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Accounting policies

The specific principles, conventions, rules and practices applied by a company in preparing and presenting its financial statements.

Acquisition costs/expenses

Expenses related to the procurement and processing of new business. Includes both direct costs such as commission payments and indirect costs such as product development and advertising.

Accretion

The increase in value of an asset over a period of time in a predictable or pre-determined way. The opposite of amortisation.

Actuary

Someone who uses mathematics (in particular, probability) to provide solutions to insurance-related problems. Actuarial techniques are used to design new insurance products and to assess the profitability of new and existing business.

Additional value of in-force long-term business

An estimate of future profits that will emerge over the remaining term of all existing life and pensions policies for which premiums are being paid or have been paid at the financial reporting date.

Adjusted operating profit (AOP)

A measure of underlying profitability which excludes any distortions from one-off items, market volatility and accounting treatments that are not reflective of a company's performance in its reporting period.

Amortisation

An accountancy term for the gradual reduction in value of an asset caused by the passage of time based on writing off the asset over its projected life. If the reduction in value is not solely related to time, the effect is described as depreciation.

Annual General Meeting (AGM)

The meeting for shareholders at which routine matters, such as the election of directors and approval of reports and accounts, are put to the vote of shareholders. Old Mutual generally holds its AGM in May.

Annual premium equivalent (APE)

An industry method for calculating levels of life, pensions and investment new business to enable comparisons between companies with a different mix of single and regular premium business. Calculated as the total of new annual premiums plus 10% of single premiums.

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 saved during their working lifetime.

Asset

Anything of value owned by a business. Usually divided into four types: assets (eg. land, buildings and machines); current (eg. cash, stock and payments owing); liquid (cash or funds that can be quickly converted into cash); intangible (eg. goodwill and trademarks).

Asset management

Investment management service provided by financial institutions on behalf of their clients according to specific stated objectives or investment styles.

Assets under management

The total market value of the assets (shares, bonds, property, cash) managed by a company on behalf of itself and investors.

Assumptions

Variables applied to data used to project expected outcomes. In the life insurance business this might include assumptions on average life expectancy or policy surrender rates.

Assurance

A term sometimes used instead of "insurance", generally in connection with life business.

Auditor

A firm of accountants who check ("audit") a company's accounts and decide whether the published report is accurate.

B

Balance sheet

A statement showing the financial position of a business on a specific date by listing its assets (what it owns) and its liabilities (what it owes).

Bancassurance

An arrangement whereby banks and building societies sell life, pension and investment products to their customers on behalf of other financial providers.

Basis point

Usually one hundredth of a percentage point (0.01 per cent), most often used in quoting movements in interest rates or yields on securities.

Benchmark

Typically a stock market index (for example, the FTSE 100 index) against which an investment fund compares its performance and mix of assets.

Bid price

The price at which shares may be bought in the market.

Bond

Technically a certificate of debt issued by a government or company in return for a loan from an investor. Bonds are sometimes known as fixed interest securities, as they often have a fixed rate of interest and a predetermined repayment date.

Boutique

A small investment firm specialising in offering specific but limited services to a select number of individuals.

Buy back

The purchase by a listed company of its own shares either through purchases in the open market or through making an offer to all shareholders to repurchase their shares.

C

Capital gain

The profit made on the sale of investments, such as shares or property.

Capital gains tax

The tax required to be paid on any profit or gain made by selling something for more than it was bought.

Cash flow

The amount of cash a company generates and uses during a period. An indication of a company's financial strength.

Cash flow statement

A mandatory part of a company's financial reports. The cash flow statement records the amounts of cash and cash equivalents entering and leaving a company and allows users to understand the ability of the company to generate cash and how that cash is being spent.

Claim

Notification to an insurance company of a call by a policyholder to the benefits due under the terms of an insurance policy or scheme.

Claims expenses

Expenses incurred while investigating and settling an insurance claim, over and above the cost of the claim itself. Can include legal and other professional fees.

