Glossary.

  • ANNUAL PREMIUM EQUIVALENT (APE)

    A standardised measure of the volume of new life insurance business written. It is calculated as the sum of (annualised) new recurring premiums and 10% of the new single premiums written in an annual reporting period.

  • ANNUITY

    A regular payment from an insurance company made for an agreed period of time (usually up to the death of the recipient) in return for either a cash lump sum or a series of premiums which the policyholder has paid to the insurance company during their working lifetime.

  • ASSETS UNDER ADMINISTRATION (AUA)

    These are assets we manage on behalf of our clients. AUA are beneficially owned by those clients and all investment decisions pertaining to these assets are also made by the clients. These are different from Assets under Management (AUM) defined below.

  • ASSETS UNDER MANAGEMENT (AUM)

    The total amount of money investors have trusted to our fund managers to invest across our investment products i.e. these are funds which are actively managed by our fund managers on behalf of investors.

  • 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.

  • CREDIT RATING

    A measure of the ability of an individual, organisation or country to repay debt. The highest rating is usually AAA, and the lowest D. Ratings are usually issued by a credit rating agency (eg Moody's or Standard & Poor's) or credit bureau.

  • DERIVATIVES

    Derivatives are not a separate asset class but are contracts usually giving a commitment or right to buy or sell assets on specified conditions, for example on a set date in the future and at a set price. The value of a derivative contract can vary. Derivatives can generally be used with the aim of enhancing the overall investment returns of a fund by taking on an increased risk, or they can be used with the aim of reducing the amount of risk to which a fund is exposed.

  • 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.

  • 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.

  • ECONOMIC CAPITAL

    Economic capital is the capital that an insurer holds internally as a result of its own assessment of risk. It differs from regulatory capital, which is determined by regulators. It represents an estimate of the amount of economic losses an insurer could withstand and still remain solvent with a target level of confidence over a specified time horizon.

  • 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.

  • 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.

  • 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.

  • 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).

  • 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.

  • IGD SURPLUS

    Legal & General Group's solvency surplus measured in accordance with the EU Insurance Groups Directive.

  • INDEX-TRACKER (PASSIVE FUND)

    Index-tracker funds invest in most or all of the same shares, and in a similar proportion, as the index they are tracking, for example the FTSE 100 index. Index-tracker funds aim to produce a return in line with a particular market or sector, for example, Europe or technology. They are also sometimes known as 'tracker funds'.

  • INSURANCE GROUPS 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.

  • 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.

  • IFRS PROFIT BEFORE TAX (PBT)

    PBT measures profit attributable to shareholders incorporating actual investment returns experienced during the year.

  • 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.

  • LGA

    Legal & General America.

  • LGAS

    Legal & General Assurance Society (division).

  • LGC

    Legal & General Capital.

  • LGIM

    Legal & General Investment Management.

  • 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.

  • MORTALITY RATE

    Rate of death, influenced by age, gender and health, used in pricing and calculating liabilities for future policyholders of life and annuity products, which contain mortality risks.

  • NET CASH GENERATION

    Net cash generation is defined as operational cash generation less new business strain.

  • 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.

  • OPEN ARCHITECTURE

    Where a company offers investment products from a range of other companies in addition to its own products. This gives customers a wider choice of funds to invest in and access to a larger pool of money management professionals. Cofunds is an open architecture platform.

  • 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.

  • 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.

  • PLATFORM

    Online services used by intermediaries and consumers to view and administer their investment portfolios. Platforms usually provide facilities for buying and selling investments (including, in the UK products such as Individual Savings Accounts (ISAs), Self-Invested Personal Pensions (SIPPs) and life insurance) and for viewing an individual's entire portfolio to assess asset allocation and risk exposure.

  • 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.

  • RETAIL DISTRIBUTION REVIEW (RDR)

    RDR is part of the UK Financial Conduct Authority's agenda of customer protection. RDR aimed to drive structural change throughout the retail investments industry in order to ensure consumers can have confidence in their retirement and investment planning.

  • 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.

  • RISK APPETITE

    The aggregate level and types of risk a company is willing to assume in its exposures and business activities in order to achieve its business objectives.

  • 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.

  • SOLVENCY II

    An 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.

  • 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.

  • 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.

  • WITH-PROFITS FUNDS

    Individually identifiable portfolios where policyholders have a contractual right to receive additional benefits based on factors such as the performance of a pool of assets held within the fund, as a supplement to any guaranteed benefits. An insurer may either have discretion as to the timing of the allocation of those benefits to participating policyholders or may have discretion as to the timing and the amount of the additional benefits.

  • YIELD

    A measure of the income received from an investment compared to the price paid for the investment. Normally expressed as a percentage.