Montepaschi Life (Ireland) Limited. Directors report and financial statements. Year ended 31 December Registered number

Transcription

1 Directors report and financial statements Year ended 31 December 2005 Registered number

2 Directors report and financial statements Contents Page Directors and other information 1-2 Directors report 3-5 Statement of directors responsibilities 6 Report of the reporting actuary 7 Independent Auditor s report 8-9 Statement of accounting policies Profit and loss account Balance sheet Notes to the financial statements 17-26

3 Directors and other information Directors A. Bates M. Ceccobelli (Italian) F. MacHugh E. Marsiglia (Italian) D. Rouse (British) G. Santucci (Italian) Registered office Grand Canal House 1 Upper Grand Canal Street Dublin 4 Ireland Secretary Tudor Trust Limited 1 Upper Grand Canal Street Dublin 4 Ireland Appointed Actuary Neil Guinan Montepaschi Life (Ireland) Limtied Auditors KPMG 1 Harbourmaster Place IFSC Dublin 1 Ireland Bankers Allied Irish Banks plc 7/12 Dame Street Dublin 2 Ireland Banca Monte dei Paschi di Siena Member of MPS Banking Group Siena Italy 1

4 Directors and other information (continued) Solicitors Dillon Eustace Grand Canal House 1 Upper Grand Canal Street Dublin 4 Ireland Service Provider Investment Managers Irish Progressive Services International Limited Beresford Court Beresford Place Dublin 1 Ireland JP Morgan Fleming Asset Management (Europe) S.a.r.l. Monte Paschi Asset Management SGR MPS Asset Management Ireland Limited Merrill Lynch Investment Managers Luxembourg S.A. Morgan Stanley Dean Witter Investment Management Limited Goldman Sachs International Limited Janus International Limited Deutsche Bank (London) Limited Fidelity Investments Luxembourg S.A. HSBC Asset Management (Europe) S.A. Mellon Global Investments Limited ING (L) Fund Shareholder Services Société Générale Asset Management Julius Baer Investment Funds Dexia Asset Management DWS Investments S.A. Aberdeen Fund Management Ireland Ltd. ABN AMRO Investment Funds S.A. AXA Rosenberg JP Morgan Asset Management Europe Sarl Nordea Bank S.A. BNP Paribas Security Services European Fund Administration (EFA) Belgrave Capital Management Ltd. WestLB Asset Management 2

5 Directors report The directors present their annual report and the audited financial statements for the year ended 31 December Principal activities, business review, annual risks and uncertainties The principal activity of the company is, as authorised by the Minister for Enterprise, Trade and Employment in Ireland, to transact cross-border life assurance business in the European Union under the Third Life Directive as introduced into domestic Irish legislation by the European Communities (Life Assurance) Framework Regulations, The company s business to date has mainly been the sale of single premium investment products in Italy through a broker, Willis Italia. During 2005, sales amounted to 1,204 million, an increase of 16% over Most of this production was in respect of our index linked product line which has proved to be very popular as it gives policyholders access to investments that literally 'track' the performance of an Index/basket of assets. The tracker bonds are structured to return the original investment back at the end of the term with a potential increased return based on the performance of the Index/basket of assets to which it is linked. Total claims for the period amounted to 498million for the year 2005, an increase of 186% over that in 2004, reflecting the growth in the book of business. Overall surrender rates increased on index linked products compared to 2004 while unit linked surrender rates reduced slightly over the same period. The investment markets performed better in 2005 and the prices of our unit funds benefited from this. The combination of sales and capital appreciation helped our funds under management for policyholders to grow to over 4,934 million at end 2005, an increase of 23% over that at end The directors are satisfied with the company s performance during the year and consider that it is well placed to continue its development in the future. In 2006, we plan to adapt our existing products for sale and extend our unit linked product offering. The main risks and uncertainties that the business faces are in relation to new business volumes. These are influenced by the general investment markets and the impact that this has on the confidence of investors. This is constantly monitored by the company. The director s wish to thank all of those who contributed to the successful year of the company the management and staff of the company, our Service Provider, our broker Willis Italia and all our advisors, and in particular the branch networks of Banca Monte dei Paschi di Siena S.pA, Banca Toscana, Banca Monte Parma S.p.A., Banca Popolare di Spoleto S.p.A and MPS Banca Personale who, by introducing our products to their customers, contributed so much to the great results recorded here. 3

