart. It shows the analysis over the headings of short term, long term and customer

accounts.

Along with the key objective of refinancing €3bn of term funding in the first half, we also targeted

growth in customer account balances. Happily, we can report major successes on both counts.

A substantial portion of the €3bn was funded at the half year and a further €1bn of inflows arrived

in July. Taken together with a number of additional lines which are close to being finalised , new

term funding should shortly hit close to €4bn and that would take us a long way towards

refinancing term debt expected to roll off in 2009.

Our experience in the term debt markets where we have dealt with a wide range of investors,

reflects well on the quality of the assets on our balance sheet.

Customer Accounts have grown strongly and at June accounted for 39% of total funding, up from

34% in December. We have enjoyed particular success in the area of commercial deposits. We

have increased our resources in this area and will be building up further momentum for the

balance of the year. Retail deposits have also been receiving attention - this area is a slower

growth story but we are starting to see some real results in the second half of this year, with

growth in the area of longer term deposits in particular.

Long term debt and customer accounts together now account for 68% of total funding as at the

end of June as against 64% at December 2007.

Short term lines have been reduced accordingly, including the ECB repo facility which I have

often referred to as the “safety net”. USCP and Euro CP markets remain open for us, albeit

generally with shorter durations than before. The US market is an interesting one to watch as

hundreds of billions of dollars in extendible note programmes mature over the next few months

and that money will be looking for alternative investment opportunities.

So, the overall story has moved on from one of concerns over supply, particularly for term

funding. In doing so, we are obviously attracting a higher cost and in that regard, we expect our

blended cost of funding at the year end to be somewhere in the region of 4.5%.

Slide 23: Impaired Loans

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In the changing economic conditions which we are experiencing a key priority is to minimise the

losses from credit impairments and the nature of our lending activities will clearly mitigate the

extent of any losses.

Impairment losses in respect of our loan portfolios need to be placed in the context of trends in

impaired loans. As illustrated earlier by Denis, there is nothing remarkable happening within our

Irish mortgage portfolio and accordingly, impaired loans remain at 10 bps of the total portfolio

unchanged from last December.

Again as you saw on an earlier chart, UK mortgage arrears, whilst continuing to run at about 50%

of the overall UK buy-to-let market experience, had increased at end June to about 77bps of our

UK portfolio. Impaired loans have risen from 30 bps to 50 bps over the last six months, reflecting

this trend in arrears.

Commercial mortgages, all Irish, are showing a flattish trend, having risen by just €1m.

Consumer finance, which represents about 6% of our total lending and which is the highest risk

category of lending, is showing that impaired loan balances have remained at last December’s

level of 2.1% of the total portfolio.

Taken together, our impaired balances amounting to €127m represent 31 bps of our total

portfolio. Provisions of €82m cover these impaired loans and these obviously take into account

the security underpinning the loans. Since most of the increase in impaired loans is coming from

the well secured mortgage portfolios this explains why €22m of growth in impaired loans has

resulted in a relatively lower rate of growth in provisions. Of the total provisions, €52m relate to

consumer finance – which effectively represents a 100% provision of all impaired balances – and

€30m relates to our mortgage portfolios.

Slide 24: Impairment Charge How does that trend translate into impairment charges for the half year?

Charges for Irish mortgages remain immaterial. The trend in impairment charges for UK

mortgages show €1m for the first half of 2007, increasing to €3.7m in the second half of 2007 and

to €5.4m in the first six months of 2008. This broadly reflects the 100% growth in impaired loans

and follows a careful and detailed case by case review.

Consumer finance loans have attracted €8.3m of charges out of the total of €14.6m. Provisioning

here is completed on a collective basis using predictive impairment models. The net effect of

these models is to accelerate conservative provisions well ahead of any permanent impairments,

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producing a 34% increase in the impairment charge compared to the same period in 2007,

despite the fact that impaired loan balances have increased by only 11%.

So in the case of customer finance and all of our other portfolios, we believe that we have a

prudent level of provisioning in place.

Regarding the balance of 2008, I think that, given the trends which we have seen in all of the

portfolios, the full charge for 2008 would equate to around 8 bps of the portfolio, suggesting a 2nd

half charge, somewhat ahead of the first half.

