IL&P Management Briefing London, May Irish Life seizing the pensions & investment opportunities. Kevin Murphy, CEO Irish Life Retail

Transcription

1 IL&P Management Briefing London, May 2007 Irish Life seizing the pensions & investment opportunities Slide 1 Introduction Kevin Murphy, CEO Irish Life Retail From Mass Market to Mass Affluent Okay. We have three presentations on our side, myself; Donal Casey, who is the Chief Executive of our Corporate business; and Gerry Keenan, who's the Chief Executive of the Investment Management business. The two business opportunities identified for Irish Life this morning are wealth in Ireland and secondly pensions in Ireland. So I'm going to focus on the wealth opportunity, because that's a huge opportunity for the retail business. And Donal and Gerry will talk essentially on the pensions opportunity, there's huge growth potential both in our packaged group pension products and our institutional pension business on the pension side. Slide 2 From Mass Market to Mass Affluent So what I want to speak to you is about the repositioning of our business from the mass market to the mass affluent, which effectively reflects what's happening demographically in Ireland. Slide 3 Population by Growth As both Denis and Dermot have said this morning, the period -- the baby boom period has moved from the kind of teenagers into the adults in Ireland. So the fastest growing segments in Ireland are the adult segments. So we see from a retail point of view, big business opportunities in the 24 to 44 for savings and protection, 45 to 64 for pensions and investments and then in the 65 plus is what's called the de-cumulation segment. Basically people are managing the race between their money and their life expectancy towards the latter end of their life. And each of these three segments is a big opportunity for us. Slide 4 Household Savings We calculate that if you work through the kind of macro economic statistics, there's going to be huge positive cash flow in Ireland. Irish households, we reckon, 6 billion to 7 billion cash flow each year over the next five years. And that's positive for each of our business segments. Slide 5 Forecast Flows Next 5 Years 32 billion will be accumulated on deposits, 29 billion into the pension funds, 29 billion into investment funds, 11 billion for direct equity, and 7 billion into commercial property. And other than direct equity, we're well positioned for each of those four segments in terms of business opportunity. So against that background, we're very confident with the outlook for the life and pensions market in Ireland. Slide 6 The Life & Pensions Market in Ireland is Booming Post 2002, it's been on a steady and rapid growth over the last few years and our best estimate is the market for life and pensions earned will hit 2.5 billion in And the background is just simply very strong for all the products in the life and pensions market.

2 Slide 7 Retail Today Okay. If we just then focus on our own retail business. Retail success has essentially been built across four forms of distribution. We have our direct sales force that sells to the mass market with pretty simple products and an equivalent focus from PTSB selling to our branches. We've taken our success in PTSB on to other banks in Ireland to our institutional business. And then we have brokers who have positioned themselves similar to the IFA market in the UK in the mass affluent sector. We've built a suite of more complicated, more complex sophisticated product for the mass affluent segment in Ireland. Slide 8 Retail Success And we've been fantastically successful both in terms of managing a complex range of distribution in terms of quality of our service and the quality of our investment products. Slide 9 Retail Success I suppose the Oscars in Ireland and financial services are the KPMG Awards and recently at their 2007 ceremony we got the number one Life Office and the number one Investment Manager in Ireland. In addition, on the service side the IBA, which is the IFA Broker Organization body, they voted Irish Life as the number one for service in So that shows how strong our distribution is, how strong our service is and how strong our investment management offering are. Slide10 Irish Life Market Share So the payoff on that clearly has been the steady increase in market share. Every year 1% or 2% market share has been gained every year, so you can see that we have leverage, we have significant competitive advantage into this market and we've been successfully driving that through the market year by year. Slide 11 Two Challenges So clearly the challenge then from a retail business looking forward for the next two or three years is a), how to maintain that growth momentum and b), we have to reposition our business to reflect the change in nature of the Irish population and particularly the growth of the mass affluent. Slide 12 Maintain Growth On the momentum side, Gerry's just talked to you about the significant investment we're making in enhancing our branch cross selling to the PTSB. A similar investment program is taking place on our direct sales force to drive up the productivity from three sales a week to five sales a week. We've obtained two new distributions recently, we signed the new Halifax Bank in Ireland on a trial basis and EBS, which over 75 building society branches in Ireland. And both of those are at early stages yet, we've built up maybe 20 salesmen at this stage, but clearly we're going to double that over the next two to three years. And finally then, we're the number one player in the broker's market with a terrific suite of complex mass affluent products, which has successfully gained significant share in that market. So we see strong growth in our traditional mass market and mass affluent positioning in the broker market, but the real challenge for the business is to cope with the nature and change in the Irish population.

