The specific principles, conventions, rules and practices applied by a company in preparing and presenting its financial statements.
The increase in value of an asset over a period of time in a predictable or pre-determined way. The opposite of amortisation.
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.
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 HEADLINE EARNINGS (AHE)
A key performance indicator for Old Mutual. Adjusted Headline Earnings is calculated as headline earnings, as defined by SAICA Circular 2/2015, adjusted for items that are not reflective of the economic performance of the Group
ADJUSTED NET WORTH (ANW)
Represents the market value of the net shareholders' net assets held in respect of an insurance business and forms part of the embedded value of a life company.
An investment firm specialising in offering specific services to a select number of individuals (term is interchangeable with "boutique").
African Infrastructure Investment Managers, a member of Old Mutual Alternative Investments.
An accountancy term for the reduction in value of an asset by the systematic allocation of its depreciable value over its projected useful life.
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)
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.
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.
APPLICATION LEVEL C
The level of compliance with the Global Reporting Initiative guidelines, a template for good corporate governance, that states a company should report fully on at least 10 performance indicators including at least one from each Indicator Dimension (economic, environmental and social).
Anything of value controlled by a business. Usually divided into four types: fixed (e.g. 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).
An investment management service provided by financial institutions on behalf of their customers.
ASSETS UNDER MANAGEMENT
The total market value of the assets (shares, bonds, property, cash) managed by a company on behalf of itself and investors.
Variables applied to data used to project expected outcomes. In the life insurance business, when calculating the level of reserves required assumptions are made about the future outcome of events. These could include average life expectancy and policy surrender rates. These assumptions are then applied to the data, compiled from the business written, to project expected outcomes.
A term sometimes used instead of "insurance", generally in connection with life business.
A firm of accountants who check ("audit") a company's and Group financial statements and provide an opinion on the appropriateness of the financial statements.
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). This is also referred to as the statement of financial provisions.
An arrangement whereby banks and building societies sell life, pension and savings products on behalf of other financial providers.
Usually one hundredth of a percentage point (0.01 per cent), most often used in quoting movements in interest rates or yields on securities.
Broad-Based Black Economic Empowerment relates to activities associated with the South African Government's Broad-Based Black Economic Empowerment Act of 2003 to distribute wealth across as broad a spectrum of South African society as possible.
Typically a stock market index (for example, the JSE Top40 index) against which an investment fund compares its performance and mix of assets.
The price at which shares may be bought in the market.
Typically a certificate of debt issued by a government or company in return for a loan from an investor. Bonds are sometimes known as fixed income securities, as they often have a fixed rate of interest and a predetermined repayment date or call date.
An investment firm specialising in offering specific services to a select number of individuals (term interchangeable with affiliate).
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.
A term used to refer to investment institutions concerned with buying various forms of listed and or unlisted securities. It is a term commonly used to refer to the institutional investors in South Africa.
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.
CARBON DISCLOSURE PROJECT
The Carbon Disclosure Project (CDP) is an independent not-for-profit organisation holding the largest database of primary corporate climate change information in the world. Thousands of organisations from across the world's major economies measure and disclose their greenhouse gas emissions, water use and climate-change strategies through CDP. Corporations are rated and the information helps investors, corporations and regulators to make more informed decisions.
The release of carbon dioxide into the atmosphere. An increase in global atmospheric levels of carbon dioxide has been linked to climate change. All FTSE listed companies are required to report their corporate carbon emissions.
The amount of cash a company generates and uses during a period.
CASH FLOW STATEMENT
A mandatory part of a company's financial statements. 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. Cash flows are presented in terms of operating, financing and investing activities.
CERTAINTY EQUIVALENT METHOD
This is a technique used to calculate embedded value which involves risk-adjusting future earnings rather than allowing for risk separately using an appropriate risk discount rate. The earnings from the assets in the business are calculated using risk-free reference rates, before tax and investment management expenses. All cash flows are discounted using risk-free reference rates, which are gross of tax and investment management expenses.
Notification to an insurance company of a call by a policyholder to the benefits due under the terms of an insurance policy or scheme.
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.
The total of all claims sustained during an accounting period, whether paid or not. Also known as losses incurred.