It is obviously somewhat more difficult to predict impairments beyond 2008 particularly within

Ireland where we have no historic loss experience. However, as a result of unemployment levels

impacting on affordability and some fall in house prices lowering recovery levels, there will be an

inevitable rise in impairment charges. The development of the UK mortgage portfolio will also

continue to see some degree of pressure.

As part of our capital modeling, we apply a range of stress tests to our loan portfolios. These

would, for example as a proxy, apply UK impairment experience in the early 1990s to our Irish

mortgage portfolio. Through an economic cycle of the next 3 years, these stressed models show

that impairment charges could run within a range of 60 to 80 bps in aggregate.

At that level, we believe that the group is well able to support the capital strain caused by these

impairments.

Slide 25: Bank Capital This leads me into the area of capital. Earlier I referred to having safety nets in the context of our

funding requirements. I now want to deal with the same concept with regards to capital.

This chart on Bank/parent company capital is, no doubt, familiar to you.

It shows total /Tier 1 ratio of 10.1% versus a regulatory minimum of 9.03% for total capital. That

excludes the half year earnings of the bank which would add another 0.3% to the total ratio.

It also continues to show less than 50% usage of Tier 2 capital capacity and no hybrid Tier 1

capital whatsoever.

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The fundamentals remain very sound, even under this hybrid Basle 1 measurement. This is

perhaps best illustrated by the fact that, whilst we have something over €200m of maturing Tier 2

capital in the current year and have already refinanced €100m, we may take the opportunity to

retire the balance as the low level of growth in risk weighted assets combined with our existing

capital allows us to do so.

Basle 2 implementation has been slow to happen. Unlike some of our European neighbours, we

have had only a little of the capital releases expected under Basle 2. The ICAAP or Pillar 2

process is ongoing and our Basle 2 IRB models still show very real surpluses in our capital base,

even with the prudent assumptions built in around mortgage impairments in Ireland.

Now, since that excess capital is still locked into the balance sheet and previously we would have

expected to apply it to cover balance sheet growth, which has now slowed dramatically, we can

instead earmark it to cover the effects any of the downsides which could occur over the next few

years, for example, additional capital required to cover rising LGDs within our loan portfolios.

So, I think that it is very important that we don’t lose sight of the valuable buffer within the bank’s

existing capital base.

Slide 26: Life Capital In the area of Life capital, the current levels are robust and the outlook for the future is such that it

offers some flexible options which we are now progressing.

At the half year stage, once again we see the strong level of cashflow coming off the back book of

business at €169m. The new business strain absorbs about half of this. The STIFs, which are a

once off hit at €73m effectively absorb the balance of the capital generated.

Despite that, we have still been able to distribute surplus capital of €65m up to the parent

company and leaves us close to our target minimum solvency cover of 1.6 times at 30 June.

For the full year we don’t expect to have the same impact from STIFs in the second half of the

year and we also expect to be able to reduce the impact on capital from the new business strain.

Slide 27: Capital Planning Let me explain what we are considering in the area of Life capital.

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Firstly we are well advanced in finalising a Financial Reinsurance facility in relation to the new

business strain. This facility will allow the accelerated release of surplus in new business from

2008 to 2010 in the region of €250m. This will provide additional Tier 1 capital with effect from

2009 for the Group, and the initial drawdown will be in the region of €100m.

The second initiative is still on the drawing board and could, if we pursue it, be completed in

2009. This relates to a securitisation of the value of the in force which will again accelerate the

realisation of surplus. We are considering a minimum level of around €300m and, based on

discussions with a wide range of potential advisors, this is considered to be well within our reach.

The attractions of these two transactions over raising debt capital in the bank are:

Firstly, it provides an acceleration of core Tier 1 capital for the Group.

Secondly, whilst providing Tier 1, the cost is equivalent to Tier 2 debt capital for the bank if we

benchmark against some recent deals.

Thirdly, as core capital, it provides an opportunity to bridge the potential capital releases under

Solvency 2.

