Financial Statements
Abbreviations and definitions
Abbreviations
| ABI | Association of British Insurers |
|---|---|
| ABS | Asset Backed Securities |
| AGM | Annual General Meeting |
| ALM | Asset Liability Management |
| APE | Annualised Premium Equivalent |
| DPF | Discretionary Participation Features |
| EEV | European Embedded Value |
| EPS | Earnings Per Share |
| ESOS | Executive Share Option Scheme |
| EURIBOR | Euro Interbank Offered Rate |
| F&C | F&C Asset Management plc |
| FFA | Fund for Future Appropriations |
| FPI | Friends Provident International |
| FPLA | Friends Provident Life Assurance Limited |
| FPLP | Friends Provident Life & Pensions Limited |
| FPMS | Friends Provident Management Services Limited |
| FPP | Friends Provident Pensions Limited |
| FPPS | Friends Provident Pension Scheme |
| FRC | Financial Risk Committee |
| FRS | Financial Reporting Standard |
| FSA | Financial Services Authority |
| GAAP | Generally Accepted Accounting Practice |
| HMRC | HM Revenue and Customs |
| HNWI | High Net Worth Individual |
| IAS | International Accounting Standard |
| IFA | Independent Financial Adviser |
| IFRS | International Financial Reporting Standard |
| IRR | Internal Rate of Return |
| LDI | Liability Driven Investment |
| LIBOR | London Interbank Offered Rate |
| LTIP | Long Term Incentive Plan |
| LTRP | Long Term Remuneration Plan |
| OLAB | Overseas Life Assurance Business |
| ORC | Operational Risk Committee |
| PPFM | Principles and Practices of Financial Management |
| PVIF | Present Value of In-force |
| PVNBP | Present Value of New Business Premiums |
| RBS | Realistic Balance Sheet |
| RCM | Risk Capital Margin |
| RPI | Retail Prices Index |
| STICS | Step-up Tier one Insurance Capital Securities |
| TSR | Total Shareholder Return |
Definitions
EEV underlying profit is based on expected investment return and excludes: (i) amortisation and impairment of non-covered business acquired intangible assets (ii) effect of economic assumption changes (iii) non-recurring items; and is stated after deducting interest payable on STICS.
IFRS underlying profit is based on longer-term investment return and excludes: (i) policyholder tax (ii) returns attributable to minority interests in policyholder funds (iii) non-recurring items (iv) amortisation and impairment of acquired intangible assets and present value of acquired in-force business; and is stated after deducting interest payable on STICS.
Present Value of New Business Premiums (PVNBP) represents new single premiums plus the expected present value of new business regular premiums.
Annualised Premium Equivalent (APE) represents annualised new regular premiums plus 10% of single premiums.
Internal Rate of Return (IRR) is equivalent to the discount rate at which the present value of the after tax cash flows expected to be earned over the lifetime of the business written is equal to the capital invested to support the writing of the business. All assumptions and expenses in the calculation of IRR are consistent with those used for calculating the contribution from new business.
Cash payback on new business is the time at which the value of the expected cash flows, after tax, is sufficient to have recouped the capital invested to support the writing of the business. The cash flows are discounted at the appropriate risk-discount rate, and calculated on the same assumptions and expense basis as those used for the contribution from new business.
Margins are defined as the pre-tax contribution from new business generated by each product type, divided by the new business volume for that product. Contribution is calculated using economic assumptions at the beginning of the period, and is quoted after the cost of required capital, share based payments and including an apportionment of fixed acquisition expenses across products.