6 Directors report (continued) Financial risk management objectives and policies of the Company Ultimate responsibility for the company s internal controls, including risk management, rests with the company s Board of Directors. Management have day-to-day responsibility for monitoring, measuring, controlling and reporting the risks connected with the company s activities. As the company has developed, the directors have been improving our corporate governance processes, to take account of best practice, increasing regulatory requirements and the requirements of our parent group. The directors are aware of the critical need for effective corporate governance, risk management and internal controls to guide the companys' business practices and activities, thereby promoting compliance with all laws and regulations and safeguarding the companys reputation. The risk management activity of the company is oriented towards measuring and controlling risk in order to substantially reduce any risk that could affect the net worth of the company and the assets under management. The main risks monitored are market risk, interest rate risk, currency risk, liquidity risk and credit risk. For all policyholder funds, the main investment risks (i.e. market risk, interest rate risk, currency risk, liquidity risk and credit risk) are borne by the policyholders and for shareholders funds the main investment risks are borne by the company. The company s strategic investment activities are approved and managed in accordance with a set of clearly defined policy statements which have been approved by the Board. The Board has also appointed an Investment Committee whose role is the review of the on-going asset allocation process for policyholder funds and the review of the asset allocation limits for shareholder funds. Investment of shareholders funds is governed mainly by solvency and liquidity considerations and the need to comply with the regulations and guidelines specified by the regulator. The company is developing a Value at Risk (VaR) model to monitor the market risk with specified limits approved by the Board. Currency risk, liquidity risk and credit risk are maintainted at a very low level and do not represent a material risk to the cmpany. Results for the year and state of affairs at 31 December 2005 The results for the year are set out on pages 13 and 14. The company s balance sheet is set out on pages 15 and 16. Dividends The Directors propose a final dividend of 22.5 million in respect of the year ended 31 December 2005 (2004: 22.5million). In accordance with FRS 21, this dividend is not recognised as a liability at the balance sheet date as it was declared after the balance sheet date. The Directors note the change in accounting policy in relation to the recognition of dividends payable to shareholders, which is set out below. 4

7 Directors report (continued) Change in accounting policy The Company has adopted Financial Reporting Standard 21, Events after the Balance Sheet Date. Under FRS 21 where dividends are declared after the balance sheet date, those dividends shall not be recognised as a liability at the balance sheet date. Consequently, only dividends paid or approved by the members of the Company during the financial year will be recorded in shareholders funds at the balance sheet date. Directors The directors are not required to retire by rotation. Accounting records The directors believe that they have complied with the requirements of Section 202 of the Companies Act, 1990 with regard to books of account by employing a service provider and personnel with appropriate expertise and by providing adequate resources to the financial function. The books of account of the company are maintained at the premises of its service provider, Irish Progressive Services International Limited. Directors and secretary and their interests The directors and secretary who held office at 31 December 2005 had no interests other than shown below in the shares in, or debentures or loan stock of, the company or group companies. Interest at beginning of Name of company Interest at year or date Name of director and description of instrument end of year of appointment G. Santucci Banca Monte dei Paschi di Siena S.p.A. shares of ,221 Post balance sheet events There have been no significant events affecting the company since the year end. Auditors In accordance with Section 160, (2) of the Companies Act 1963 the auditors, KPMG, Chartered Accountants, have indicated their willingness to continue in office. On behalf of the board Director Director 5 27 March 2006

8 Statement of directors responsibilities The directors are responsible for preparing the financial statements, in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with Generally Accepted Accounting Practice in Ireland, comprising applicable law and the accounting standards issued by the Accounting Standards Board and promulgated by the Institute of Chartered Accountants in Ireland. The company s financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss for that period. In preparing the financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that its financial statements comply with the Companies Acts 1963 to 2005 and all Regulations to be construed as one with those Acts. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities. The directors are also responsible for preparing a Directors Report that complies with the requirements of the Companies Acts. On behalf of the board Director Director 6

