Annual Report and Accounts 2013

Glossary.

Glossary.
A

ASSETS UNDER MANAGEMENT (AUM)

The total amount of money investors have trusted to our fund managers to invest across our investment products.
B

BULK PURCHASE ANNUITY (BPA)

Bulk annuities are bought by entities 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.
C

COMPANY

Legal & General Group Plc.
D

DIVIDEND COVER

Dividend cover measures how many times over the net cash generated in the year could have paid the full year dividend. For example, if the dividend cover is 3, this means that the net cash generation 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 shareholder profit after tax divided by the number of shares outstanding. EPS uses a weighted average number of shares outstanding during the year.
* Key performance indicator

EMPLOYEE ENGAGEMENT INDEX*

The Employee Engagement Index measures the extent to which employees are committed to the goals of Legal & General and are motivated to contribute to the overall success of the company, whilst at the same time working with their manager to enhance their own sense of development and well-being.
* Key performance indicator

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.

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. Operating profit on the EEV basis reports the change in embedded value in a period, but excludes fluctuations from assumed longer-term investment return.
* Non GAAP measures

EUROPEAN EMBEDDED VALUE PER SHARE (EEV PER SHARE)

EEV per share is used to measure value creation over time. It is the Group’s EEV including LGIM, divided by the closing number of shares in issue.
F

FULL YEAR DIVIDEND*

Full year dividend is the total dividend per share declared for the year (including interim dividend but excluding, where appropriate, any special dividend).
* Key performance indicator
G

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

These are a widely accepted collection of guidelines and principles, established by accounting standard setters and used by the accounting community to report financial information.

GROSS WRITTEN PREMIUMS (GWP)

GWP is an industry measure of the life insurance premiums due and the general insurance premiums underwritten in the reporting period, before any deductions for reinsurance.

GROUP

The company and its subsidiary undertakings.
I

IFRS PROFIT BEFORE TAX (PBT)*

PBT measures profit attributable to shareholders incorporating actual investment returns experienced during the year.
* Key performance indicator

INSURANCE GROUP DIRECTIVE (IGD) SURPLUS AND COVERAGE*

The IGD surplus is a regulatory measure which calculates surplus capital within the Group. IGD surplus is defined as Group regulatory capital less the Group regulatory capital requirement, after accrual for proposed dividends. Surplus capital held within Society’s Long Term Fund cannot be included in the IGD definition of capital employed. IGD coverage is calculated as the Group regulatory capital divided by the Group regulatory capital requirement.
* Non GAAP measures

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

These are accounting guidelines and rules that companies and organisations 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.
K

KEY PERFORMANCE INDICATORS (KPIS)

These are measures by which the development, performance or position of the business can be measured effectively. The Group Board reviews the KPIs annually and updates them where appropriate.
L

LGA

Legal & General America.

LGAS

Legal & General Assurance Society (division).

LGC

Legal & General Capital.

LGF

Legal & General France.

LGIM

Legal & General Investment Management.

LGN

Legal & General Netherlands.

LGR

Legal & General Retirement.

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.
* Non GAAP measures
** Key performance indicator

NEW BUSINESS STRAIN*

The impact of writing new business on the regulatory position, including the cost of acquiring new business and the setting up of regulatory reserves.
* Non GAAP measures
O

OPERATING PROFIT*

Operating profit information provides further analysis of the results reported under IFRS and we believe gives shareholders a better understanding of the underlying performance of the business. Operating profit measures the pre-tax result reflecting longer-term economic assumptions for our insurance businesses and shareholder funds, except for LGA which excludes unrealised investment returns to align with the liability measurement under US GAAP. Variances between actual and smoothed assumptions are reported below operating profit. Income and expenses arising outside of the normal course of business, such as merger and acquisition and restructuring costs, are excluded from operating profit, as are profits and losses arising on the elimination of our own debt holdings.
* Non GAAP measures

OPERATIONAL CASH GENERATION*

Operational cash generation is the expected release from in-force business for the UK non-profit LGAS and LGR businesses, the shareholder’s share of bonuses on with-profits business, the post-tax operating profit on other UK businesses, including an expected investment return on LGC invested assets, and dividends remitted from our international businesses.
* Non GAAP measures
P

PRA

Prudential Regulation Authority.

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.
* Non GAAP measures

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.
* Key performance indicator
S

SINGLE PREMIUMS

Single premiums arise on the sale of new contracts where the terms of the policy do not anticipate more than one premium being paid over its lifetime, such as in individual and bulk annuity deals.

SOCIETY

Legal & General Assurance Society Limited (legal entity).

SOLVENCY II

A proposed EU-wide regulatory regime which intends to align solvency capital to an insurers risk profile. Solvency II is currently expected to be implemented on 1 January 2016.
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.
* Key performance indicator
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.