3 Slide 13 Extend Mass Affluent Capability I mean Ireland is becoming rich over the last ten years so we've moved from being essentially a mass market networked country in 1995 to more of a mass affluent networked in And we need to reposition our direct sales force to reflect the nature of their underlying customer base as they move from where we are today to where they're going to become. Slide 14 Who are the Mass Affluent? And the mass affluent are a significant segment of our current customer base. They're the people who own small businesses, they're the professionals, the solicitors, the accountants, they're the senior executives in big businesses and clearly they're older customers who have made significant wealth, particularly in their houses. So our conversation with the mass affluent customer clearly is significantly different from a conversation with a mass market customer, and we need to retrain, re-educate our sales force to cope with that change. Slide 15 End Game So the end game we see is that our direct sales force, or PTSB, and our institutional sales people will have the skills to sell to both the mass market and affluent at the end of this process. And we will then be fantastically positioned to cope with the new Ireland that has emerged over the last ten years. Slide 16 Mass Affluent Steps to Success So let me bring you to the three phases we have on this project. Phase 1 clearly is the product development phase, Phase 2 is to retrain the sales force for the new market and Phase 3 then is to leverage that process into new markets. Slide 17 Mass Affluent Phase 1 So Phase 1, I mean we're fortunate in the sense we already have the product suite for this market. It's not like we've never been in the mass affluent market before and we've always been in it for the broker market, so we have the products already. We have a niche equity supermarket, our own in-house ILIM products, we have a relationship with Fidelity, we have a relationship with our local manager and Bloxhams so we have the range of equity products. We have the range of institutional products in in-house in Ireland and UK and a relationship with Henderson's on Europe for the Institute and Property market. We've recently launched self-directed funds, which is the equivalent to the SIP product in the UK. People can open their own stock broking account, they can buy their own property, they can access a huge range of external funds through our self-directed option, all on the balance sheet of the Life Insurance Company. And finally then, as Denis said, we've just launched a Specialist High Net Worth company, which is going to build the product capability for this market. There's a huge demand in Ireland for geared property offerings both in Ireland, the UK and Europe, and we're going to significantly invest in that. And there's also a huge demand for specialist equity products. So we're confident we have the suite of products for this market, so the next challenge is to build and train the sales force to cope to sell that. Slide 18 Mass Affluent Phase 2

4 So firstly clearly we have to identify who in the sales force can best lead this transition, who has the capability of selling to the mass affluent. So we're going to focus on maybe the top 20% initially to train them in how to sell for the mass affluent. Secondly, we have to train them in the particular and unique customer conversations which you have with the mass affluent. I mean talking to a small businessman or talking to a high net worth individual is an entirely different conversation from talking to someone in a mass market conversation. Now we are fairly process driven, so we will build the particular process to sell into that, and we've been building that from a technology and a conversation point of view over the last three to four months. Asset allocation is critical in this market, people have wealth, they have certain risk and return characteristics. And we need to have those conversations to translate that into a recommended asset mix advice and then a follow-up review conversation. And finally then we have to build a CRM. CRM, as Gerry has outlined, is a critical skill for us in identifying the customers we want to sell to, so we need to build the systems to get into our customers, identify the people who are mass affluent and focus them into this process. So in terms of time scale, clearly we are kind of at capacity with the SSIA opportunity at the moment. And clearly from a business point of view the challenge clearly is to sustain the growth of the business against a very benign market background at the moment with the SSIA opportunity. So we see the mass affluent opportunity as the sustaining of our growth going forward from here, so we're going to kind of switch that on post-summer when in a sense the SSIA opportunity is beginning to dip down. So we aim to launch our mass affluent process products and sales force at the first of September. And broadly, we would expect in about a year's time we would be confident that we then have a saleable process and sales force. Slide 19 Mass Affluent Phase 3 Because in Ireland there are specialist banks who have large mass affluent databases that they don't know how to cross sell. They're general insurance brokers who have big SME bases, they would love to cross sell but they don't have the aptitude, the process of the sales force. And they're pension consultants who have access to senior executives, but equally they don't have the capability or the process to do that. So our aim is that when we are confident that we have the sales force, the products and the process, we will go to them in a year's time and say, "Let us work with you on a joint venture basis into those markets. So that's how we're going to leverage our capability into these opportunities towards the second half of Slide 20 Maximising the Opportunity Okay so that's a quick summary of the retail opportunities going forward from here. We're very confident in what we can do. You know the population is on our side, they're the key growth segments. They're becoming rich for the first time and that's a huge opportunity for us because they will have money, they need our advice, they have money to be advised on and we are going to position ourselves to do that. So our two business opportunities going forward from here clearly is to maximize the leverage of the business we have at the moment in the mass market, and we're going to continue to invest in that. And secondly, we're going to reposition the business to cope with the new Ireland, the Ireland of the mass affluent. Slide 21 The Life & Pensions Market in Ireland is Booming