This is (depending on either gross or net) the ratio of claims incurred to the corresponding earned premiums. Gross claims ratio = gross claims incurred / gross earned premiums Net claims ratio = net claims incurred / net earned premiums.
CODE FOR RESPONSIBLE INVESTING IN SOUTH AFRICA (CRISA)
CRISA is a voluntary code that applies to institutional investors such as pension fund and insurance companies as the owners of assets, and their service providers including asset managers and consultants. The code supports the integration of environmental, social and governance issues into investment decisions.
CODE OF CONDUCT
Our Code of Business Conduct sets out details of the standards we will adhere to when dealing with others, including shareholders, employees, customers, suppliers, competitors and the wider community. It ensures that we maintain the highest ethical standards in carrying out our business activities.
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.
Payment made to a salesman, agent or other intermediary, normally in return for selling an insurance or investment policy
COMMON EQUITY TIER 1 (CET)
A banking term. Common Equity Tier 1 (CET1) is a component of Tier 1 capital that consists mostly of common stock or equity. It is a capital measure that was introduced in 2014 as a precautionary measure to protect the economy from a financial crisis.
COMMUNITY INVESTMENT PRINCIPLES
These principles help guide our community investment decisions, which in turn helps ensure we maximise the long-term impact and strategic relevance of our investments. The Principles also provide us with a framework by which to measure and monitor our community investment activities.
Expressing results in constant currency removes exchange rate volatility and present results, for reference purposes, at unchanged exchange rates compared to prior period. This provides a clearer perspective of the underlying business performance relative to the prior reporting period.
Correlation is a statistical measurement of the relationship between two variables. Possible correlations range from +1 to -1. A zero correlation indicates that there is no relationship between the variables. A correlation of -1 indicates a perfect negative correlation, meaning that as one variable goes up, the other goes down. A correlation of +1 indicates a perfect positive correlation, meaning that both variables move in the same direction together.
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, potentially missing out on more profitable opportunities elsewhere.
COST TO INCOME RATIO/EFFICIENCY RATIO
Total operating expenses as a percentage of total income of the banking operations (net interest income and non-interest revenue).
A concept defined in the Market Consistent Embedded Value (MCEV) Principles and Guidelines. It generally refers to long-term business, which includes traditional life insurance, long-term healthcare and accident insurances, savings, pensions and annuities.
CREDIT LOSS RATIO
A banking measure. Total impairment losses on loans and advances, divided by the total average loans and advances.
A measure of the ability of an individual, organisation or country to fulfil its debtor obligations, usually in respect of debt. The highest rating is typically AAA, and the lowest D. Ratings are usually issued by a credit rating agency (eg Moody's, Fitch or Standard & Poors) or credit bureau.
Measures the amount of negative or limiting values that exist within an organisation resulting in unproductive employees.
A survey that enables Old Mutual to measure and manage the culture within its organisation. At Old Mutual the survey is conducted annually and covers all employees.
Assets of a company which can be realised in cash, sold or consumed within one year. Typically there sum of cash, cash equivalents, receivables, inventories, prepaid expenses and other current assets.
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.
Crime committed online or using a computer. This may involve stealing a person's identity, funds or digital property, network intrusions and the dissemination of computer viruses.
DEFERRED ACQUISITION COSTS (DAC)
A method of accounting whereby the acquisition costs on insurance business with an extended contractual period are recognised over the life of the contracts rather than upfront at the time of sale. An example of this would be sales commission payable to an insurance broker. The costs are aggregated and capitalised on the balance sheet as an asset and amortised through the accounts over the contract's life.
An annuity 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.
DEFERRED FEE INCOME
A method of accounting whereby fee income is recognised over the term of the contract with customers, rather than up front at the time of sale. The fees are aggregated and recorded on the balance sheet as a liability and amortised through the accounts over the term of the contract.
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.
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.
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.
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.
Expressed as how many times the company could pay its most recent dividend from its profit (after tax).
The dividend payable on a share expressed as a percentage of the market price.
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.
Another word for profit. It is calculated as revenues minus costs, operating expenses and taxes, minority interests and extraordinary items.
