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Structural Business Statistics for the Financial sector are used to complete the coverage of the business economy in Ireland and to allow meaningful comparisons with other business sectors such as Industry and Services.
The Financial and Insurance Activities sector, NACE Section K, has traditionally been excluded from the Structural Business Statistics arising from difficulties in generating definitions for production value, gross value added and gross operating surplus. However, these definitions have been developed over the last number of years at European level.
The objective behind producing Structural Business Statistics for the Financial sector is to complete the coverage of the business economy in Ireland and to allow meaningful comparisons with other business sectors such as Industry and Services.
The Financial sector is described by NACE Section K. It includes:
K64 is dominated by credit institutions which in Ireland are banks and credit unions. However, it also includes activities of holding companies, investment funds and other financial service activities.
K65 includes life insurance companies, non-life insurance companies and reinsurance companies as well as pension funds.
K66 is the most diverse category and includes all financial auxiliaries including brokerage firms, insurance agents and fund management activities.
The business operations data presented for the Financial sector in Chapter 2 of this report covers banks, life insurance, non-life insurance and reinsurance. The detailed calculations of the main indicators for these enterprises are presented here. The calculations are based on an accounting framework where the income and expenses for the reference year 2012 are analysed in detail. See Tables 9.1 and 9.2.
Banks
In 2012, interest receivable for all resident banks in Ireland was €18.1 billion, a reduction of €2.4 billion from 2011. The 2012 figure comprised of €12.2 billion in interest from loans and deposits and €6 billion in interest from securities held as assets. See Figure 9.1 and Table 9.1.
| Interest receivable from loans and deposits | Interest receivable from securities | |
| 2010 | 16.4 | 6.5 |
| 2011 | 15 | 5.5 |
| 2012 | 12.2 | 6 |
When commissions and other operating income are included, total income for banks in 2012 was €21.4 billion. Total income in 2010 and 2011 was €27.8 billion and €27.1 billion respectively.
Interest payable in 2012 from resident banks was €13 billion which comprised €9.8 billion in interest paid for loans and deposits and €3.2 billion in interest paid to holders of issued securities. Interest payable in 2011 was €15.4 billion while in 2010 it was €16.7 billion. See Figure 9.2 and Table 9.1.
| Interest payable linked to loans and deposits | Interest payable linked to securities | |
| 2010 | 11.8 | 4.9 |
| 2011 | 11.3 | 4 |
| 2012 | 9.8 | 3.2 |
Please note that a definition of turnover does not exist for banks at European level, therefore for the purposes of this report, turnover is equal to production value. Also, the concept of Financial Intermediation Services Indirectly Measured (FISIM)[1] is not used in Structural Business Statistics.
Gross value added (GVA) for banks was €5.6 billion in 2012. This was a decrease of €3.2 billion from 2011 due mainly to a drop in interest receivable and other operating income. See Table 9.1.
Gross operating surplus, which is GVA minus personnel costs, was €2.8 billion in 2012 falling from €5.8 billion in 2011. This was the amount of money that was earned by banks through their normal operations which was used to fund the operation of the business, meet tax obligations, pay out dividends, or to meet the cost of write-downs on the value of loans advanced to customers.
[1] In the System of National Accounts, FISIM is used to estimate the value of the services provided by financial intermediaries such as banks.
| Table 9.1 Production account and generation of income for all banks, 2010-2012 | ||||
| 2010 | 2011 | 2012 | ||
| €m | €m | €m | ||
| All interest receivable | 22,881 | 20,552 | 18,144 | |
| Interest receivable from securities | 6,487 | 5,530 | 5,968 | |
| Interest receivable from loans and deposits | 16,396 | 15,023 | 12,176 | |
| Commissions receivable | 2,122 | 1,916 | 2,057 | |
| Other operating income | 2,785 | 4,618 | 1,194 | |
| All Income | 27,788 | 27,087 | 21,395 | |
| All Interest payable and similar charges | 16,739 | 15,355 | 13,014 | |
| Interest payable linked to securities | 4,925 | 4,020 | 3,193 | |
| Interest payable linked to loans and deposits | 11,814 | 11,334 | 9,820 | |
| Production value1 excluding value adjustments and profits from affiliates | 11,050 | 11,733 | 8,381 | |
| Interest Margin2 | 6,143 | 5,198 | 5,130 | |
| Commissions payable | 1,067 | 450 | 486 | |
| Other administrative expenses (other than labour costs) | 822 | 625 | 493 | |
| Other operating charges | 1,942 | 1,864 | 1,838 | |
| Gross value added at factor cost3 | 7,217 | 8,793 | 5,566 | |
| Personnel costs | 2,617 | 2,989 | 2,738 | |
| Gross operating surplus4 | 4,601 | 5,804 | 2,828 | |
| Source: CSO/Central Bank survey of credit institutions | ||||
| 1 All income less all interest payable and similar charges. | ||||
| 2 All interest received less all interest payable and similar charges. | ||||
| 3 Production value less commissions payable, other administrative expenses (other than labour costs) and other operating expenses. | ||||
| 4 Gross value added less personnel costs. | ||||
Insurance
Gross premiums earned, which is defined as turnover in Structural Business Statistics, amounted to €41.7 billion in 2012 for all insurance companies in Ireland[1]. This is an increase of approximately €2.8 billion on the 2011 figure. See Figure 9.3 and Table 9.2.
