A
ANNUAL PREMIUM EQUIVALENT (APE)
An industry measure of new business that is common in the UK. It is the total value of regular premiums, plus 10% of any new single premiums written for the year.
B
BULK PURCHASE ANNUITY (BPA)
Bulk annuities are bought by firms that run final salary pension schemes to reduce their responsibilities by closing the schemes to new members and passing the assets and obligations to insurance providers.
D
DIVIDEND COVER
Dividend cover measures how many times over the profits could have paid the dividend. For example, if the dividend cover is 3, this means that the company’s post tax profit attributable to shareholders was three times the amount of dividend paid out.
E
EARNINGS PER SHARE (EPS)
EPS is a common financial metric which can be used to measure the profitability and strength of a company over time. It is the total earnings divided by the number of shares outstanding. Basic EPS uses a weighted average of shares outstanding during the year.
EUROPEAN EMBEDDED VALUE (EEV)*
The Embedded Value (EV) of a life insurance company is the value to equity shareholders of the net assets and expected future profits of the company on existing business. The European Embedded Value (EEV) is a variation of EV which allows for a more formalised method of choosing the parameters and doing the calculations to enable greater transparency and accountability.

* This is a Key Performance Indicator

EUROPEAN EMBEDDED VALUE OPERATING PROFIT (EEV OPERATING PROFIT)*
Legal & General provides supplementary financial statements prepared on the European Embedded Value (EEV) basis for long term insurance contracts. 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.

* This is a Key Performance Indicator

EUROPEAN EMBEDDED VALUE PER SHARE (EEV PER SHARE)*
EEV per share is used to measure value creation over time. It is the total Group EEV divided by the closing number of shares in issue.
Purpose: EEV per share provides shareholders with an insight into the value of the existing book of business at the balance sheet date.

* This is a Key Performance Indicator

F
FUNDS UNDER MANAGEMENT (FUM)
The total amount of money investors have trusted to a fund manager to invest across all their investment products.
G
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
These are a widely accepted collection of guidelines and principles, established by the International Accounting Standards Board, and used by the accounting community to report financial information.
I
INSURANCE GROUP DIRECTIVE SURPLUS (IGD SURPLUS)*
The IGD surplus is an FSA regulatory measure which calculates surplus capital within the Group. IGD surplus is defined as Group regulatory capital less the Group regulatory capital requirement. Surplus capital held within Society’s 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 accrual of proposed dividend.

* This is a Key Performance Indicator

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
These are accounting guidelines and rules that companies and organisations can follow when completing financial statements. They are designed to enable comparable reporting between companies, and they are the standards that all publicly listed groups in the European Union (EU) are required to use.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) OPERATING PROFIT*
The Group’s primary financial statements are prepared on an International Financial Reporting Standards (IFRS) basis. 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.
Purpose: IFRS operating profit gives an insight into the Group’s ability to generate cash flows to support dividends during a period.

* This is a Key Performance Indicator

K
KEY PERFORMANCE INDICATORS (KPIs)
These are measures by which the development, performance or position of the business can be measured effectively.
L
LIABILITY DRIVEN INVESTMENT (LDI)
A form of investing in which the main goal is to gain sufficient assets to meet all liabilities, both current and future. This form of investing is most prominent in final salary pension plans, whose liabilities can often reach into billions of pounds for the largest of plans.
N
NET CASH GENERATION*
Net cash generation is defined as operational cash generation less new business strain for the UK non profit Risk and Savings businesses.
Purpose: Net cash generation demonstrates the ability of the Group to pay returns to shareholders.

* This is a Key Performance Indicator

NEW BUSINESS STRAIN
The impact of writing new business on the regulatory position, including the cost of acquiring new business and setting up regulatory reserves.
O
OPERATIONAL CASH GENERATION
Operational cash generation is defined as the expected release from in-force business for the UK non profit Risk and Savings businesses, the shareholders’ share of bonuses on With-profits business, the post-tax operating profit on other UK businesses, including an expected investment return on Group Capital and Financing invested assets, and dividends remitted from our international businesses from sustainable cash generation.
P
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP)
The industry measure used to determine the value of new business. It is calculated as 100% of single premiums plus the expected present value of new regular premiums.
PURCHASED INTEREST IN LONG TERM BUSINESS (PILTB)
An estimate of the future profits that will emerge over the remaining term of life and pensions policies that have been acquired via a business combination.
R
RETURN ON EQUITY (ROE)*
ROE measures the return earned by shareholders on shareholder capital retained within the business. ROE is calculated as IFRS profit after tax divided by average IFRS shareholder’s funds.
Purpose: ROE provides a link between performance and balance sheet management and ensures that an appropriate balance is maintained between the two.

* This is a Key Performance Indicator

S
SELF INVESTED PERSONAL PENSIONS (SIPP)
A self invested personal pension provides the policyholder with greater choice and flexibility as to the range of investments made, how these investments are managed, and the administration of those assets and how retirement benefits are taken.
SOCIETY
Legal & General Assurance Society Limited.
T
TOTAL SHAREHOLDER RETURN (TSR)*
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.
Purpose: TSR measures total return to shareholders over the medium term.

* This is a Key Performance Indicator

S
SOLVENCY II
A proposed EU-wide regulatory regime which intends to align solvency capital to an insurers risk profile. Expected to be implemented in 2014.
V
VALUE IN FORCE (VIF)
The value of in-force business is the present value of expected future shareholder profits less the present value cost of holding capital required to support the in-force business.
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