Claims incurred

The total of all claims sustained during an accounting period, whether paid or not. Also known as losses incurred.

Claims ratio

Claims incurred, adjusted for any reinsurance, expressed as a percentage of net premiums earned.

Combined operating ratio

A financial measure of insurance underwriting profitability that expresses the total of claim costs, commission and expenses as a percentage of premiums.

Commission

Payment made to a salesman, agent or other intermediary, normally in return for selling an insurance or investment policy.

Cost of capital

Measures the opportunity cost incurred by a company for holding the level of required capital. The cost arises because the capital can only earn broad market-related returns while tied up in the business, missing out on more profitable opportunities elsewhere.

Cost to income ratio/efficiency ratio

A banking term. Total operating expenses as a percentage of total income of the banking operations (net interest income and non-interest revenue).

Covered business

The business covered by the EEV methodology. Essentially long-term business which includes traditional life insurance, long-term healthcare and accident insurances, savings, pensions and annuity business.

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. Moodys or Standard & Poors) or credit bureau.

Current asset

Assets of a company which can be realised in cash, sold or consumed within one year. Typically the sum of cash, cash equivalents, receivables, inventories, prepaid expenses and other current assets.

Current liabilities

Liabilities of a company that the company expects to satisfy within one year. Typically accounts payable, short term debt, notes payable, taxes payable, dividends payable and other current liabilities.

D

Deferred acquisition costs (DAC)

A method of accounting whereby the acquisition costs on long-term business (eg. sales commissions) are recognised over the life of the contracts rather than up-front at the time of sale. The costs are deferred on the balance sheet as an asset and amortised over the contract life.

Deferred annuity

An annuity (or pension) due to be paid from a future date or when the policyholder reaches a specified age. A deferred annuity may be funded by the policyholder by payment of a series of regular contributions or by a capital sum.

Demutualisation

The process by which a mutual organisation owned by its members, such as a building society or insurance company, converts to a public limited company owned by its shareholders. Old Mutual demutualised in 1999.

Depreciation

The value of an asset in a company's accounts is reduced to reflect the passage of time and the rate at which it is being used. If the reduction in value of the asset is related solely to the passage of time the effect is called amortisation.

Discounting

Calculating the present value of a future amount to reflect that the value of money changes over time; ie. that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Dividend

An amount based on a company's profits paid out to shareholders, usually in the form of cash, for each share they hold. Old Mutual generally pays an interim dividend in November, based on its half-year results, and a final dividend in May, based on its full-year results.

Dividend cover

Expressed as how many times the company could pay its most recent dividend from its profit (after tax).

E

Earned premiums

Premium payments received by an insurer for cover provided during the current accounting period. Premiums received which relate to cover which will be provided in a future period are known as unearned premiums.

Earnings

Another word for profit. Broadly calculated as revenues minus costs, operating expenses and taxes, minority interests and extraordinary items.

Earnings per share (EPS)

A guide to how well a company is performing. The net profit attributable to shareholders holding ordinary shares divided by the number of shares in issue.

EBIT

Earnings before deductions for interest and tax.

EBITDA

Earnings before deductions for interest, tax, depreciation and amortisation.

Efficiency ratio/Cost to income ratio

A banking term. Total operating expenses as a percentage of total income of the banking operations (net interest income and non-interest revenue).

Embedded value (EV)

Life insurance contracts are usually long-term and may involve complex payment flows. This means it is difficult to measure the value of a life insurance business or how much income it is likely to generate over time. EV is a way of indicating what the underlying business is worth based on the total of the net assets already invested in the business and the profits expected to emerge in the future.

Embedded value per share

Embedded value divided by the weighted average number of shares in issue.

European embedded value (EEV)

EEV provides a common set of guidelines for insurance companies to use in calculating their embedded value. It attempts to measure the value of business in-force based on a set of best estimate assumptions, allowing for the impact of uncertainty in future investment returns. It is designed to provide an accurate reflection of the performance of long-term savings business and a method of comparing companies on a consistent basis.