5 So with those two forces in place, we're very confident with the growth prospects for the retail business. We estimate that our total sales 2009 should be hitting 750 million plus, that's 30% of the 2.5 billion market in We're very confident we can deliver that because we feel our skills in process, in analysis and in selling will enable us to deliver that target. Okay so that's finished my segment and I'll hand over to Donal who will give you the pension story. Donal Casey, CEO Irish Life Corporate Maximising the Pensions Opportunity Slide 22 Introduction Good morning everyone and thank you Kevin. I have a very easy job this morning and that's to talk about the pension's opportunity for the Irish Life and Permanent Group, because it quite literally is a fantastic opportunity. The baby boomers, as Dermot and Denis have covered, have spent the last ten years buying their first houses. And over the next ten or 15 years they are going to start saving for their pensions in increasing numbers and with increasing volume. So we would characterise the pensions opportunity quite simply. The opportunity for the Irish Life and Permanent Group is to grow our market share in a rapidly growing market at stable margins. Slide 23 Overall Backdrop to Irish Pensions Market And before I get to the presentation in detail I just want to start with the backdrop and the backdrop to the Irish Pensions market is very, very positive. There is a national consensus that pensions are a good thing. That's across regulators, opinion leaders, the media, and politicians, the significant incentivisation of private pensions with the very favorable demographics. And uniquely, even the government is getting in on the act of saving for its pension. The government via the National Pension Reserve Fund has already accumulated over EUR18 billion for future public sector employee pensions. Slide 24 Pensions Growth: (1) But the growth isn't just starting as of now, the growth is already well under way. And you can look at the growth under a number of headings, if you look at the pension funds under management, they've doubled over the last four years. Now almost 90 billion of assets under management are pension related and growing at a current rate of 18% per annum. Slide 25 Pensions Growth: (2) If you look at the Life Insurance sector the new business flows into the Life Insurance sector, the growth engine is already coming through, it's been growing at 15% per annum over the last five years and with a lot more to come. Slide 26 Overall Pensions Growth Forecast to 2020