[1] In 2012, there were 63 life insurance companies, 135 non-life insurance companies and 107 reinsurance companies.
| Gross premiums earned | Gross claims incurred | |
| 2010 | 39.144 | 29.949 |
| 2011 | 38.87 | 40.078 |
| 2012 | 41.695 | 37.714 |
Besides gross premiums, other sources of income for insurance companies in 2012 included portfolio investment income of €3.9 billion and income from the provision of other services of €1.7 billion. Both of these sources of income fell in 2012 compared to 2011.
Gross claims incurred by insurance companies in 2012 were €37.7 billion, which was a significant decrease of €2.4 billion from 2011. This decrease was caused by a non-recurrent small number of large transactions taking place in 2011. The outcome of this was that gross claims incurred were smaller than gross premiums earned, which is in line with the trend prior to 2011.
Production value amounted to €12.5 billion for all insurance companies in 2012, an increase of almost €1.6 billion compared to 2011.
GVA for insurance companies was €3.4 billion in 2012, an increase of almost €850 million compared to 2011.Decreases in reinsurance gross claims and steady increases in gross premiums earned across all three areas (life insurance, non-life insurance and reinsurance) drove the rise in GVA.
Gross operating surplus or profit for insurance companies was almost €2.7 billion in 2012 increasing from €1.8 billion in 2011.
Summary
By amalgamating the data on banks and insurance, it is possible to produce key indicators which can then be used to compare the Financial sector with the other business sectors in the economy. See Table 9.3.
| Table 9.2 Production account and generation of income for all insurance companies, 2010-2012 | |||
| 2010 | 2011 | 2012 | |
| €m | €m | €m | |
| Gross premiums earned | 39,144 | 38,870 | 41,695 |
| Portfolio investment income | 4,717 | 4,122 | 3,898 |
| Investment income (Technical a/c) | 4,131 | 3,623 | 3,396 |
| Investment income (Non-Technical a/c) | 586 | 500 | 503 |
| Other services produced | 2,045 | 1,673 | 1,651 |
| Fees receivable (commissions etc) | 1,114 | 1,262 | 1,046 |
| Other income - Technical a/c | 932 | 411 | 605 |
| Gross claims incurred | 29,949 | 40,078 | 37,714 |
| Gross claims payments | 30,175 | 40,308 | 37,641 |
| Gross change in the provision for outstanding claims | -227 | -230 | 73 |
| Capital gains and provisions | -4,030 | 6,349 | 2,958 |
| Capital gains/losses realised and unrealised | 8,682 | -4,004 | 11,664 |
| Gross change in life insurance provision | -12,711 | 10,352 | -8,706 |
| Production value1 | 11,928 | 10,936 | 12,490 |
| Gross value of reinsurance services received | 1,358 | 1,501 | 2,313 |
| Other intermediate consumption | 6,772 | 6,901 | 6,797 |
| Gross value added at factor cost2 | 3,799 | 2,533 | 3,379 |
| Personnel Costs | 762 | 749 | 702 |
| Gross operating surplus3 | 3,037 | 1,785 | 2,677 |
| Source: CSO Balance of Payments surveys of insurance corporations | |||
| 1 Includes gross premium earned, portfolio investment income, other services produced, capital gains and provisions less gross claims incurred. | |||
| 2 Production value less gross value of reinsurance services received and other intermediate consumption. | |||
| 3 Gross value added at factor cost less personnel costs. | |||
| Table 9.3 Summary of main indicators for banks and insurance, 2012 | |||
| €m | |||
| Banks | Insurance | Total | |
| Turnover | 8,381 | 41,695 | 50,076 |
| Production value | 8,381 | 12,490 | 20,871 |
| Gross value added | 5,566 | 3,379 | 8,945 |
| of which | |||
| Gross operating surplus | 2,828 | 2,677 | 5,505 |
| Personnel costs | 2,738 | 702 | 3,440 |
| Source: CSO/Central Bank survey of credit institutions and CSO Balance of Payments surveys of insurance corporations | |||
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