Aviva 2009 Annual Report Download - page 323

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Performance review
Aviva plc Glossary continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
Market Consistent Embedded Value
(MCEV) terms cont.
Cost of non-hedgeable risks
This is the cost of undertaking those risks for
which a deep and liquid market in which to
hedge that risk does not exist. This can include
both financial risks and non-financial risks such
as mortality, persistency and expense.
Covered business
The contracts to which the MCEV methodology
has been applied.
EU solvency
The excess of assets over liabilities and the
worldwide minimum solvency margins,
excluding goodwill and the additional value of
in-force long-term business, and excluding the
surplus held in the group’s life funds. The
group solvency calculation is determined
according to the UK Financial Services
Authority application of EU Insurance
Groups Directive rules.
Financial options and guarantees
Features of the covered business conferring
potentially valuable guarantees underlying,
or options to change, the level or nature of
policyholder benefits and exercisable at the
discretion of the policyholder, whose potential
value is impacted by the behaviour of
financial variables.
Free surplus
The amount of any capital and surplus
allocated to, but not required to support,
the in-force covered business.
Frictional costs
The additional taxation and investment costs
incurred by shareholders through investing
the Required Capital in the Company
rather than directly.
Funds under management
Represents all assets actively managed or
administered by or on behalf of the group
including those funds managed by third parties.
Group MCEV
A measure of the total consolidated value of
the group with covered life business included
on an MCEV basis and non-covered business
(including pension schemes and goodwill)
included on an IFRS basis.
Gross risk-free yields
Gross of tax yields on risk-free fixed interest
investments, generally swap rates under MCEV.
IFRS operating profit
From continuing operations on an IFRS basis,
stated before tax attributable to shareholders’
profits, impairment of goodwill and
exceptional items.
Implicit items
Amounts allowed by local regulators to be
deducted from capital amounts when
determining the EU required minimum margin.
Inherited estate
The assets of the long-term with-profit funds
less the realistic reserves for non-profit policies,
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.
Life business
Subsidiaries selling life and pensions contracts
that are classified as covered business
under MCEV.
Life MCEV
The MCEV balance sheet value of covered
business as at the reporting date. Excludes
non-covered business including pension
schemes and goodwill.
Life MCEV operating earnings
Operating earnings on the MCEV basis relating
to the lines of business included in the
embedded value calculations. From continuing
operations and is stated before tax, impairment
of goodwill and exceptional items.
Life MCEV earnings
Total earnings on the MCEV basis relating to
the lines of business included in the embedded
value calculations. From continuing operations.
Look-through basis
Inclusion of the capitalised value of profits and
losses arising from subsidiary companies
providing administration, investment
management and other services to the extent
that they relate to covered business.
Long-term savings
Includes life and pension sales calculated under
MCEV and retail investment sales.
Market consistent
A measurement approach where economic
assumptions are such that projected asset cash
flows are valued consistently with current
market prices for traded assets.
Net asset value per ordinary share
Net asset value divided by the number of
ordinary shares in issue. Net asset value is
based on equity shareholders’ funds.
Net worth
The market value of the shareholders’ funds
and the shareholders’ interest in the surplus
held in the non-profit component of the long-
term business funds, determined on a statutory
solvency basis and adjusted to add back any
non-admissible assets, and consists of the
required capital and free surplus.
Other information