Five measures of financial performance of the Group as a whole, helping us to evaluate progress towards our strategic imperatives.
You can also view our Key Performance Indicators in html.
We use other indicators to record progress elsewhere, including those pertaining to customers, employees and Corporate and Social Responsibility.
The assessment of our non-financial performance against these strategic imperatives is provided in the relevant business review.
Return on Equity
Definition: RoE measures the return earned by shareholders on shareholder capital retained within the business. RoE is calculated as shareholders [IFRS] profit after tax divided by average IFRS shareholders’ funds.
Purpose: RoE provides a link between performance and balance sheet management and ensures that an appropriate balance is maintained.
IFRS Operating Profit
Definition: The Group’s primary financial statements (see Financial Statements) are prepared on an International Financial Reporting Standards (IFRS) basis which all EU listed companies are required to follow. [IFRS] operating profit measures the pre-tax result using a smoothed longer term investment return. Any variance between actual and smoothed investment return is reported below operating profit along with the release of the 1996 Sub-fund. For UK Risk and Savings, the operating profit will comprise the profits and losses emerging from this business on an IFRS basis, adjusted to include a longer term investment return on the [Society] shareholder assets held within the Society Shareholder Capital (SSC).
Purpose: IFRS operating profit gives an insight into the Group’s ability to generate cash flows to support dividends during a period.
Insurance Groups Directive (IGD) Surplus*
Definition: The [IGD] surplus is an [FSA] regulatory measure which calculates surplus capital within the Group. IGD surplus is defined as Group regulatory capital employed less the Group regulatory capital requirement. Surplus capital held within our Society Long Term Fund cannot be included in the IGD definition of capital employed.
Purpose: [IGD] surplus is the Group level regulatory surplus capital measure. IGD surplus is after payment of proposed dividend.
Total Shareholder Return (TSR)
Definition: [TSR] is a measure used to compare the performance of different companies’ stocks and shares over time. It combines the share price appreciation and dividends paid to show the total return to the shareholder. The TSR shown is the change in share price over a three year performance period, plus the value of reinvested dividends, relative to the performance of all the other companies in the [FTSE] 100.
Purpose: TSR measures total return to shareholders over the medium term.
EEV Operating Profit
Definition: Legal & General provides supplementary financial statements prepared on the European Embedded Value (EEV) basis for long term insurance contracts (see Supplementary Financial Statements). The EEV basis provides an assessment of the value which has been generated by the business during a period. Operating profit on the EEV basis reports the change in embedded value in a period, but excludes fluctuations from assumed longer term investment return.
Purpose: In the Board’s opinion, [EEV] operating profit provides shareholders with a good understanding of the value which is being created on the Group’s long term insurance contracts.
* Figures extracted from draft unaudited regulatory returns.