9 Report of the reporting actuary to the directors I certify that at 31 December 2005 (i) (ii) (iii) in my opinion, proper records have been kept by Montepaschi Life (Ireland) Limited, adequate for the purposes of the valuation of the liabilities of its life assurance business; the computation of the Long Term Business Provision has been made on the basis of recognised actuarial methods and with due regard to the actuarial principles laid down in Council Directive 92/96/EEC; and the Long Term Business Provision is sufficient to enable the company to meet any liabilities arising out of insurance contracts as far as can reasonably be foreseen. Neil Guinan 27 March 2006 Fellow Member of the Society of Actuaries in Ireland Reporting Actuary of Montepaschi Life (Ireland) Limited 7

10 Independent Auditor s report to the members of Montepaschi Life (Ireland) Limited We have audited the financial statements of Montepaschi Life (Ireland) Limited for the year ended 31 December 2005 which comprise the Profit and Loss Account, Balance Sheet and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company s members, as a body, in accordance with section 193 of the Companies Act Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors responsibilities for preparing the Directors Report and the financial statements in accordance with applicable law and the accounting standards issued by the Accounting Standards Board and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland), are set out in the Statement of Directors Responsibilities on page 6. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Companies Acts 1963 to 2005 and all Regulations to be construed as one with those Acts. We also report to you whether, in our opinion: proper books of account have been kept by the company; whether at the balance sheet date, there exists a financial situation requiring the convening of an extraordinary general meeting of the company; and whether the information given in the Directors Report is consistent with the financial statements. In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit, and whether the parent company financial statements are in agreement with the books of account. We also report to you if, in our opinion, any information specified by law regarding directors remuneration and directors transactions is not disclosed and, where practicable, include such information in our report. We read the Directors Report and consider implications for our report if we become aware of any apparent misstatements within it. 8

11 Independent Auditor s report to the members of Montepaschi Life (Ireland) Limited (continued) Basis of opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the state of the company s affairs as at 31 December 2005 and of its profit for the year then ended; the financial statements have been properly prepared in accordance with the Companies Acts 1963 to 2005 and all Regulations to be construed as one with those Acts. We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the company. The financial statements are in agreement with the books of account. In our opinion the information given in the directors report is consistent with the financial statements. The net assets of the company, as stated in the company balance sheet are more than half of the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31 December 2005 a financial situation which under Section 40 (1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the company. KPMG 27 March 2006 Chartered Accountants Registered Auditor 1 Harbourmaster Place IFSC Dublin 1 9

12 Statement of accounting policies for the year ended 31 December 2005 The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the company s financial statements. Basis of preparation The financial statements have been prepared in accordance with the provisions of the Companies Act 1963 to 2005, as amended by the European Communities (Insurance Undertakings: Accounts) Regulations The financial statements are prepared on the going concern basis and in accordance with generally accepted accounting principles under the historical cost convention, as modified by the revaluation of investments. They have also been prepared in accordance with the Statement of Recommended Practice (SORP) on Accounting for Insurance Business issued by the Assocation of British Insurers. The Company has adopted Financial Reporting Standard 21, Events After the Balance Sheet Date ( FRS 21 ) when preparing accounts for the year end 31 December Under FRS 21 where dividends are declared after the balance sheet date, those dividends shall not be recognised as a liability at the balance sheet date. Consequently, only dividends paid or approved by the members of the Company during the financial year will be recorded in shareholders funds at the balance sheet date. The change in accounting policy has been applied to the comparative balances resulting in an increase in shareholder funds of 22,500,000 and 7,500,000 at 1 January 2005 and 1 January 2004, respectively. See note 19 to the financial statements. The financial statements are expressed in euro. Premium income Premiums fall due when payment is received, in accordance with the terms and conditions of policies issued by the company. Reinsurance premiums are accounted for when the related premium income is received. Premiums are shown net of any insurance taxes. Claims and surrenders Death claims and surrenders are recorded on the basis of notifications received and the value of such claims then ceases to be included within the technical provisions for life assurance policies. Claims payable include claims handling costs. Reinsurance recoveries are accounted for in the same period as the related claim. 10