EARNINGS PER SHARE (EPS)
Earnings per Share (EPS) is calculated as post-tax adjusted operating profit divided by the adjusted weighted average number of shares (WANS) held by our investors. EPS is an indicator of our profitability that measures how much we earn for each share held.
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.
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 existing 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 from that business. It does not include the value of any future new business.
EMBEDDED VALUE PER SHARE
Embedded value divided by the weighted average number of shares in issue.
The degree to which an employee is involved and engages with the company's corporate values.
Environmental, social and governance factors that can affect the long-term returns on investment and can be integrated into investment analysis and decision making.
A non-recurring event that materially affects a company's finances in a reporting period.
The rate at which one currency may be converted into another.
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.
Expenses associated with running an insurance business (eg. commission, professional fees and other administrative costs), expressed as a percentage of premiums. The annual operating costs of an investment fund, expressed as a percentage of assets.
In calculating embedded value of life business, it is necessary to make assumptions about 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 known as the experience variance.
A non-recurring event that materially affects a company's finances in a reporting period. This is expected to be extremely rare.
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 SERVICES BOARD (FSB)
The regulator of financial services in South Africa.
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.
FREE SURPLUS GENERATION
A key performance indicator for Old Mutual. Calculated as the difference between Adjusted Headline Earnings and the amount of capital required by the businesses to grow in line with the Group's strategy. This metric includes adjustments for non-fungible earnings and only includes Nedbank's contribution as a dividend and as such is a measure of surplus cash generated by the Group available for distribution or investment.
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.
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.
FUNDS UNDER MANAGEMENT (FUM)
The total market value of funds managed by the Group on behalf of customers, at the point at which funds flow into the Group.
Measure of the extent to which a company is funded by borrowings in relation to shareholders' equity. A highly geared or leveraged company carries higher amounts of debt, relative to equity.
GENERAL INSURANCE/PROPERTY AND CASUALTY INSURANCE (SHORT-TERM 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.
GLOBAL REPORTING INITIATIVE (GRI)
The Global Reporting Initiative provides companies and organisations with a comprehensive sustainability reporting framework that is widely used around the world.
An intangible asset, arising from other assets acquired in a business combination that are not individually identified and separately recognised. In an acquisition it represents the difference between the fair value of the consideration transferred and the fair value of its net assets.
GREENHOUSE GAS EMISSIONS (GHG)
Gases that absorb and emit radiation within the thermal infrared range which cause the greenhouse effect. The burning of fossil fuels contributes to this effect, which has been linked to climate change. The most common greenhouse gas is carbon dioxide.
GREENHOUSE GAS PROTOCOL
The Greenhouse Gas Protocol is an international accounting tool to help governments and businesses understand, quantify and manage their greenhouse gas emissions. It provides a consistent methodology by which companies can report their greenhouse gas emissions.
This represents a total before deductions, for example the amount before tax has been deducted.
GROSS PREMIUM INCOME
Income from business written during the period, before any reinsurance is taken into account.
GROSS WRITTEN PREMIUMS
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.
HEADLINE EARNINGS PER SHARE (HEPS)
The SAICA Circular 2/2015, defines Headline Earnings as an additional earnings number permitted by the International Financial Reporting Standards (IFRS). The starting point is earnings as determined in IFRS (IAS 33), excluding separately identifiable re-measurements, net of related tax (both current and deferred) and related non-controlling interest, other than re-measurements specifically included in headline earnings. Headline earnings per share is a company’s Headline Earnings divided by the weighted average number of shares in issue.
Protecting against the risk of losses in one investment by taking up other investment positions that will reduce that risk.
International Financial Reporting Standards. Accounting regulations that all publicly listed companies in regions in which we are publicly listed are required to use. These standards are designed to ensure companies prepare their accounts in the same way so that there is a common basis for comparison.
Impairments are recognised in the income statement where the value of an asset as shown in the prior period balance sheet exceeds the value that the asset could be sold for currently. The amount shown in the balance sheet needs to be reduced through an impairment charge in the income statement.
INDEPENDENT FINANCIAL ADVISER (IFA)
An IFA is a person or organisation authorised to give advice on financial matters and to sell the products of financial services providers.