Exceptional item

A non-recurring event that materially affects a company's finances in a reporting period.

Exchange rate

The rate at which one currency may be converted into another.

Ex-dividend

The ex-dividend date is the time when the registrar of a company draws up the list of shareholders who qualify for a dividend payment. If you hold or buy shares before the ex-dividend date, you are entitled to the most recently-announced dividend; if you buy after that date, the dividend goes to the previous owner of the shares.

Expense ratio

1. Expenses associated with running an insurance business (eg. commission, professional fees and other administrative costs), expressed as a percentage of premiums.
2. The annual operating costs of an investment fund, expressed as a percentage of assets.

Experience variance

In calculating embedded value of life business it is necessary to make assumptions as to operating items such as lapses or surrenders, mortality experience, etc. In any period the actual result for these items will differ from the assumed experience; this is the experience variance and will be reported in operating profit for the period.

Extraordinary item

A non-recurring event that materially affects a company's finances in a reporting period.

F

Fair market value

The price that a reasonable buyer would be willing to pay and a reasonable seller would be willing to accept for a product on the open market.

Financial Groups Directive (FGD)

A financial regime applying to EU-based companies whose activities span both the banking and investment sectors and the insurance sector. It lays down requirements for the company's capital positions and is intended to improve the stability of the financial system, thereby protecting customers.

FGD surplus

This represents the amount of capital in the company which is surplus to the statutory solvency requirement for insurance groups as laid down by the Financial Groups Directive.

Financial Services Authority (FSA)

The main regulatory body of the financial service industry in the UK, covering the savings, insurance and investment businesses.

Financial Services Board (FSB)

The regulator of financial services in South Africa.

Fixed annuity

Where the insurance company guarantees to return the original investment and a minimum rate of interest which is fixed for a specified period of time.

FTSE 100 index

An index comprised of the 100 largest companies by market capitalisation on the London Stock Exchange. It is the benchmark index for share prices in London.

FTSE All-Share index

Regarded as the main benchmark for professional investors and widely used for index- tracking purposes. Today the FTSE All-Share index includes around 700 companies weighted by market capitalisation.

Fund

A pool of financial assets into which premiums are invested to produce an investment return. Examples include property funds, managed funds and with-profit funds.

Fund management

Management of money invested in funds, typically in stocks and shares, fixed interest, property and cash, on behalf of individual and institutional customers. Also known as asset management or investment management.

Fund supermarket

A company that sells funds over the internet. Both fund groups and stockbrokers have set up fund supermarkets.

Funds under management (FUM)

The total value at market prices, of funds managed by a company on behalf of shareholders and customers.

G

Gearing/Leverage

Measure of the extent to which a company is funded by borrowings rather than shareholders' equity. A highly geared/leveraged company carries a lot of debt.

General insurance/Property & Casualty Insurance

Non-life insurance mainly concerned with protecting the policyholder from loss or damage caused by specific risks. Examples include motor, contents and buildings insurance.  Property insurance covers loss or damage through, for example, fire or theft.  Casualty insurance covers losses arising from accidents that cause injury to other people or damage to their property.

Goodwill

A form of intangible asset. In an acquisition it represents the difference between the amount paid for a business and the fair value of its net assets.

Gross

Before tax has been deducted. The opposite of net.

Gross premium income

Income from business written during the period, before any reinsurance is taken into account.

Gross premiums written

The total premiums that an insurer is contractually entitled to receive in relation to insurance contracts sold during the period, before any reinsurance is taken into account. Those premiums that will be paid or relate to insurance cover for a later financial period will not be treated as income immediately.

H

Hedging

Protecting against the risk of losses in one investment by taking up other investment positions that will reduce that risk.