6 And then we get to a slide you've seen already, or a version of, from both Denis and Dermot, is that the demand forecast out over the next ten or 15 years for pensions and how the forecast growth is 20% per annum with the income elasticity of demand of 2.9. Now Dermot and his colleagues produced this piece of research about 15 months ago and we've talked a lot about it to our investors, our customers et cetera. And what we found is that people have looked at it and said, "Well it's almost too good to be true and I don't really understand where it comes from. I don't really understand what the term income elasticity of demand really means and how they've derived it." So what I've tried to do this morning is break down that 20% forecast into its constituent parts to give you a more robust feel for it. Slide 27 DC Pensions Savings Growth Drivers So if you look at the constituent parts of pension fund savings and in particular DC pension funds savings, which is essentially private sector pensions, you see that there are four main drivers of growth. First of all there's membership growth, so that's made up of three elements, obviously more people in employment means more people saving for their pensions. And you've heard Dermot talk this morning that even the latest quarterly employee growth statistics in Ireland shows the labor market growing at 4%, which is phenomenal, and that's just a continuation of the last ten years. Increased pensions coverage, so an increase in the percentage of people who are saving for their pensions, and we're seeing a steady and relentless growth in that statistic, which I'll come to later. And then a global statistic, which is the relentless and universal trend from Defined Benefit pensions to Defined Contribution. A question earlier touched on the age related impact, I mean Ireland's average age is 33, 34, we're just at the cusp of really beginning to save for our pensions. I'll look at the impact of that, obviously salaries and then discretionary incomes. Slide 28 Pensions Savings Membership Growth So let's just look at the membership growth. So using our CSO pension coverage statistics, which are produced regularly, and the pensions for registered member statistics, you can derive the following graph. And it shows that DC pension membership is growing at a phenomenal 10% per annum over the last four or five years and that's way ahead of employment growth for the three reasons listed. And you can see that the public sector pensions and the DB pension segments are relatively stable. Slide 29 - Pensions Savings Age Related Impact But even more interesting, if you look at the age related impact, and this specifically addresses the question that was raised, that within in the overall macroeconomic forecast what is the age related impact. So we've analyzed our full group DC portfolio with 100,000 contributing members, we've broken them down into their age bands and looked at what is their annual savings rate contribution at the moment. So you don't need to be a genius to figure out that as people get older they save more for their pensions, they generally have a lot more disposable income.

7 And you'll see that the green line there, the line above it represents the government acceptance of this because the government has steadily been increasing the allowance for tax relief purposes of your own personal contributions to your pension fund. Just even this year for older people they've increased from 30% to 40% and it very much reflects the experience. So irrespective of any economic growth or any change in coverage, just within the cohort of people that we have saving for our pensions in Ireland at the moment, there is an engine of growth just from aging. Slide 30 DC Pensions Savings 20% a mid-range estimate And if you just try and put it all together, we've got pensions membership growing at 10% per annum, 60,000, 70,000 new members every year, the age related impact we've estimated at 3% per annum. If you allow a relatively modest salary growth assumption, and taking out any promotional impact on that, you assume 4% per annum for that and it leaves you only having to add 3% per annum for increasing discretionary incomes to get to the 20% estimate. And in my view the 20% estimate is a mid-range estimate. And the core message here is that DC pension savings are going to become the biggest single component in the Irish financial services sector over the next 10 or 12 years and that's almost without doubt. Slide 31 Post Retirement Savings But in game show parlance there's more, because there's another big trend happening in the Irish pensions market, which is around the area of post-retirement savings. Back in 1999 Charlie McCreevy, in a very brave and bold move, without any great consultation with the stakeholders, which if it happened it would still be going on, introduced approved retirement funds. Because he wanted to give people back ownership of their money in retirement. I mean initially it was only given back to the self-employed segment and directors. It's since been expanded to the PRSA product, but there's a huge debate on in Ireland and significant lobbying to extend it fully to all DC pension savers. And that debate is going to be successful because it's a very good idea to give people ownership of their money over their full lifetime. So there's a big engine of growth going to come through in the pensions market, which isn't even anywhere in the numbers at the moment. Slide 32 Compulsory Annuitisation at 65 We went back again to our own portfolio and tried to project it forward, so I just took our own back to the same 100,000 people, so with no new entrants, no nothing, and you just forecast the shape of the funds under management curve. And with our existing portfolio it peaked somewhere around 17, 18 years and then drifts off. Because what you're assuming here is that when people reach 65 that they take all of their money that they've saved up with you and invest it in annuity, whereas what we believe is happening and is going to happen a lot more in the future, we're going to see a switch to ARF and a draw down of 5% per annum, which is the experience today. Slide 33 Switch to Drawdown 5% a Year So that completely and utterly changes the funds under management curve.

