JP Morgan Chase 2005 Annual Report Download - page 46

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The Provision for credit losses totaled $210 million, up 2% from the prior
year. The increase was due to the Merger but was largely offset by a lower
Provision for credit losses, reflecting favorable credit trends.
Noninterest expense increased by 68% to $490 million, largely due to
the Merger.
Selected metrics
Year ended December 31,(a)
(in millions, except ratios and
where otherwise noted) 2005 2004 2003
Business metrics (in billions)
End-of-period loans and lease related assets
Loans outstanding $ 44.7 $ 54.6 $ 33.7
Lease related assets(b) 5.2 8.0 9.5
Total end-of-period loans and lease
related assets 49.9 62.6 43.2
Average loans and lease related assets
Loans outstanding(c) $ 48.5 $ 44.3 $ 32.0
Lease related assets(d) 6.6 9.0 9.7
Total average loans and lease
related assets(c)(d) 55.1 53.3 41.7
Overhead ratio 51% 43% 35%
Credit quality statistics
30+ day delinquency rate 1.65% 1.55% 1.42%
Net charge-offs
Loans $ 257 $ 219 $ 130
Lease receivables(d) 20 44 41
Total net charge-offs 277 263 171
Net charge-off rate
Loans(c) 0.57% 0.52% 0.43%
Lease receivables 0.32 0.49 0.42
Total net charge-off rate(c) 0.54 0.52 0.43
Nonperforming assets $ 237 $ 242 $ 157
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results. 2003 reflects the results of heritage JPMorgan Chase only.
(b) Includes operating lease-related assets of $0.9 billion for 2005. Balances prior to January 1,
2005, were insignificant.
(c) Average loans include loans held for sale of $3.5 billion, $2.3 billion and $1.8 billion for,
2005, 2004 and 2003, respectively. These are not included in the net charge-off rate.
(d) Includes operating lease-related assets of $0.4 billion for 2005. Balances prior to January 1,
2005, were insignificant.These are not included in the net charge-off rate.
Insurance
Insurance is a provider of financial protection products and services, including
life insurance, annuities and debt protection. Products and services are
distributed through both internal lines of business and external markets.
On February 7, 2006, the Firm signed a definitive agreement to sell its life
insurance and annuity underwriting business.
Selected income statement data
Year ended December 31,(a)
(in millions) 2005 2004 2003
Total net revenue $644 $ 393 $ 115
Noninterest expense 520 317 92
Operating earnings 79 48 13
Memo: Consolidated gross
insurance-related revenue(b) 1,642 1,191 611
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results. 2003 reflects the results of heritage JPMorgan Chase only.
(b) Includes revenue reported in the results of other businesses.
2005 compared with 2004
Operating earnings totaled $79 million, an increase of $31 million from the prior
year, on net revenues of $644 million. The increase was due primarily to the
Merger. Results also reflected an increase in proprietary annuity sales commis-
sions paid and lower expenses from merger savings and other efficiencies.
2004 compared with 2003
Operating earnings totaled $48 million on Total net revenue of $393 million
in 2004. The increases in Total net revenue and Noninterest expense over the
prior year were due almost entirely to the Merger.
Selected metrics
Year ended December 31,(a)
(in millions, except
where otherwise noted) 2005 2004 2003
Business metrics – ending balances
Invested assets $ 7,767 $ 7,368 $ 1,559
Policy loans 388 397 —
Insurance policy and claims reserves 7,774 7,279 1,096
Term life sales – first year annualized
premiums 60 28 —
Term life premium revenues 477 234 —
Proprietary annuity sales 706 208 548
Number of policies in force – direct/assumed
(in thousands) 2,441 2,611 631
Insurance in force – direct/assumed $ 282,903 $ 277,827 $ 31,992
Insurance in force – retained 87,753 80,691 31,992
A.M. Best rating AAA
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results. 2003 reflects the results of heritage JPMorgan Chase only.
The following is a brief description of selected business metrics within Insurance.
• Proprietary annuity sales represent annuity contracts marketed through and issued by subsidiaries of the Firm.
• Insurance in force – direct/assumed includes the aggregate face amount of insurance policies directly underwritten and assumed
through reinsurance.
• Insurance in force – retained includes the aggregate face amounts of insurance policies directly underwritten and assumed through
reinsurance, after reduction for face amounts ceded to reinsurers.
Management’s discussion and analysis
JPMorgan Chase & Co.
44 JPMorgan Chase & Co. /2005 Annual Report