I

IFRS

International Financial Reporting Standards. Accounting regulations that all publicly listed companies in the EU are required to use. Designed to ensure companies prepare their accounts in the same way so that there is a common basis for comparison.

Impairment

Where the value of an asset as shown in the balance sheet exceeds the value that the asset could be sold for then the amount shown in the balance sheet needs to be reduced. The amount of the reduction is the impairment and is shown as a cost in the accounts.

In force

An insurance policy is "in force" from its start date until the date it is terminated. In force business refers to policies which are active; ie. where the premiums are being paid or have been fully paid and which have not been terminated.

Independent financial adviser (IFA)

A person or organisation authorised to give advice on financial matters and to sell the products of all financial services providers.

Indexed annuity

Annuities designed to mirror the performance of an index (eg. the FTSE100, S&P 500) by tracking the ups and downs of that index.

Individual savings accounts (ISAs)

Introduced in the UK in 1999. Tax-efficient plans for investing in stocks and shares, cash deposits or life insurance investment funds, subject to certain limits and rules.

Institutional investor

Large financial institutions such as pension funds, unit or investment trusts and insurance companies.

Insurance

A contract taken out with an insurer to protect against loss from a perceived risk. The person taking out the insurance is called the insured. Payments for the policy are called premiums.

Intangible assets

Assets that do not have a physical, tangible existence. For example goodwill, brand name, trademarks. The assets have a value to a company and an estimate of the value must be included in the company's accounts.

Interim results

Accounts and other figures issued during the financial year, usually relating to the first six months of the financial year, to indicate business performance during that period. Old Mutual generally publishes its interim results in August.

Internal rate of return (IRR)

A measure of the rate of return on an investment and therefore an indicator of the efficiency with which the company uses its capital.

Investment

Buying and holding assets, such as shares, bonds, property and commodities, to earn income or to make capital gains.

Investment income

Income such as share dividends and interest payments arising from the ownership of assets.

J

Jaws ratio

The difference between the year-on-year rate of growth in income and the year-on-year rate of growth in costs. An increase in the ratio signifies increasing profitability.

K

L

Lapses/surrenders/withdrawals

The voluntary termination of a policy by a policyholder before the maturity date.

Leverage/Gearing

Measure of the extent to which a company is funded by borrowings rather than shareholders' equity. A highly leveraged company carries a lot of debt.

Liabilities

The debts of a company and other financial obligations; the opposite of assets.

Life insurance

An insurance contract which promises the payment of an agreed sum of money upon the death of the insured within a specified period of time. Also known as life assurance.

Liquid asset

Cash or assets that can be readily converted into cash.

Liquidity

1. The ease with which a company's assets can be converted into cash. Can indicate the short-term financial health of the company.
2. The volume of a company's shares being traded on the stock exchange. May affect the ability of investors to build or sell large holdings without a substantial impact on the share price.

Local currency terms

The performance of overseas business calculated in the currency of that country to remove the effects of exchange rate volatility and give a clearer picture of underlying business performance and trends.

Long-term business

Collective term for life insurance, pensions, savings, investments and related business.

Long-term investment return (LTIR)

The long-term return that a company assumes it can realistically earn on its investible shareholder assets.

M

Mark-to-market adjustment

An accounting adjustment to the book value of an asset or liability to reflect its market value.

Market capitalisation

The value at current market prices of a company's share capital. Calculated by multiplying the current share price by the number of shares outstanding.

Market consistent embedded value (MCEV)

From 2009 MCEV will replace EEV (European Embedded Value) as the standard of reporting for life insurance companies.  The MCEV principles have been developed by an industry group and provide a common set of guidelines for the valuation of life insurance policies, which includes a more consistent and transparent method of allowing for future risk. 

Maturity

The date that an insurance policy or other financial contract finishes or "matures", and the benefit becomes payable.

Mortality tables

Actuarial tables showing life expectancy and death rates for an individual by sex and age. Mortality tables are used by life insurance companies for setting premiums and to ensure they have an appropriate level of reserves.

