Irish Life & Permanent has reported a strong performance in 2005 with pretax profits up 14 per cent to €531 million. The banking and assurance group said that business continues to be strong this year. Siobhán Creaton, Finance Correspondent, reports.

Group chief executive David Went said that the Republic's healthy economy continued to provide "a perfect environment" for its businesses.

"We're confident of posting another successful performance in the current year," he said. The group is targeting earnings growth of more than 10 per cent this year.

Yesterday's figures were slightly ahead of market expectations, boosted by a stronger than expected performance from its life assurance operations, particularly in the second half of last year.

This good performance sent shares in Irish Life & Permanent well ahead in a weaker Dublin market - gaining 30 cent to close at €18.35. Some brokers signalled yesterday that they would be upgrading their profit forecasts for the group following the better than expected results.

Shareholders will receive a final dividend of 42.8 cent per share, up 11 per cent on last year, with the total dividend payment for the year amounting to 60.5 cent per share, up 10 per cent.

Earnings per share rose by 10 per cent to 60.5 cent. The group's life assurance company produced a 16 per cent increase in operating profits to €222 million on the back of robust sales and a good performance from its investment management arm.

Pension sales rose by 36 per cent, savings increased by 47 per cent with sales of protection and risk policies up 26 per cent. Sales of its corporate business swelled by 17 per cent.

Its Permanent TSB bank delivered a 6 per cent increase in profits to €148 million. The bank reported a 28 per cent rise in mortgage lending in Ireland to €6.3 billion last year, with a surge in the last quarter of 2005.

Mr Went said that mortgage lending continued to be strong this year and played down the impact of higher interest rates on the affordability of mortgages for its customers.

He said that, when advancing loans, the bank stress-tests its customers to determine their capacity to continue to make their repayments if interest rates were to rise by up to two percentage points.

It said that it had also opened 67,000 new current accounts from existing and new customers switching to the bank to avail of its free banking offering, with the balances held in these accounts up by 27 per cent.

In 2006, Mr Went said, it expected to open a further 60,000 new accounts.

The group said that the rate of account switching had accelerated since the beginning of this year, with Permanent TSB opening 1,400 accounts a week to date.

New consumer finance loans, mainly car finance, increased by 28 per cent to €959 million. The consumer loan book rose by 17 per cent to €1.6 billion, while new commercial loans rose by 8 per cent to €383 million.

General insurance group Allianz, in which Irish Life & Permanent has a holding, contributed profits of €54 million, compared with €52 million in the previous year. The group's UK mortgage arm, Capital Home Loans, advanced £1.4 billion (€2 billion), a 6 per cent increase. Its outstanding mortgage balances in the UK rose by 35 per cent to £3.7 billion.

Irish Life & Permanent has €1.5 billion in funds belonging to holders of Special Savings Incentive Accounts (SSIA), which are due to mature over the coming year.

Mr Went said that this provided an opportunity for the group to sell further products to those customers, but acknowledged that it would face increased competition.