Here in Ireland, we are stuck firmly within the constraints of Solvency 1. We are far removed

from any form of economic capital model, even the ICAAP which has been in place in the UK for

some time.

Reserving requirements are onerous and very substantial shareholder value is tied up in technical

reserves or provisions within the balance sheet and awaits the slow passage from there to

revenue reserves.

The last Solvency 2 Survey, being QIS4, suggested a positive impact of in excess of €1bln, which

is significantly more than our current net worth. With this in mind, it seems logical to me to

bridge the release of some of this potential surplus and to have it as a safety net within the

business to cover off potential downsides and to have it available, ready to help us to

aggressively grow the business once markets recover, as doubtless they will.

Slide 28: General Insurance Operating Profit That covers off our life and banking businesses.

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As I said earlier with regards to our associated company, Allianz, it’s results are well down on the

first half of 2007. Our share has reduced from €22m for half 1 2007 to €3m for 2008 on a pre-tax

basis. Whilst the underwriting result saw a somewhat stronger result in the current year as

claims experience remains robust, 2007’s result was flattered as we recorded a once off gain in

respect to the profit on disposal of the company’s head office.

The main fluctuation, however, came in the area of investment returns where the company’s

equities and bond portfolios, were severely impacted by the down turn in the market.

If we can assume that we will not see a further substantial mark to market loss in the second half

and that the underwriting account holds up, despite recent weather related events, then we could

expect a full year post tax result of around €20m.

Slide 29: EPS & Dividend My final comments this morning relate to the proposed interim dividend.

In the past, our practice has been to endeavour to smooth out fluctuations in our operating EPS

to provide a trend line which has shown robust growth levels in operating profit, effectively from

1999 when we completed the merger between Irish Life and Irish Permanent.

In turn, this has translated into a fairly even growth in our dividend just in excess of 10% p.a. and

reflects an adherence to our dividend policy of growing our dividend in line with real profit growth

on a smoothed basis over time.

Based on this precedent a 7% reduction in earnings in the current half year might suggest that,

when combined with the solid capital fundamentals enjoyed by the Group, we should continue

with a positive progression in our dividend.

In the current environment, however, we believe that it is more prudent to leave the dividend flat

or level on 2007 at the interim stage.

We feel confident that the Group performance for the balance of the year with regards profitability

and capital generation will support a flat full year on year dividend for 2008, but we will, of course

review that in the light of the full year outcome at the final results announcement stage early next

year.

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So now I’m going to hand over to Denis who will discuss that outlook for the balance of 2008.

Denis Casey, CEO

Slide 30: Outlook Thank you Peter

So what’s our outlook for the remainder of this year.

Well clearly the economic environment is going to remain difficult - for the short to medium term

and that’s going to mean more of the type of challenges we’ve been dealing with in the year to

date.

Having said that, we’ve demonstrated our ability to maximise the opportunities that are out there

and we’ll do so again through the remainder of the year.

Key influences on our banking performance for the full year will include:

• Balance sheet growth which we expect to be low single digit growth and, as Peter has

referenced,

• Higher funding costs feeding through to a full year margin of between 98bps to 100 bps.

• And impairment provisions running at approximately 8 basis points.

On the life side, we’re seeing continuing pressure on volumes. Life sales over the summer has

been weaker than anticipated – consumer sentiment weakened noticeably from early July.

On that basis, we’re guiding a decline in life sales in the mid-teens percent for 2008. It’s worth

bearing in mind that 2007 saw record life sales – up about 30% on the ‘06 figure.

In terms of the life new business margin, we expect the second half margin to be lower than that

achieved in the first half – given that it incorporates the main pension selling season and that has

a heavily brokered element with tighter margins.

On that basis, we expect a full year life margin somewhere between 16% and 17%.

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So taking life and banking businesses together, we are guiding a high single digit decline in core

operating profits for the year as a whole.

Adding the expected performance of Allianz to that, which Peter has guided on already, would

give an overall pre tax operating profit figure some 10% down on that achieved in 2007.

So that marks the end of the formal presentation. Peter and I will be happy to take any questions

you might have.

Might I suggest we begin with questions from our audience in London.

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