Annuities designed to mirror the performance of an index (e.g. the JSE TOP40, S&P 500) by tracking the ups and downs of that index.
An insurance policy is said to be in-force from its start date until the date it is terminated.
Large financial institutions such as pension funds, unit or investment trusts, asset managers and insurance companies.
A contract taken out with an insurer to give financial protection against loss from a perceived risk. The person taking out the insurance is called the insured. Payments for the policy are called premiums.
The insurance margin represents percentage of the sum of underwriting result and the additional value earned on premium income which is received through investment returns and other income or expenses over net earned premiums. = Results from operations / net earned premium.
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.
An integrated representation of both a group's financial and non-financial data and performance.
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.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
Accounting regulations that all publicly listed companies in the EU are required to use. They are designed to ensure companies in the European Union prepare their accounts in a similar way so that there is a common basis for comparison.
Buying and holding assets, such as shares, bonds, property and commodities, to earn income or to make capital gains.
Income such as share dividends and interest payments arising from the ownership of assets.
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.
Acronym for the Johannesburg Stock Exchange (which is technically the JSE Limited)
JSE SRI INDEX
Acronym for the Johannesburg Stock Exchange Socially Responsible Investment Index.
KEY RISK INDICATOR (KRI)
A forward looking metric that is indicative of the trend of risk exposures for a particular risk or group of risks.
A South African code of corporate governance issued in 2009. It recommends, among other things, that organisations produce an integrated report in place of an annual financial report and a separate sustainability report.
A South African code of corporate governance issued in 2016. It builds on its predecessors’ positioning of sound corporate governance as an essential element of good corporate citizenship.
The voluntary termination of a policy or the cessation of premiums payable by a policyholder before the maturity date.
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.
The debts of a company and other financial obligations.
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.
Cash or assets that can be readily converted into cash.
A measure of the ease with which a company's assets can be converted into cash, and therefore represents a company's ability to meet expected or unexpected cash calls.
Unencumbered available free cash and committed facilities available to Old Mutual Limited, which are available to meet expected and unexpected cash calls.
A liquidity premium can be viewed as compensation for the lower market liquidity of some bonds, particularly for longer dated and less actively traded bonds.
A term used to describe our life, health and pensions business and includes both insured and non-insured business. The term is broadly used throughout the industry, for example it is a regulatory expression broadly equivalent to life insurance and pensions.
MANAGEMENT ACTION PLAN
An action or actions developed by management that are usually triggered by one or more of the following:
Risk exposure greater than risk appetite
Control breakdowns or weaknesses
Key risk indicator threshold breaches
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)
A standard of reporting for life insurance companies that provides a common set of principles and guidelines for use in calculating embedded value. MCEV 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.
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.
An accounting adjustment to the book value of an asset or liability to reflect its current market value.
The date that an insurance policy or other financial contract finishes or 'matures' and when the benefit under it becomes payable.
These are the proportion of our earnings on the balance sheet net assets that are not owned by our ordinary equity shareholders, for example preference shareholders or the minority shareholders of Nedbank. Another term that is commonly used is non-controlling interests.
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.
A fund that aims to invest in the best funds on the market rather than making investments directly into company shares or other assets.
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
A 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. It enables investors to achieve a more diversified portfolio than they might have done by making an individual investment.
The amount that the post the deduction of tax.
NET ASSET VALUE
The value of a company calculated by subtracting the value of 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 a period.
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.
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.
NET RISK (ALSO KNOWN AS 'RESIDUAL RISK')
A net risk is the result of an assessment of the potential impact and frequency of a risk, after taking account of the controls put in place to manage the risk.
NET UNDERWRITING MARGIN
The net underwriting margin is a profit metric which indicates the underwriting gain or loss as a percentage of earned income. The underwriting profit or loss is calculated by deducting claims incurred, net of commission and management expenses from premiums earned.
= Net underwriting result / net earned premiums
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.
Insurance cover guaranteeing certain benefits, but where 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.
The price at which shares may be sold in the market.
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.
OPERATING COSTS/OPERATING EXPENSES
The day-to-day expenses involved in running a business; eg sales and administration costs.
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.