Multi-Manager Fund

A fund that aims to invest in the best funds on the market rather than making investments directly into company shares or other assets.

Mutual

A business organisation, such as an insurance company or building society, owned by its members or policyholders. Profits are shared among the members through bonus payments, dividends or reductions in future premiums.

Mutual fund/unit trust

An investment vehicle that pools money from investors which is then invested in a diverse portfolio of shares, bonds or other assets. It enables investors to achieve a more diversified portfolio than they might have done by making an individual investment. See also Unit Trust.

N

Net

After tax has been deducted. The opposite of gross.

Net asset value

The value of a company calculated by subtracting its liabilities from its assets. The difference is the amount of money that would be available to ordinary shareholders if the company was wound up.

Net client cash flow (NCCF)

The difference between money received from customers (eg. premiums, deposits and investments) and money given back to customers (eg. claims, surrenders, maturities) during the period. A measure of the success of a company in both attracting new business and retaining existing customers.

Net interest income (NII)

The income a bank has received in a period less the interest it has paid.

Net premiums earned

Those net premiums written which relate to cover provided in the accounting period and are therefore treated as income in that period.

Net premiums written

The total premiums that an insurer is contractually entitled to receive in relation to insurance contracts written in the period less the cost of premiums paid to reinsurers.

Net profit

The amount a company has left over after deducting tax, interest, depreciation, fees, minority interests and extraordinary charges from its income in the financial period.

New business

The value of long-term savings policies (including life assurance contracts) sold to new and existing customers in the period. Also includes any increases to the premiums on existing contracts.

Non-interest revenue (NIR)

The revenue received by a bank from sources other than interest; eg. revenue from brokerage commission and capital management fees.

Non-profit policy

Insurance cover guaranteeing certain benefits but for which the policyholder bears no investment risk and does not gain or lose if returns differ from expectations. Pure risk business such as annuities and health insurance is normally written on a non-profit basis.

O

Offer price

The price at which shares may be sold in the market.

Open architecture

Where a company offers investment products from a range of other companies in addition to its own products. The advantage for customers is that it gives them a wider choice of funds to invest in and access to a larger pool of money management professionals.

Operating costs/operating expenses

The day-to-day expenses involved in running a business; eg. sales and administration costs.

Operating profit

The difference between total income and total operating costs. Excludes non-operational items, such as one-off gains or losses from the sale of assets or acquisition costs.

Organic growth

Growth which excludes the impact of acquisitions or divestments or movements in exchange-rates.

Orphan assets/unclaimed assets

Funds held by financial institutions that have been left untouched by their owners for a considerable period of time - eg. dormant bank accounts or forgotten life insurance policies. Also known as unclaimed assets.

Overheads

The administrative costs of running a business that cannot be attributed to any specific activity but are still necessary for the business to function - eg. rent, insurance, electricity and water.

P

Pension

A regular payment received by an individual during their retirement until their death. A pension is usually bought through the payment of regular contributions during the individual's working lifetime.

Pension fund

1. A pool of pensions contributions invested for growth.
2. A type of institutional investor who administers and invests funds for pension plans.

Platform

Online services used by intermediaries and consumers to view and administer their investment portfolios. Platforms provide facilities for buying and selling investments (including generally ISAs, SIPPs and life insurance) and for viewing an individual's entire portfolio to assess asset allocation and risk exposure.

Premium

The payment a policyholder makes in return for insurance cover. Usually paid monthly, annually or as a single lump sum.

Present value of new business premiums (PVNBP)

A measure, using the EEV methodology, of the present value of new business premiums written during the reporting period. Calculated as 100% of new single premiums plus the discounted present value of new regular premiums.

Price/earnings ratio (P/E ratio)

A simple measure for comparing the valuations and potential of different companies. Calculated as the share price divided by earnings per share (EPS) in the latest financial year. In general a relatively high P/E ratio suggests that investors think a company's earnings have strong growth potential.