13 Statement of accounting policies (continued) for the year ended 31 December 2005 Investments and investment return (i) Investment valuations Listed investments are included in the balance sheet at mid-market value, and unlisted investments at directors valuation. (ii) Investment income and investment expenses and charges Investment income, which includes dividends, interest, gains and losses on the realisation of investments and related transaction expenses, is accounted for on an accruals basis. (iii) Investment gains and losses Commission Both realised and unrealised gains and losses are taken to the technical and non-technical account. Acquisition commissions are included in acquisition costs in the technical account as incurred. Life assurance provision The life assurance (long term business) provision is determined by the company s Reporting Actuary following his annual investigation of the life assurance business. The technical provisions are calculated in accordance with the valuation of liability regulations of the European Communities (Insurance Undertakings; Accounts) Regulations, Tangible fixed assets Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided for at the following rates: Fixtures and fittings, other equipment Computer equipment & software 20% per annum 20% per annum Acquisition costs Acquisition costs comprise direct costs of obtaining and processing new business and include acquisition commission. Certain costs are deferred as an explicit deferred acquisition cost asset gross of tax. This asset is amortised against annual management charges levied on the related policies. The deferred acquisition cost asset is reviewed for recoverability at the end of each accounting period against future margins expected to arise from the related policies. 11

14 Statement of accounting policies (continued) for the year ended 31 December 2005 Taxation Corporation tax is assessed on the results for the period. In accordance with Financial Reporting Standards No. 19 Deferred Tax, except where otherwise required by accounting standards, full provision without discounting is made for all timing differences which have arisen but not reversed at the balance sheet date. Deferred tax balances are provided at rates of taxation expected to prevail at the time of reversal. A deferred tax asset is recorded where it is more likely than not recoverable. The recoverability of the deferred tax asset is assessed annually by the directors. Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated into euro at the exchange rate ruling at the balance sheet date and revenues, costs and non monetary assets at the exchange rates ruling at the dates of the transactions. Profits and losses arising from foreign currency translations and on settlement of amounts receivable and payable in foreign currency are dealt with through the profit and loss account. Pensions The pension entitlements of employees are secured by contributions from the company to a separately administered defined contribution pension fund. Contributions to the fund are charged to the technical account in the same period as the salaries to which they apply. 12

15 Profit and loss account for the year ended 31 December 2005 Technical account - life assurance business Note Earned premiums (net of reinsurance) Gross premiums written 1 1,204,118 1,029,445 Outward reinsurance premiums 25 (339) 1,204,143 1,029,106 Investment income 2 146,912 46,390 Unrealised gains on investments 168, ,734 Other technical income, net of reinsurance 12,965 13,657 Total technical income 1,532,142 1,264,887 Claims incurred (net of reinsurance) Claims paid Gross amount (497,516) (273,601) Reinsurer s share (2) 14 Change in provision Gross amount Reinsurer s share (497,518) (273,587) (497,518) (273,587) Change in technical provisions Life assurance provision Gross amount 14 (4,576) (8,936) Reinsurer s share - - Net of reinsurance (4,576) (8,936) Technical provisions for life assurance 14 (920,121) (889,121) Net operating expenses 4 (56,044) (52,219) Investment expenses and charges 3 (9,447) (13,243) Unrealised losses on investments (16,722) (2,577) Total technical charges (1,504,428) (1,239,683) Balance on the technical account - life assurance business 27,714 25,204 13

16 Profit and loss account for the year ended 31 December Note Balance on the technical account - life assurance business 27,714 25,204 Investment income Income from other investments 3,254 3,268 Unrealised gains on investments 1, Unrealised losses on investments (808) (365) Profit on ordinary activities before taxation 5 31,614 28,687 Tax on profit on ordinary activities 6 (3,952) (3,586) Profit for the financial year 13 27,662 25,101 There were no recognised gains or losses other than those dealt with in the profit and loss account of the financial year and preceeding financial year. All activities arose from continuing operations. On behalf of the board Director Director 14