OPERATIONAL RISK SCENARIOS
Foreseeable, hypothetical events relating to failure of people, processes, systems and/or external events that potentially could have a significant impact on an organisation's risk profile or capital.
Growth which excludes the impact of acquisitions or divestments or movements in exchange-rates.
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.
Refers to a (re)insurance undertaking's available financial resources, calculated in accordance with the Solvency II rules, which can serve as a buffer against risks and absorb financial losses, where necessary.
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. It may be a legal insurance contract, but this is not always the case.
A pool of pensions contributions invested for growth. A type of institutional investor who administers and invests funds for pension plans.
Online services used by intermediaries and consumers to view and administer their investment portfolios. Platforms usually provide facilities for buying and selling investments and for viewing an individual's entire portfolio to assess asset allocation and risk exposure.
The payment a policyholder makes in return for insurance cover. A single-premium contract involves a single lump sum payment made at the start of the contract. Under a regular-premium contract, the policyholder agrees at the start to make regular payments throughout the term of the contract.
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP)
A measure, using the MCEV 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.
PRINCIPLES FOR RESPONSIBLE INVESTMENT (PRI)
The Principles for Responsible Investment are a set of principles which provide a recognised framework for the incorporation of environmental, social and governance issues into investment and ownership decision making practices.
A financial asset made up of securities, shares and bonds that are not publicly traded or listed on a stock exchange.
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.
A mathematical description of a range of possible values for a certain variable, identifying the likelihood of each possible value occurring.
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. This is 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.
A process whereby investors delegates their voting powers to Old Mutual to vote, on behalf of these investors, on a variety of issues relating to companies in which the investors have shares.
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).
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.
Provides Old Mutual investment managers with insights, metrics, ratings and analysis of environmental, social and governance-related information to help them integrate ESG factors into their investment processes.
REAL WORLD ECONOMIC ASSUMPTIONS
A term used in the calculation of MCEV. The expected return is based on a projection from beginning of period to end of period for investment return. This requires assumptions regarding the investment returns expected to be achieved over the period. The investment return assumptions (for this purpose only) are based on the 'real world' returns in excess of the risk-free reference rate. The use of real world investment assumptions gives a more realistic basis for the expected return calculation and allows for returns commensurate with the risk underlying each asset class. Any under or over-performance of actual investment returns over the real world economic assumption will be reported through economic variance. These have no bearing on the calculated MCEV other than the calculation of the expected existing business contribution in the analysis of MCEV earnings.
The date by when an investor must be recorded as an owner of shares to qualify for a forthcoming dividend or share distribution.
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.
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.
A form of insurance bought by insurance companies to protect themselves from the risk of large losses.
Energy that comes from natural resources such as sunlight, wind, tides and geothermal heat, and is not derived from fossil or nuclear fuel. Renewable energy does not directly produce greenhouse gases which are linked to climate change.
The currency in which a business reports its results. Old Mutual Limited’s reporting currency is the South African Rand (ZAR).
The way Old Mutual does business that takes account of its responsibilities to its stakeholders. Old Mutual has five responsible business pillars and introduced our Positive Futures Plan in 2015. This states our ambition in our two focus areas of financial wellbeing and responsible investment.
RESPONSIBLE BUSINESS FORUM
The Responsible Business Forum champions and challenges Old Mutual's approach to Responsible Business. It provides a robust system to manage and discuss responsible business risks.
RESPONSIBLE BUSINESS POLICY
Sets out the approach principles and mandatory minimum standards for the management of Responsible Business.
The incorporation of environmental, social and governance factors into investment and ownership decision-making processes.
RESPONSIBLE INVESTMENT (RI) STANDARD
Our Responsible Investment Standard is an agreed aspirational standard for RI practices across Old Mutual.
RESPONSIBLE INVESTMENT COMMITTEE
The Responsible Investment Committee is responsible for formalising Old Mutual's approach to Responsible Investment. Each member of the Committee is responsible for driving the implementation of Responsible Investment in their respective business.
RESPONSIBLE OWNERSHIP GUIDELINES
These Guidelines set out Old Mutual Investment Group's approach to responsible ownership of its investments which integrates environmental, social and governance factors into the investment and ownership process.
