50 LV= Annual Report 2012
Glossary
ABI: Association of British Insurers. ICA: Individual capital assessment is the process by
which the Financial Services Authority (FSA) requires
AFS: Association of Friendly Societies. insurance companies to make an assessment of
the regulated company’s own capital requirements,
Annual Premium Equivalent (APE): A measure which is then reviewed and agreed by the FSA.
commonly used to calculate and compare the size
of a life company. It is calculated by adding the total IFRS: International Financial Reporting Standards
annual premiums received and 10% of all single are used to ensure a company’s reported accounts
premiums received in the year. are prepared to common standards across
the world.
Asset shares: Asset shares reflect the amount
of money paid into with-profits policies by way of ILAG: Investment and Life Assurance Group.
premiums and investment returns, less the costs of
administering those policies. Industrial branch: Part of our heritage business and
typically contains small premium whole of life and
Association of Financial Mutuals (AFM): The trade endowment policies.
body that represents mutual insurers, Friendly
Societies and other financial mutuals in the UK. Mutual: A business that is owned by its members
It was formed in January 2010 after a merger rather than by shareholders.
of the Association of Friendly Societies and the
Association of Mutual Insurers. Mutual bonus: A discretionary enhancement to
asset shares to share the results of the group’s
Capital resources: The amount of capital that we performance.
have to run our business.
OEICs: Open-Ended Investment Companies are
Enterprise Value: As LV= is not quoted on the investment funds similar to investment trusts.
stockmarket, Enterprise Value is our measure They are open-ended because they can take money
of the market value of the business. Any rise or from new investors at any time. Equally they can
fall in Enterprise Value will also tell us if we are pay back investors whenever the investor chooses.
growing member value. A complex formula is used OEICs often adopt an umbrella structure where the
to calculate our Enterprise Value, and the figure is investor can get access through the umbrella fund
independently verified every three years. to a number of sub-funds which invest with different
objectives.
Friendly Society: Friendly Societies were set
up in the 19th century to help and encourage Ordinary branch: Part of our heritage business
underprivileged people to improve their financial and typically consists of traditional with-profits
wellbeing. As they are mutuals, Friendly Societies endowments, whole of life policies, annuities
are owned by members rather than shareholders. and pensions.
FSA: The Financial Services Authority regulates the Pension annuity: An annuity uses the proceeds of a
financial services industry in the UK. pension fund to provide an income for a fixed term
or the rest of your life.
FTSE: FTSE is an independent company that
provides indices to measure how stockmarkets and Periodic payment orders (PPOs): An annuity style
other financial markets perform. In the UK, the FTSE award paid to claimants instead of a lump sum,
100 index is widely used by the media to report on where indexed payments can be varied to meet
the valuation of the largest 100 quoted companies likely future changes in circumstance. This transfers
on the UK Stock Exchange. mortality and investment risk from the claimant to
the insurer.
Heritage business: Principally, the Society’s with-
profit policies, together with the policies acquired PHI: Permanent Health Insurance is an insurance
from RNPFN. policy paying benefits to policyholders who are
incapacitated and hence unable to work due to
GWP: Gross written premiums. illness or accident.