17 Balance sheet As at 31 December 2005 Assets Note Investments Other financial investments 8 147, ,083 Investments for the benefit of life assurance policyholders who bear the investment risk 9 4,934,312 4,010,768 5,082,227 4,140,851 Debtors Amounts falling due within one year: Debtors arising out of direct insurance operations Other debtors (inlcuding 20,572k receivable greater than one year (2004: 12,045k)) 11 32,198 19,783 Other assets Tangible assets and stocks Cash at bank and in hand 5,092 2,586 Prepayments and accrued income Accrued interest and rent Deferred acquisition costs 869 1,882 Total assets 5,121,134 4,165,670 15

18 Balance sheet (continued) As at 31 December Note Liabilities (As restated) (As restated) Capital and reserves Called up share capital Reserves 13 54,444 54,444 Profit brought forward 13 51,498 33,897 Profit for financial year 5,162 17,601 Shareholders funds - equity interests , ,577 Technical provisions Life assurance business provision 14 24,051 19,475 Technical provisions for life assurance policies where the investment risk is borne by the policyholders 14 4,934,312 4,010,768 Provisions for other risks and charges Creditors Creditors arising out of direct insurance operations 16 34,811 22,658 Other creditors including taxation and social welfare 17 16,208 6,179 Total liabilities and capital and reserves 5,121,134 4,165,670 On behalf of the board Director Director 16

19 Notes forming part of the financial statements 1 Gross premiums written - linked Single premiums 1,190,561 1,018,414 Regular premiums 13,557 11,031 Total 1,204,118 1,029,445 The company transacts cross-border life assurance business in the European Union under the Third Life Directive as introduced into domestic Irish legislation by the European Communities (Life Assurance) Framework Regulations, All new premiums during the year were written in Italy. 2 Investment income Technical account - Life assurance business Income from other investments 51,450 1,136 Gains on the realisation of investments 95,462 45, ,912 46,389 3 Investment expenses and charges Technical account - Life assurance business Losses on realisation of investments 145 2,653 Investment management expenses, including interest 9,302 10,590 9,447 13,243 17

20 Notes (continued) 4 Net operating expenses Technical account - life assurance business Acquisition costs 34,550 33,703 Administrative expenses 20,481 17,513 Change in deferred acquisition costs 1,013 1,003 56,044 52,219 Gross acquisition costs in 2005 include total commissions for direct insurance of 29 million (2004: 27 million). 5 Statutory and other information Directors emoluments For services as directors Auditor s remuneration Depreciation Staff costs Wages and salaries Pension costs Social welfare costs , The average number of employees during the period was as follows: Administration 8 7 Finance 2 1 Actuarial 1-18

21 Notes (continued) 6 Taxation Non-technical account Corporation tax 3,952 3,597 Deferred tax - (11) 3,952 3, Profit on ordinary activities before taxation 31,614 28,687 Current tax at 12.5% (2004: 12.5%) 3,952 3,585 Effects of Items not deductible for tax purposes Capital allowances for period in excess of depreciation (12) (2) Adjustments to tax charge in respect of previous periods - 2 Underprovision in the current year - (22) Total current tax charge 3,952 3,597 7 Dividends The Company has adopted Financial Reporting Standard 21, Events after the Balance Sheet Date. The change in accounting policy in relation to the recognition of dividends payable to shareholders is set out in the statement of accounting policies. A dividend of 22,5000,000 and 7,500,000 for the years ended 31 December 2004 and 2003, respectively, were declared after the respective balance sheet dates and, in accordance with FRS 21, are not recognised as a liability at the balance sheet dates (See note 19). A dividend of 22,500,000, in respect of 2005 profits, has been declared after the balance sheet date. In accordance with FRS 21, this dividend is not recognised as a liability at the balance sheet date. 19