RESULTS FROM OPERATIONS (RFO)
A key performance indicator for Old Mutual. Results from Operations is calculated as Adjusted Headline Earnings before tax and minority interest, excluding net investment return on shareholder assets and finance costs. It is the primary measure of the business performance of the Old Mutual’s individual segments and will quantify the segments' contribution to the Group's Adjusted Headline Earnings.
RETAIL DISTRIBUTION REVIEW (RDR)
The RDR aims to drive structural change throughout the retail investments industry in order to ensure consumers can have confidence in their retirement and investment planning. Its ultimate aim is customer protection.
RETURN ON EMBEDDED VALUE (ROEV)
The annualised post tax operating profit calculated on an MCEV basis expressed as a percentage of the opening embedded value adjusted for dividends paid to equity holders.
RETURN ON EQUITY (ROE)
A measure calculated by dividing profit after tax by the average amount of equity in the business. Equity indicates how much capital provided or belonging to shareholders is tied up in the business.
RETURN ON NET ASSET (RONAV)
RoNAV is calculated as AHE divided by average Adjusted IFRS Equity. Adjusted IFRS Equity is calculated as IFRS equity attributable to operating segments before adjustments related to the consolidation of funds. It excludes equity related to the Residual plc, discontinued operations and operations in hyperinflationary economies.
Reverse stress-tests are stress tests that require a firm to assess scenarios and circumstances that would render its business model unviable, thereby identifying potential business vulnerabilities.
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.
The threat of an event that will limit an organisation's ability to achieve its business objectives.
RISK ADJUSTED PERFORMANCE MEASURES
A metric that measures returns based on the quantum of risk taken to generate those returns.
The level of risk that we are prepared to accept in the achievement of our objectives. Limits and early warning thresholds are set and we manage our risks within this.
A forward-looking assessment whereby risks are identified and exposures assessed or measured in the context of the business objectives.
A process for classifying risks possessing common qualities or quantities.
RISK MANAGEMENT FRAMEWORK
A set of principles that provide the foundations and organisational arrangements for designing, implementing, monitoring, reviewing and continually improving risk management processes throughout the organisation.
Policies that set out the minimum mandatory requirements that businesses must follow to mitigate key Group risks.
The entire portfolio of risks organised by risk category that are found within a particular organisation.
Attaching a probability or impact to the occurrence of a negative event. Risks are assigned a probability between 0 and 1. If it is certain that an event cannot occur, it is given a probability of 0; if it is certain that it will occur, it is given a probability of 1.
Risk-based capital is the minimum amount of capital that an organisation needs to support its overall business operations. Risk-based capital is used to set capital requirements considering the nature, scale and complexity of the organisation.
RISK-FREE REFERENCE RATE
The rate at which earnings are discounted in the MCEV calculation.
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.
A predicted sequence of events.
Scenario analysis is a process of analysing possible future events by considering possible outcomes or scenarios.
Emissions that are direct greenhouse gas emissions from sources owned or controlled by the company (eg the burning of diesel as a generator fuel).
Emissions that are indirect, and associated with the purchase of electricity, cooling, heating or steam.
Other indirect emissions not covered in scope 2 (eg employee business travel, purchased materials and waste).
The payment of dividends in the form of extra shares rather than cash.
Sell side refers to the part of the financial industry that is involved in the creation, promotion and sale of equities, bonds, foreign exchange and other financial instruments. Sell-side analysts and firms work to create and service products and research that are made available to the buy-side of the financial industry.
Total shareholders' interests in a company, including issued share capital, retained profit and reserves.
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.
SOLVENCY ASSESSMENT AND MANAGEMENT REGIME (SAM)
SAM is the new risk-based solvency regime for the South African long-term and short-term insurance industries to align the South African insurance industry with international standards. SAM will be based on Solvency II that has recently been implemented for European insurers, but it will be adapted to South African circumstances.
SOLVENCY CAPITAL REQUIREMENTS (SCR)
The Solvency Capital Requirement (SCR) is the main regulatory capital requirement under the South African Solvency Assessment and Management framework (SAM) and reflects the amount of Own Funds that a company requires to survive a 1-in-200-year loss event. The SCR is thus a Value-at-Risk of the Own Funds, calculated at a 99.5% confidence level over a one-year period, i.e., it is the amount of Own Funds that will allow a company to absorb a 1-in-200-year loss event.