8 It obviously increases it and extends it. In kind of simple math, I reckon it increases it by two and lengthens it by two. So that's a big increase in the stock of funds under management from this impact. Slide 34 IL&P - The Pensions Opportunity So I hope I've convinced you on the case for our rapidly growing market. So let's talk now about whether we're going to grow our market share on that, and obviously the best place to start is our recent experience. Slide 35 Growing Pensions Market Share So the experience across the Irish Life & Permanent Group, so for Irish Life Retail and Irish Life Corporate business combined, has been very impressive over the last four or five years. We've seen our pensions market share grow from 25% to 30% and that's against a backdrop, as I said, of a market that was growing at 15% per annum. Slide 36 IL&P Market Share Prospects That's the past, so what's going to happen in the future? What are the prospects? Well in my view there are three core foundations to market share growth in pensions. The first is your pensions franchise, what does your brand say about pensions? How linked is your brand to the world of long-term pension savings? And there's absolutely no doubt that the Irish Life brand firmly ticks that box. We have the old slogan that nobody pays more pensions than the State other than Irish Life. Secondly we have distribution reach, which Kevin has talked about, we have phenomenal distribution reach across all channels. And that's been the engine of that market share growth. And without going into my colleague Gerry Keenan's presentation, our investment reputation, which has been growing all the time over that period, is yet another engine of growth for our pensions market share. Indeed our Consensus Fund product is probably the perfect product for trustees to choose as their default investment fund if they have a large corporate DC customer base. You know for trustees who have to take responsibility for other people's livelihood, for other people's investment decisions, then the absolute best product is our Consensus product. And the experience to date, which Gerry will go into, bears that out. Slide 37 Corporate Business Well just to touch briefly into Corporate business, I mean we've had a very simple strategy, it's a simple services-first strategy. It's very simple to say but much more difficult to execute. And we've executed it through people with a relentless investment in people. And in reality it's been a people-first strategy because pensions and corporate pensions in particular, it's a highly regulated business, it's a very knowledge intense business. And we identified at least seven years ago that the only way you could really achieve competitive edge in this market is through people. We have a dramatically lower turnover rate of people, we've had 7% staff turnover for the last seven years, which is just way out of line with the rest of a buoyant economy labor market. Slide 38 Corporate Business Service Improvement What we've ended up, we have a group of highly skilled people delivering much better service to our customers with a widening service gap between ourselves and our competition. We already have 42% market share and we're growing it relentlessly on the back of this service proposition. Because the group market, it's a really highly efficient model. I mean we've talked a lot about the retail market and dealing with people as individuals when they come into our branch network when we deal with them through our other channels.

9 Slide 39 Corporate Business - Distribution Well in the group market you can deal with hundreds of people in one site in any day and that's what we're doing. And using that service advantage and using that access advantage to develop existing relationships and grow our business and we've seen an acceleration of business from all our existing relationships over the last 24 months. We've also been boosted by exceptional performance from our Cornmarket subsidiary who has just the most wonderful positioning in the public sector segment. And they're seeing really, really strong growth every year in additional pension fund savings for the public sector market. We're within a couple of months of opening our platform to other investment managers and this really is the culmination of our service-first strategy where we step confidently into the large corporate DC market and take on the larger pension consultants for the bigger end of the corporate market in Ireland. Slide 40 Increasing Productivity As we talked about in the opportunity, it's not just about sales and it's not just about market share, you've got to make money from it as well. And this may well be the most important slide of the whole presentation because if you set our unit cost per member, and this is a blended unit cost across every pension customer we have, if you set it at 100 in 2004, the real reduction in our unit cost per member by this year is getting on for 20%, which in any business is obviously highly impressive. It's built on a relentless investment in technology on the retail side and a relentless investment in people on the Corporate business side. And it's also built on the volume, the productivity improvement that almost automatically comes through, the productivity improvement that comes through as you increase volumes. Slide 41 Gross Margin Contribution That then, even as we write higher ticket business, more business and grow our sales so rapidly, the top of that slide should say growth contribution. The growth contribution on our pension products, and once again this is a blended average across the whole group, is pretty stable around the 30% mark. So all of the growth in the market and all of the growth in market share is coming through to the bottom line. Slide 42 IL&P The Pensions Opportunity So that's the pensions opportunity. I mean in financial services, it's wonder to sell someone a current account. It's a bit like your first date, it's a start of a relationship. And it's even better to sell them their mortgage because you're definitely officially going out with them at that stage. But the real prize in financial services is the pension relationship because that's marriage. Now I know they don't all last for 50 years, but in pensions terms, a lot of them last for 50 years so that when we talk about the first year margin in a pension relationship, it really is just the tip of a very large lifetime margin iceberg. Slide 43 IL&P The Pensions Opportunity And when Kevin talks about across-the-group writing, 750 million APE for the group, we would expect 500 million of that in 2009 to be pensions. Okay thank you.