22 Notes (continued) 8 Other financial investments Market value Cost Market value Cost Shares and other variable-yield securities and units in unit trusts 24,139 24,384 3,866 4,841 Debt securities and other fixed income securities 64,688 65,235 93,257 93,407 Deposits with credit institutions 59,088 59,088 32,960 32, , , , ,208 9 Investments for the benefit of life assurance policyholders who bear the investment risk Market value Cost Market value Cost Unit Linked 1,349,776 1,161,960 1,168,268 1,090,569 Tracker Bonds 2,762,999 2,603,796 1,972,762 1,853,369 Capital Guaranteed 821, , , ,649 At 31 December 4,934,312 4,531,408 4,010,768 3,768,587 20

23 Notes (continued) 10 Tangible fixed assets Computer equipment and Other software equipment Total Cost At 31 December , ,340 Additions At 31 December , ,384 Accumulated depreciation At 31 December ,090 Charge for year At 31 December , ,208 Net book value At 31 December At 31 December Other debtors Management fee rebates 3,069 3,168 Italian tax receivable 20,572 12,045 Sundry debtors 8,557 4,570 32,198 19,783 On 1 February 2004 the company opted into the new Italian tax regime. Under the tax codes (L art. 41-bis del Decreto legge 30 settembre 2003, n. 269, convertito dalla legge n. 326 dello stesso anno) and (Decreto-legge 12 luglio 2004, n. 168, convertito dalla legge 30 luglio 2004, n. 191 Disposizioni fiscali urgenti modifiche alla disciplina fiscale delle riserve matematiche.) the company is required to make an advance payment of policyholder taxes to the Italian Revenue Authorities. The company paid 2.6m and accrued an additional liability of m (see note 17) in respect of the year ended 31 December The tax asset is recoverable against taxes witheld on policyholder income and through a group recovery mechanism i.e. offsetable against other taxes payable. In the opinion of the directors, the realisable value of the Italian tax asset is not less than its net book value. Included in the above is 20.5 m (2004: 12.0m) which are receivebale after more than 1 year. 21

24 Notes (continued) 12 Share capital - equity Authorised: 5,078,953 ordinary shares of 1 each 5,079 5,079 Allotted, called up and fully paid: 634,870 ordinary shares of 1 each Movement in shareholders funds Share Capital Profit & Capital Contribution Loss account Total Balance at 1 January 2005 (as originally stated) ,444 28,998 84,077 Prior period adjustment ,500 22,500 Balance as at 1 January 2005 (as restated) ,444 51, ,577 Profit for the financial year ,662 27,662 Dividend paid - - (22,500) (22,500) Dividend proposed - - (22,500) (22,500) Effect of prior period adjustment ,500 22,500 Balance at 31 December ,444 56, ,739 22

25 Notes (continued) 13 Movement in shareholders funds (cont) Share Capital Profit & Capital Contribution Loss account Total Balance at 1 January 2004 (as originally stated) 635 4,444 26,397 31,476 Prior period adjustment - - 7,500 7,500 Balance as at 1 January 2004 (as restated) 635 4,444 33,897 38,976 Profit for the financial year ,101 25,101 Dividend paid - - (7,500) (7,500) Dividend proposed - - (22,500) (22,500) Effect of prior period adjustment ,500 22,500 Capital Contribution received - 50,000-50,000 Balance at 31 December ,444 51, ,577 In 1999, the shareholders, Montepaschi Vita S.p.A. and Banca Monte dei Paschi di Siena S.p.A., companies incorporated in Italy, made an irrevocable contribution of 4,444,083 to the capital of the company. This contribution is distributable, after all accumulated losses have been taken into account. On 30 December 2004 the company received additional capital contributions from its parent and its ultimate parent of 30,000,000 and 20,000,000 respectively. The capital contributions are non-refundable and non interest bearing. 14 Technical provisions Life assurance business provision Life assurance Technical provision for business provision linked liabilities Opening balance at 1 January ,475 4,010,768 Movement in technical provisions during the year 4, ,121 Purchase of portfolio during the year - 3,423 Balance at 31 December ,051 4,934,312 23