Solvency II is the EU risk based solvency regime for EU (re) insurance companies. The rules are primarily concerned with the amount of capital that EU insurance companies must hold to reduce the risk of insolvency, and also with risk management standards.
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).
Any person or organisation that has an interest or is affected in some way by Old Mutual. This includes employees, local communities or other businesses, non-governmental organisations, regulators and government.
A non-entity-specific risk-based mathematical formula used by insurers to calculate their Solvency Capital Requirement under Solvency II, if the company is not using an internal model.
An arrangement of values of a variable showing their observed or theoretical frequency of occurrence, eg frequency distribution - a distribution of observed frequencies of occurrence of the values of a variable.
The accounts that every public limited company is required by law to produce.
STRESS AND SCENARIO TESTING
Stress and scenario tests test the organisation’s resilience in the face of adverse conditions. For example, to test adverse market conditions, a set of economic stresses are defined, such as a rise in interest rates or drop in markets, and the organisation must then calculate whether it has sufficient capital to withstand these stresses.
The lump sum benefit payable under an insurance policy or contract in circumstances which are defined within the policy; eg the amount payable on the death of the policyholder.
Cancelling an insurance contract before it becomes payable (eg on the death of the policyholder) or reaches its maturity date.
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.
TANGIBLE FIXED ASSET
Assets that physically exist such as property, plant and equipment. They are presented on the balance sheet net of any depreciation charges or impairment losses.
A way for an individual to hold funds such that they gain certain tax benefits.
Amounts set aside on the basis of actuarial calculations to meet forecast future obligations to policyholders. Otherwise known as reserves.
A type of life insurance where the benefit is paid only if death occurs within a specified period of time.
Abbreviations used to identify different companies traded on a stock exchange. Old Mutual is represented on the Johannesburg Stock Exchange by the ticker "OMU".
TIER 1 CAPITAL
A banking term. TIER 1 capital the core measure of a bank's financial strength from a regulator's point of view. It is composed of core capital, which consists primarily of common stock or equity and retained earnings, but may also include non-redeemable non-cumulative preferred shares.
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.
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.
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.
Someone willing to take on an insurance risk in exchange for a payment.
The process of deciding which risks an insurance company will cover, the terms of acceptance and the premiums it will charge.
UNDERWRITING PROFIT/LOSS (GENERAL INSURANCE)
A generally accepted non-life insurance term, also referred to as underwriting result, representing earned premiums minus the cost of claims and operating expenses. It indicates whether premiums cover claims and expenses or not.
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.
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.
UNITED NATIONS GLOBAL COMPACT (UNGC)
Businesses that are signed up to UNGC have committed to aligning their operations and strategies with ten principles in the areas of human rights, labour, environment and anti-corruption. The Global Compact is a practical framework for the development, implementation and disclosure of sustainability policies and practices for businesses. Each business must report their actions on progress against the principles annually in a "Communication on Progress".
UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT (UN PRI)
The UNPRI is a set of principles that provides a recognised framework for the incorporation of environmental, social and governance issues into investment and ownership decision making practices.
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.
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.
VALUE OF IN-FORCE BUSINESS (VIF)
Part of the embedded value of a life insurance company. It represents the discounted value of the profits expected to arise from the in-force business. VIF is calculated using a set of actuarial, economic and operational assumptions.
VALUE OF NEW BUSINESS (VNB)
The discounted value of the future profits expected to arise from all new business sold during a reporting period. VNB is calculated by using actuarial, economic and operational assumptions.
A long-term unit-linked investment suitable for retirement savings. Payouts are dependent on the change in value of the investments that underly it.
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.
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.
A type of investment policy 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 usually guaranteed. A final or 'terminal' bonus may be added when the policy becomes payable.
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.
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.
The reduction in the value of an asset on the balance sheet to reflect its current market value.
To acknowledge the loss or worthlessness of an asset by removing it entirely from the balance sheet.
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.
Rate of return on an investment in percentage terms, taking into account annual income and any change in capital value.