10 Gerry Keenan, CEO Irish Life Investment Managers Delivering the Investments Solutions Slide 44 Introduction Hello everybody, it's good to be here. I'm Gerry Keenan, I'm the Chief Executive of the Investment Management company. I think you can hear from the previous speakers that there's a little bit of pressure on our business to deliver. I don't know whether I have the easiest job or the hardest job, but whatever it is we're up for it anyway. I think the critical thing that I want you to take away from what I have to say is that we've done a lot of re-engineering of our Investment Management business over the last ten years to create, not a competitive advantage, but a sustainable competitive advantage for our business. And I think that sustainable competitive advantage has been behind a lot of what's happened with the Investment Management company over the last five, six and seven years and we've carried forward that from here. So to step back a bit, the Investment Management company at the moment has 30 billion of assets under management. And that 30 billion of assets under management leads us in the number two position within the marketplace. Our ambition is to be number one and to do that, and the reason why I think we'll achieve it, is that I think we have at this stage created a sustainable competitive advantage within the marketplace, and that's behind our success in recent times. Slide 45 ILIM 2 Business Model You've heard from our previous speakers first because they're in the Retail and the bancassurance business and the Corporate Pension side, and of the 30 billion of assets under management that we had at the end of 2006, half of the assets that we manage are on behalf of our internal clients. For those customers we are very much the investment hub, we have to produce investment performance, we have to produce investment products and we also have to produce good costs at low cost from the administration and pricing service for them. The other half of our business is on behalf of the large corporate clients that we have. These are principally but not exclusively within the pensions market and these clients really operate in what I'd see as a globally competitive environment. A lot of them, you can see from some of the names underneath, have given them our business. Slide 46 Growth in Market Share We have a very large share within this management. And have given us our business, I think, because they see us as a winning investment manager and a manager who has a very strong brand and a brand which they're happy to associate with. Slide 47 ILIM Share of Irish Assets Under Management The competitive advantage which we have developed within the marketplace underlies a couple of things, one is that our share of the total funds under management within the marketplace has increased from 2001 at 18% to over 25% at the end of Slide 48 ILIM Share of Irish Pension Funds Every speaker today has spoken about the pensions opportunity, within the pensions market our market share has increased from 20% in 2001 to 26% at the end of 2006.

11 Our competitive advantage is the principal reason why we have seen that share grow over the last number of years. And as I said, from my perspective in leading the Investment Management company, is producing a sustainable competitive advantage that's absolutely important. Slide 49 ILIM Brand Key Components The key elements, I think, in producing that sustainable advantage are within our brands and they're the elements of expertise, innovation and execution on our delivery of product. On the execution side, clearly all Investment Managers are mandated by their clients to produce superior competitive returns. For those of you who have been looking at the Investment Management business globally over the years, know that the challenge to the business is not producing superior competitive returns, the problem is sustaining it. And how do you sustain superior competitive returns? And to some extent, if you look the growth of at things like the hedge fund business et cetera, it has to be around that agenda. Slide 50 Key Elements - 1. Expertise How do you maintain the growth in the business? How do you give customers sustained competitive returns? Within the Investment Management company we looked at that issue many years ago and we re-engineered our products and our investment processes. And the critical re-engineering was to change our business model from one in the investment company, which was historically I suppose more art-based, and move it into one which was a process-driven investment management and move it to the science end of our business. So on the product side we introduce and manufacture internally a range of index products. And also on the active side we moved our business from subject stock selection to a quant driven investment management process. This has given us much more sustainable results and I think it underlies the reason why an awful lot of customers have been coming to us throughout our business over the last five, six seven years. Slide 51 Active Management Credentials When we look at the results achieved, again I would stress that the Investment Management business is globally competitive and we win business if we beat the best, we don't win business if we don't. The chart you're looking at shows you a selection of the managers that are operating within the Irish marketplace today. And this table is available to all of our customers. So how does our active investment management rank within this, our top quartile? The international managers and the globalisation of the Irish active managers promise much to the marketplace and there was a rush of money going overseas in the last few years. That has now stopped and the market has consolidated, and a small number of open managers are starting to make fresh inroads into the marketplace lead by ourselves. Slide 52 Indexed Management Credentials Indexation business has been a great business for us. Sometimes when we think of indexation we just think of it in terms of the bulky Defined Benefit market. But I think you know from what the other speakers have said, and we have spread this concept right into the Defined Contribution market and into the real time market. And it offers very, very strong support now for our product range throughout.

