Aviva 2013 Annual Report Download - page 315

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
313
Glossary continued
Bancassurance
An arrangement whereby banks and building societies sell
insurance and investment products to their customers on behalf
of other financial providers.
Combined operating ratio (COR)
COR is calculated as incurred claims expressed as a percentage of
net earned premiums, plus written commissions and written
expenses expressed as a percentage of net written premiums.
Deferred acquisition costs (DAC)
The costs directly attributable to the acquisition of new business
for insurance and investment contracts may be deferred to the
extent that they are expected to be recoverable out of future
margins in revenue on these contracts.
Fair value
The amount for which an asset can be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm’s
length transaction.
Financial Conduct Authority (FCA)
One of the two bodies (along with the PRA) which replaced the
Financial Services Authority from 1 April 2013. The FCA is a
company limited by guarantee and is independent of the Bank
of England. It is responsible for the conduct business regulation
of all firms (including those firms subject to prudential
regulation by the PRA) and the prudential regulation of firms
not regulated by the PRA. The FCA has three statutory
objectives: securing an appropriate degree of protection for
consumers, protecting and enhancing the integrity of the UK
financial system and promoting effective competition in the
interests of consumers.
Funds under management
Represents all assets actively managed or administered by or
on behalf of the Group including those funds managed by
third parties.
Gross written premiums
The total earnings or revenue generated by sales of insurance
products, before any reinsurance is taken into account. Not all
premiums written will necessarily be treated as income in the
current financial year, because some of them could relate to
insurance cover for a subsequent period.
Independent Financial Advisers (IFAs)
A person or organisation, authorised under the FCA, to give
advice on financial matters and to sell the products of all
financial service providers.
Internal rate of return (IRR)
A discount rate used to measure profitability. The rate used
is that which will bring a series of cash flows to a net present
value of nil.
International financial reporting standards (IFRS)
These are accounting regulations designed to ensure
comparable statement of financial position preparation and
disclosure, and are the standards that all publicly listed
companies in the European Union are required to use.
Operating profit
This is also referred to as adjusted operating profit or operating
profit (IFRS basis). It is based on expected investment returns,
and stated before tax and before non-operating items including,
impairment of goodwill, exceptional and other items.
Inherited estate
In the UK, the assets of the long-term with-profit funds less the
realistic reserves for non-profit policies written within the with-
profit funds, less asset shares aggregated across the with-profit
policies and any additional amounts expected at the valuation
date to be paid to in-force policyholders in the future in respect
of smoothing costs and guarantees.
Long-term and savings business
Collective term for life insurance, pensions, savings, investments
and related business.
Net written premiums
Total gross written premiums for the given period, less
premiums paid over or ‘ceded’ to reinsurers.
New business strain (NBS)
The name given to the initial impact on shareholders' net assets
when an insurance contract is sold. This “strain” arises because,
in addition to meeting costs associated with the sale of
contracts, insurance companies must meet capital and reserving
requirements at the outset of a contract that are often
significantly higher than the premiums received.
Present value of new business (PVNBP)
Present value of new regular premiums plus 100% of single
premiums, calculated using assumptions consistent with those
used to determine the value of new business under Market
Consistent Embedded Value (MCEV) principles published by the
CFO Forum.
Prudential Regulatory Authority (PRA)
One of the two bodies (along with the FCA) which replaced the
Financial Services Authority from 1 April 2013. The PRA is a part
of the Bank of England and is responsible for the prudential
regulation of deposit taking institutions, insurers and major
investment firms. The PRA has two statutory objectives: to
promote the safety and soundness of these firms and,
specifically for insurers, to contribute to the securing of an
appropriate degree of protection for policyholders.
Solvency II
These are insurance regulations designed to harmonise EU
insurance regulation. Primarily this concerns the amount of
capital that European insurance companies must hold under a
measure of capital and risk. Solvency II is due to become
effective from 1 January 2016.
Turnbull Guidance on Internal Control
The Turnbull Guidance sets out best practice on internal
controls for UK listed companies, and provides additional
guidance in applying certain sections of the UK Corporate
Governance Code.
UK Corporate Governance Code
The code sets out guidance in the form of principles and
provisions on how companies should be directed and controlled
to follow good governance practice.
Value of new business (VNB)
VNB is the present value of future profits from new business
written at the point of sale. It is calculated on a market
consistent basis using economic assumptions set at the start
of each quarter and the same operating assumptions as those
used to determine the embedded value at the end of the
reporting period and is stated after the effect of any frictional
costs. Unless otherwise stated, it is quoted net of tax and
minority interests.