Private shareholder/investor

An individual who buys and sells relatively small amounts of shares for their own benefit. Also known as an individual, retail or small investor.

Pro forma results

A set way of restating a company's financial results when circumstances have changed, for example after a flotation, merger or takeover.

Profit

The amount by which income exceeds costs for a particular period.

Profit and loss account

An account compiled at the end of a financial period showing the company's income and costs for the period and indicating gross and net profit or loss. Also called an income statement or earnings statement.

Property and Casualty insurance

Also known as non-life or general insurance. Property insurance covers loss or damage through fire, theft, floods or other specified risks. Casualty insurance covers losses arising from accidents that cause injury to other people or damage to their property.

Q

Quartile

Investment funds are ranked on the basis of the total returns (income and growth) that they have produced for investors. The best performing are in the top 25% of the list (first quartile) and the worst performing are in the bottom 25% (fourth quartile).

R

Rate of return

The change in the value of an investment over a period of time, taking into account income arising from it and any change in its market value. Normally expressed as a percentage of the total amount invested.

Record date

The date by when an investor must be recorded as an owner of shares to qualify for a forthcoming dividend or share distribution.

Registrar

Responsible for maintaining the register of a company's shareholders including their names and addresses and the number of shares that each shareholder owns. The registrar updates the register when a shareholder's personal circumstances or shareholding change, and also send out dividend cheques and share certificates.

Regular premium

A regular premium contract (as opposed to a single premium contract) is where the policyholder agrees at the start to make regular payments throughout the term of the contract.

Reinsurance

A form of insurance bought by insurance companies to protect themselves from the risk of large losses.

Return on Embedded Value (RoEV)

The annualised post tax operating profit calculated on an EEV basis expressed as a percentage of the opening embedded value adjusted for dividends paid to equity holders.

Return on capital employed (ROCE)

Indicates the efficiency with which a company uses its assets to generate profits. Usually calculated as pre-tax profit divided by capital employed (total assets minus current liabilities) and expressed as a percentage.

Return on equity (RoE)

Indicates how much profit a company has generated with the money that shareholders have invested. Usually calculated as annual operating profit (after tax and minority interests) divided by average shareholders' equity.

Rights issue

A method by which a company raises additional capital by inviting existing shareholders to buy new shares in proportion to their existing holding, usually for less than the current market price of the shares.

Risk discount rate

The rate used in calculating the embedded value to obtain the present value of future cash flows, taking into account a margin to reflect the risk that those cash flows might not materialise.

Run off

The process of managing accounts and settling claims for an insurance business or investment fund that has stopped accepting new risks or has been closed to new business.

S

Scrip dividends

The payment of dividends in the form of extra shares rather than cash.

Shareholders' funds

Total shareholders' interests in a company, including issued share capital, retained profit and reserves.

Single premium

A single premium contract (as opposed to a regular premium contract) is where the policyholder makes one payment at the start of the contract and has no obligation to make any further payments.

Spread

Usually the difference between the price at which shares can be bought in the market (bid price) and the prices at which they can be sold (offer price).

Stamp duty

A UK tax on the purchase of shares and other assets, such as houses.

Statutory accounts

The accounts that every public limited company is required by law to produce.

Sum assured

The lump sum benefit payable under an insurance policy or contract in circumstances defined within the policy; eg. the amount payable on the death of the policyholder.

Surrender

Canceling an insurance contract before it becomes payable (eg. on the death of the policyholder) or reaches its maturity date.

Surrender value

The amount of money payable to the policyholder on cancellation of an insurance policy which has an investment element. Surrender values depend on premiums paid and time elapsed.

T

Tangible fixed asset

Assets that physically exist such as property, plant and equipment. Normally shown in a company's accounts after the deduction of depreciation.

Tax wrapped

A way for an individual to hold funds such that they gain certain tax benefits.