12 And the margin pressures that can arise in a business from index business really arrives at the very top end side of it within the Defined Contribution end and in the retail market there is pretty much the same margins as there are in any investment management process. Indexation has been extremely successful for us, it has delivered what it says on the tin and our shop window fund, which Don referred to earlier which is the consensus fund, now has 6.5 billion of assets under management. And from a customer's perspective and in investment performance terms, it's not from the second quartile in any investment table that you look at, and that creates absolutely zero problems and a great platform for building your business on. So really what's happened is that this has worked for us. Slide 53 Expertise Aware Winning Manager The recognition that we got for this, Kevin referred to some of it earlier, we've won MoneyMate Awards in 2004, 2005 and 2006 on the investment performance side. And in a wider spectrum, over the last two years, KPMG looking at our total Investment Management business have given us the Excellence Awards in Financial Services for Investment Management. Slide 54 Key Elements - 2. Innovation The second pillar of our brand is innovation. This is important and simple. We have all seen Investment Managers who have not innovated, investment Managers who have stayed with one product and that product is the same as it was five, ten, 15 years ago. And we know that in terms of market share they have been losers in the fund management industry globally. We have been major innovators within the marketplace. We've been first to the market with indexation a number of years ago, for the last few years we've been first to the market with liability driven investment structures, first to the market with lifestyle funds for our Defined Contribution clients and more recently the introduction of diversified alternative funds, commodity funds. And even then, looking at innovative structures around some of our funds that we've introduced. The CPPI product for example, which dominates some of our sales in the bancassurance end of it. Innovation is an important element of our brand and I think if you go and ask our customers and ask our advisors how do they see us in the marketplace because of this, they would see Irish Life Investment Managers as top leaders. And you know in an economy that's getting richer, people do want to be associated and do business with top leaders because they are seen as top of where the market is going rather than yesterday's men. Slide 55 Key Elements - 3. Execution The final element is execution. There are many different dimensions to that. The part that I want to focus on is that Irish Life Investment Managers is very much an open organisation. We aim to give our customers best-in-class products. I would never stand up in front of any customer and say that we have all the products and we can create all the products internally which are best-in-class products. We can't, we can create some of them. But what I will tell you as that we can be a one-stop shop for you and that we will partner with best-in-class providers of other products around the world. So we have partnered with a hedge fund provider, Kevin referred earlier on to our partnership with Henderson and the provision of European Property, and we have also spoken to private equity providers around the world. So what we promise our customers is that you will get best-in-class but we will not ram our products into your business model. Effectively what we will do is we will allow you to come to us and get those best-in-class and build up a strong trusting relationship, a customer

