Aviva 2006 Annual Report Download - page 20

Return on equity shareholders’ funds
*
Proposed ordinary dividend per share and dividend cover
**
Group operating profit before tax
†
16
2004 2005 2006
2004 2005 2006
2004 2005 2006
14
12
ROE (%)
10
8
6
4
2
0
30
Dividend (pence)
Dividend cover (x)
25
20
15
10
5
0
3.0
2.0
1.5
1.0
0.5
0
3,500
3,000
2,500
Operating profit (£m)
2,000
1,500
1,000
500
0EEV
IFRS
Dividend
Cover
ROE
Target
2.5
Aviva plc
Annual Report and Accounts 2006 16
Key performance indicators
In 2006, the group’s strategy was underpinned by focusing on a number of key financial performance measures. The key measures that
are used to assess performance at a group level are set out below:
Business review continued
* Return on equity shareholders’ funds is calculated using opening equity capital and after-tax return based on operating profit, including long-term savings profit on a
European Embedded Value (EEV) basis beforeadjusting items.
** Dividend cover is measured on operating earnings after tax on an IFRS basis, expressed as a multiple of the ordinary dividend in respect of the financial year.
† Group EEV operating profit is calculated using long-term savings operating profit on an EEV basis before adjusting items. Group IFRS operating profit is calculated using
long-term savings operating profit on an IFRS basis beforeadjusting items.
We aim to deliver an after-tax operating return on opening equity
shareholders’ funds, including life profits on a European Embedded
Value (EEV basis), equivalent to 12.5%. This is a change to our
previously stated aim of a 10% net real return.
Our post-tax operating return on equity shareholders’ funds
was 13.1% (2005: 15.0%), ahead of our 12.5% target,
notwithstanding opening shareholders’ funds being £3.2 billion
higher and so impacting the return.
Our intention is to increase the total dividend on a basis judged
prudent using a dividend cover in the 1.5 to 2.0 times range as
aguide, while retaining capital to support future business growth.
Our boardhas recommended a final dividend of 19.18 pence
(2005: 17.44 pence),bringing the total dividend for the year to
30.00 pence (2005: 27.27 pence).This is a 10% (2005: 7.5%)
increase. Dividend cover is 2.80 times (2005: 2.17 times).
Excluding the beneficial impacts of one-offs in 2006 and applying
anormalised tax rate, the dividend cover was 2.0 times.
Weaim to achieve steady sustainable growth in our operating
profit, both on an EEV and IFRS basis. In seeking to achieve
this growth, we continue to adopt strict financial management
disciplines underpinned by strong corporate governance.
Our EEV operating profit grew by 12% to £3,245 million
(2005: £2,904 million).On an IFRS basis, operating profit
before tax amounted to £3,110 million (2005: £2,128 million).
Both results reflect strong operational performance, expanding
and strengthening distribution channels and the benefit of
rising investment markets.