Technical provisions

Amounts set aside on the basis of actuarial calculations to meet forecast future obligations to policyholders.

Term insurance

A type of life insurance where the benefit is paid only if death occurs within a specified period of time.

Ticker

Abbreviations used to identify different companies traded on a stock exchange. Old Mutual is represented in London by the ticker "OML".

Total shareholder return

The overall value to shareholders of their investment in the company over a given period of time. Includes movement in the share price and any dividends paid and reinvested and is usually expressed as a percentage of the share price at the start of the period.

U

Unclaimed assets

Funds held by financial institutions that have been left untouched by their owners for a considerable period of time - eg. dormant bank accounts or forgotten life insurance policies. Also known as orphan assets.

Underlying profit

A profit measure used to provide a more meaningful analysis of underlying business performance. Underlying profit is calculated by adjusting profit before tax for items such as impairments and exceptional or one-off items such as restructuring expenses.

Underwriter

Someone willing to take on an insurance risk in exchange for a payment.

Underwriting

The process of deciding which risks an insurance company will cover, the terms of acceptance and the premiums it will charge.

Underwriting profit/loss

The difference between insurance premiums earned and claims and expenses paid over a given period.

Unearned premiums

Premiums received by an insurer which relate to cover provided outside the current accounting period. Such premiums are normally treated as income in the period to which they relate.

Unit trust

Fund of shares, bonds and other assets held by a manager for the benefit of investors who buy units in the fund, effectively pooling their money with that of other investors. The price of the units is determined by the market value of the assets that the pooled funds are invested in. See also Mutual Fund.

Unit-linked policy

A type of long-term savings plan where premiums are used to buy units in an investment fund, such as a unit trust and the benefits will be linked to the value of the underlying units rather than being fixed or guaranteed at the start of the plan.

Unrealised

The profit or loss expected to be achieved through selling an asset but where the transaction has not yet taken place. The profit or loss is "realised" when the transaction takes place.

V

Value of in-force business (VIF)

Part of the embedded value of a life insurance company. The discounted value of the profits expected to arise from business that is already written. VIF is calculated using a set of actuarial, economic and operational assumptions.

Value of new business (VNB)

The value of the future profits expected to arise from all new business sold during a reporting period. Usually expressed as a percentage of the Annual Premium Equivalent to give a measure of the profitability of that new business.

Variable annuity

A long-term unit-linked investment suitable for retirement savings. Payouts are dependent on the change in value of the investments that underly it.

Volatility

The amount by which a share price or market index rises and falls during a period of time. If it is stable or rarely changes it has low volatility; if it changes quickly or unpredictably it has high volatility.

W

Weighted average cost of capital (WACC) 

The average cost of the capital invested in a company, weighted by that company's capital structure of debt and equity funding.

Whole life insurance

A type of life insurance where the benefit is payable on death, whenever it occurs.

With-profit

A type of investment plan in which extra amounts (bonuses) may be added to the sum assured to reflect profits earned during the course of the contract. Regular bonuses are usually added each year and once declared are guaranteed. A final or "terminal" bonus may be added when the policy becomes payable.

Wrap account

An account in which a broker or fund manager executes investment decisions on behalf of a client in exchange for a fee. These decisions might include share holdings, investment funds, pensions and life insurance contracts.

Wrap platform

An investment platform which enables investment funds, pensions, direct equity holdings and some life insurance contracts to be held in the same administrative account rather than as separate holdings.

Write down

Reducing the value of an asset on the balance sheet to reflect its current market value.

Write off

To acknowledge the loss or worthlessness of an asset by removing it entirely from the balance sheet.

X

XD

An abbreviation used to indicate that a share is trading ex-dividend- ie. that people who buy the share now will not receive the most recently declared dividend.

Y

Yield

Rate of return on an investment in percentage terms, taking into account annual income and any change in capital value. The dividend payable on a share expressed as a percentage of the market price.

Z

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