Set out below are the KPIs that we used to monitor the
performance of the business.
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Financial KPI Definition
Return on Equity (RoE)%
A relative measure expressed as a percentage, calculated by
dividing IFRS3 Adjusted Operating Profit (AOP) (post-tax and
minority interests) by the average capital tied up in the business,
where capital is defined as shareholder equity excluding hybrid
Return on Equity is an indicator of our profitability and
efficiency, demonstrating how much profit has been generated given
the resources provided by our shareholders.
Net Client Cash Flow (NCCF)/Opening Funds under
This measure indicates the extent to which client funds are
either retained or lost during the year. Inflows are driven by
premiums, deposits and investments, whereas outflows are driven by
claims, surrenders, withdrawals, benefits and maturities.
NCCF/Opening Funds Under Management (FUM) measures our success
in attracting new business and retaining existing customers, and
provides a good indication of investor confidence in our ability to
effectively manage their funds.
The LTS businesses achieved positive NCCF of £5bn in 2010. The
USAM business had outflows of £11.7bn.
For more discussion please see the Finance Director's
Group Value Creation % (Long-Term Savings
Calculated as the Market Consistent Embedded Value (MCEV) value
of new business plus the MCEV experience variances divided by the
opening MCEV balance, expressed as a percentage.
Group Value Creation for the Long-Term Savings covered business
measures the contribution to Return on Embedded Value from
management actions of writing profitable new business, and managing
expense, persistency, risk and other experience compared with that
which was assumed.
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IFRS Operating profit margin (basis points)
Calculated as pre-tax adjusted operating profit divided by the
average funds under management for the period, expressed in basis
IFRS Operating profit margin measures the profit margin we have
earned on the funds we manage. An improved basis point margin is an
indicator of the success a company is having in growing its revenue
at a greater rate than its expenses.
Adjusted Operating Earnings per Share
Calculated as post-tax adjusted operating profit divided by the
adjusted weighted average number of shares (WANS), held by our
Adjusted Operating Earnings per Share (EPS) is an indicator of
our profitability that measures how much we earn for each share
held. The trend in the movement of EPS demonstrates our rate of
Measured by the average percentage of positive responses
gathered via employee survey to two questions measuring Intent to
Stay, and three questions measuring Discretionary Effort.
In 2011 we will replace the Engagement Survey with a Culture
Survey which will facilitate the tracking of the overall health of
Intent to Stay is a lead indicator of retention and
Discretionary Effort is a lead indicator of performance. These two
factors correlate with business performance and total shareholder
In 2011 we will be reporting on customer