13 relationship driven system with our clients. That has worked. Clearly for it to work you've got to be cost efficient and you've got to be flexible. And we have benchmarked ourselves and do benchmark ourselves against alternatives in the marketplace and we come out very well on that front. The last time we did it our internal costs were about 25% cheaper than they would be if we outsourced some of our business, and the outsourcer also said that we were extremely flexible compared to the targeted services that they could offer. So that execution, I think, is really critical so that we can maintain a best-in-class offering to our clients. Now stand back again, I think this is really what, if people look at Irish Life Investment Managers in the marketplace, just that's what they see we are. They see that we have created something which is not just a competitive advantage but they see the elements of sustaining it. Because we all know that investment management can be a volatile business and that investment managers come and go in the lead tables. The issue for us is can we sustain something? Is it temporary or is it permanent? And I think what we've created over the last number of years within our organisation in shifting the business model from art to science to very much a process driven investment management organization is a sustainable outcome within the marketplace. And I think that's what our clients see from us. Slide 56 Future Growth In terms of the future, my colleagues have spoken about what's happening in the retail market and the bancassurance end, so I'm not going to go back into that. I look at the direct business we can run, over the period 2001 to 2006 our assets under management doubled, that's an impressive performance. And certainly our view is that, based on what's going on in the marketplace today and the competitive advantage which we have, we see a further 50% growth in assets under management within this business between the end of 2006 and Denis referred earlier on to the start that happened in 2007 and we've had a very, very strong start indeed and I'm very confident that the start that we have seen in this three-year period is suggesting that the trajectory which we've set ourselves is very, very much achievable. Slide 57 Drivers of Growth in Institutional Funds under Management If we look at the elements of that within the direct business, I think there are four key elements. We saw earlier how our market share was increasing and it's increasing at 1% plus per annum. We're winning market share against competitors and I think that's for two reasons. One is that the competitors are consolidating so a lot of the smaller players who are in the marketplace are backing off some of the markets and trying to find little niches for themselves, and we're hoovering up market share from them. The second is that the largest player in the market, who is our target clearly if we're to be number one, has been stumbling in global markets and has been stumbling locally in terms of their business and we have been picking up market share from them. And I think that the evidence that we're seeing in terms of more recent growth is that there's an acceleration in that pickup process. So that all bodes very well for our business. 39% of Defined Benefit pension plans have closed their doors to new members and as pension funds close their doors to new members they have to change their investment strategy. And what's happened is that the Defined Benefit pensions industry is starting to look at LDI strategies.

14 We have a full range of LDI products which we have launched in the marketplace and they've been extremely well received and we have many pitches that involve us going to talk to clients about this. And again I think we have an advantage in local end being good because we can actually sit across proactively with the client across the table to try and tailor made their solutions to their problems, and we have done that. The other area then is on the indexation side and the DC side, and these are linked as well. Currently indexation assets within the pensions market account for about 25% of the total assets under management. We see that percentage going up to 40% and that's based on the numbers that we see in the UK and in the U.S. for similar sized pension funds. In the UK for example, if you look at the market segments pension funds less than EUR150 million in size, 40% of those assets are indexed. And similarly within the UK, when you look at pension funds of less than 150 million in size, that is the Irish market. The whole market is pretty much like that. Slide 48 ILIM Growth in Indexed / Passive Funds So we would see that the share of indexation is going to arise and we're far and away the biggest player in this market locally. We have competition from BGI, we have competition from Legal in General and we have competition from StateStreet, we win against those competitors. I don't know whether you noticed earlier on when I put up the clients that we have, we have the European Central Bank in our client bank, we've won an index mandate, we won their pension fund on an index basis. And we won that mandate against StateStreet, against LGI and against all the other players within the marketplace. We are globally competitive in this business. We're not going global with it, but we are extremely competitive and we've invested rightly in it in order to win. So certainly given our share, and we have by far and away the dominant share in this passive market locally, it's a rapidly growing market and we're well positioned to grow our asset base within it. Slide 59 Growth in DC Institutional Funds Donal has talked about the Defined Contribution market and I will reiterate what he said, the Irish pensions market, I think, when we look back in ten years time we'll see it went Defined Contribution and very strong so. I referred earlier to 39% of Defined Benefit funds have already closed their door, the other side of that then is that 24% of employers have opened new Defined Contribution plans in the last five years. And survey which will come out in the next few weeks will show that a further 7% of employers are going to open new plans over the next two years. We've always had volume of Defined Contribution plans being opened. What we're seeing is that the value of them is also increasing with employers and employees increasing contributions significantly within that. That's good for our business. And for an organization like ourselves that has managed to get a strong foothold in all of the top corporates within the marketplace where our Defined Contribution offerings are very the default option put in the Defined Contribution plans we're extremely well positioned. We have a very large share, about a 50% share in the DC market, and that leaves us positioned very strongly for the growth of that market.

15 Slide 60 - Conclusion Conclusion then, ambition is to be the number manager. We're very much multi-product, we're proud of it. Some of those multi-products we manufacture ourselves and some we bring in, but ultimately the sustainability of what we're doing is to be willing to buy in best-in-class products from outside and also then to manufacture best-in-class product internally, but do it very much on a process driven investment management structure, which we have implemented over the last ten years. Thank you.