26 Notes (continued) 14 Technical provisions (continued) The life assurance business provision was calculated by the company s Reporting Actuary, Mr. Neil Guinan FASA FIA. Mr.Guinan is a Fellow Member of the Society of Actuaries in Ireland. The computation was made on the basis of recognised actuarial methods and with due regard to the principles laid down in Council Directive 92/96/EEC. Total technical provisions shown in the financial statements should be sufficient to cover accrued liabilities arising out of life assurance contracts, as far as can reasonably be foreseen. The life assurance business provision was calculated using modern tables of mortality. Expense assumptions used in the computation were based on the company s recent experience. 15 Provisions for other risks and charges Deferred tax: Balance at beginning of year Arising during the year: Non-technical account - (11) Balance at end of year Deferred tax arises on timing differences due to accelerated capital allowances in respect of tangible fixed assets. 16 Creditors arising out of direct insurance operations Other insurance creditors 25,252 22,105 Amounts due to group companies Amounts owed to credit institutions 9,000 - Amounts due in respect of reinsurance outwards ,811 22,658 Amounts owed to credit institutions represent a bank overdraft. All amounts fall due within one year. 24

27 Notes (continued) 17 Other creditors including tax and social welfare (As restated) Amounts falling due within one year Corporation tax 879 1,601 Italian tax payable 14,817 2,694 Social welfare - 5 Other creditors 512 1,879 16,208 6, Capital position statement (As restated) Total shareholder funds 111, ,577 Adjustment to regulatory bases: Adjustments to asset values (4,967) (3,375) Adjustments to reserves value (32,005) (24,680) Deferred acquisition costs (870) (1,882) Total available capital resources 73,897 76,640 Minimum solvency level required by Financial Regulator 25,031 17, Prior year adjustment The Company adopted Financial Reporting Standard 21, Events After the Balance Sheet Date, ( FRS 21 ) when preparing accounts for the year end 31 December The change in accounting policy arising from the adoption of FRS21 gave rise to a credit to shareholders funds and a reduction in creditors, amounts falling due within one year of 22,500,000 and 7,500,000 at 1 January 2005 and 1 January 2004, respectively. This credit relates to dividends in respect of each financial year which are declared subsequent to the year end. Previously such dividends were recognised as a liability at the year end. On adoption of FRS 21, such dividends are now recognised as a liability when declared. 25

28 Notes (continued) 20 Group membership The company is ultimately a 100% subsidiary of Banca Monte dei Paschi di Siena S.p.A.. The parent undertaking of the smallest group of undertakings for which group financial statements are drawn up, and in which the company s financial statements are included, is Monte Paschi Vita S.p.A., a company incorporated in Italy. The parent undertaking of the largest group of undertakings for which group financial statements are drawn up is Banca Monte dei Paschi di Siena S.p.A.which is incorporated in Italy and this company is considered by the directors to be the ultimate parent undertaking. The consolidated financial statements of Banca Monte dei Paschi di Siena S.p.A. are available from the Company Secretary, Banca Monte dei Paschi di Siena S.p.A., Piazza Salimbeni 3, Siena, Italy. The financial statements of Montepaschi Life (Ireland) Limited are available from the Company Secretary at Grand Canal House, 1 Upper Grand Canal Street, Dublin Related party transactions The company is availing of the exemption under Financial Reporting Standards No. 8 Related Party Disclosures not to disclose details of transactions with group companies as the company is ultimately a wholly owned subsidiary of Banca Monte dei Paschi di Siena S.p.A. Mr. A. Bates is a partner in Dillon Eustace. Dillon Eustace received professional fees of 47,383 (2004: 87,200) in relation to services provided to the company during the year. The balance owing to Dillon Eustace at 31 December 2005 was 39,321 (2004: 60,000). 22 Cash flow statement The company is availing of the exemption under Financial Reporting Standard No. 1 (Revised) Cash Flow Statements not to prepare a cash flow statement as the company is a subsidiary of Banca Monte dei Paschi di Siena S.p.A. which prepares a consolidated cash flow statement. 23 Post balance sheet events Subsequent to the year end a dividend of 22,500,000 was declared. There have been no other significant events affecting the company since the year end. 24 Approval of financial statements The board of directors approved these financial statements 27 March