Glossary

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

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

    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.

    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 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.

    Adjusted operating profit (AOP)
    A measure of underlying profitability which excludes the impacts of one-off items, market volatility and accounting treatments that are not reflective of a company's performance in its reporting period.

    Affiliate
    An investment firm specialising in offering specific services to a select number of individuals (term is interchangeable with "boutique").

    AIIM
    African Infrastructure Investment Managers, a member of Old Mutual Alternative Investments.

    Amortisation
    An accountancy term for the gradual reduction in value of an intangible asset caused by the passage of time based on writing off the asset over its projected 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.

    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 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).

    Asset
    Anything of value controlled 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
    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.

    Assumptions
    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.

    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 and Group financial statements and provide an opinion on the appropriateness of the financial statements.

  • 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). This is also referred to as the statement of financial provisions.

    Bancassurance
    An arrangement whereby banks and building societies sell life, pension and savings products 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.

    B-BBEE
    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.

    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
    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.

    Boutique
    An investment firm specialising in offering specific services to a select number of individuals (term interchangeable with affiliate).

    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.

  • Capital adequacy requirement (CAR)
    The level of capital required by Old Mutual Life Assurance Company (South Africa) Limited to support its insurance business. It is mostly driven by the capital required to absorb investment risk, ie a fall in the value of investments of the business, and generally exceeds the level of capital required by the South African regulator (which is called the "Statutory Capital Adequacy Requirement").

    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.

    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.

    Carbon emissions
    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.

    Cash flow
    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.

    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.

    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.

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

    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.

    Correlation
    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, 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
    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 rating
    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 Moodys, Fitch or Standard & Poors) or credit bureau.

    Cultural entropy
    Measures the amount of negative or limiting values that exist within an organisation resulting in unproductive work.

    Culture survey
    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.

    Current asset
    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.

    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.

    Cyber-crime
    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.

    Deferred annuity
    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.

    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.

    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).

    Divident yield
    The dividend payable on a share expressed as a percentage of the market price.

  • 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. 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.

    EBIT
    Earnings before deductions for interest and tax.

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

    Economic capital
    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.

    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 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.

    Employee engagement
    The degree to which an employee is involved and engages with the company's corporate values.

    ESG
    Environmental, social and governance factors that can affect the long-term returns on investment and can be integrated into investment analysis and decision making.

    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
    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.

    Experience variance
    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.

    Extraordinary item
    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 Conduct Authority (FCA)
    The regulator for UK financial services firms and financial markets in the UK.

    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.

    FTSE4Good
    The FTSE4Good is an index that measures the performance of companies that meet globally recognised corporate responsibility standards.

    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.

  • Gearing/Leverage
    Measure of the extent to which a company is funded by borrowings in relation toshareholders' equity. A highly geared or everaged 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.

    Goodwill
    A form of intangible asset. 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 government and businesses understand, quantify and manage their greenhouse gas emissions. It provides a consistent methodology by which companies can report their greenhouse gas emissions.

    Gross
    This represents 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 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.

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

  • IDEAS
    Infrastructural, Developmental and Environmental Assets Managed Fund in South Africa, a member of Old Mutual Alternative Investments.

    IFRS
    International Financial Reporting Standards. Accounting regulations that all publicly listed companies in the EU 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.

    Impairment
    Impairments are recognised in the income statement 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.

    Independent financial adviser (IFA)
    In the UK an IFA is a person or organisation authorised to give advice on financial matters and to sell the products of 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.

    In-force
    An insurance policy is said to be in-force from its start date until the date it is terminated.

    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 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.

    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.

    Integrated report
    An integrated representation of both a group's financial and non-financial data and performance.

    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.

    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.

    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.

  • 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.

    JSE
    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.

    King III
    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.

  • Lapses/surrenders/withdrawals
    The voluntary termination of a policy or the cessation of premiums payable 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.

    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
    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.

    Liquidity headroom
    Unencumbered available free cash and committed facilities available to Old Mutual plc, which are available to meet expected and unexpected cash calls.

    Liquidity premium
    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.

    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
    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 UK regulatory expression broadly equivalent to life insurance and pensions.

    Long-term investment return (LTIR)
    The long-term return that Old Mutual assumes can realistically be earned on its investible shareholder assets when calculating Adjusted Operating Profit. Long-term investment return rates are reviewed annually and reflect the returns expected on the chosen asset classes.

  • 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
    Loss events
    Audit findings

    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)
    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.

    Market liquidity
    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.

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

    Maturity
    The date that an insurance policy or other financial contract finishes or 'matures' and when the benefit under it becomes payable.

    Minority interests
    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.

    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
    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.

  • Net
    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.

    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.

    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.

    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 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.

  • 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. 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.

    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.

    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.

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

    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.

    Own funds
    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.

  • 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. It may be a legal insurance contract, but this is not always the case.

    Pension fund
    A pool of pensions contributions invested for growth. 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 usually provide facilities for buying and selling investments (including, in the UK products such as Individual Savings Accounts (ISAs), Self-Invested Personal Pensions (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. 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.

    Private equity
    A financial asset made up of securities, shares and bonds that are not publicly traded or listed on a stock exchange.

    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.

    Probability distribution
    A mathematical description of a range of possible values for a certain variable, identifying the likelihood of each possible value occurring.

    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. 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.

    Proxy voting
    A process where Old Mutual votes, on behalf of an investor, on a variety of issues relating to how a company that the investor has a share in operates.

  • 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).

  • 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.

    Rating provider
    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.

    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.

    Renewable energy
    Energy that comes from natural resources such as sunlight, wind, rain, 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.

    Respoinsible 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
    The way Old Mutual does business that takes account of its responsibilities to its stakeholders. Old Mutual introduced our Positive Futures Plan in 2015 and this states our ambition in our two focus areas of financial wellbeing and responsible investment. As part of managed separation we are transitioning the plan into the businesses.

    Responsible Business Policy
    Sets out the approach principles and mandatory minimum standards for the management of Responsible Business.

    Responsible Investment
    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. To read the standard, visit www.oldmutual.com/rb/responsibleinvestment

    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
    The Guidelines set out Old Mutual Investment Group South Africa's approach to responsible ownership of its investments which integrates environmental, social and governance factors into the investment and ownership process.

    Retail Distribution Review (RDR)
    The RDR is a key component of the UK Financial Services Authority's agenda of customer protection. 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.

    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 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.

    Reverse stress-testing
    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.

    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
    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.

    Risk appetite
    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.

    Risk assessment
    A forward-looking assessment whereby risks are identified and exposures assessed or measured in the context of the business objectives.

    Risk categorisation
    A process for classifying risks possessing common qualities or quantities.

    Risk management framework
    A set of components that provide the foundations and organisational arrangements for designing, implementing, monitoring, reviewing and continually improving risk management processes throughout the organisation.

    Risk policies
    Policies that set out the minimum mandatory requirements that businesses must follow to mitigate key Group risks.

    Risk profile
    The entire portfolio of risks organised by risk category that are found within a particular organisation.

    Risk quantification
    Attaching a probability or impact to the happening of a negative event. 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 Risks are assigned a probability between 0 and 1.

    Risk-based capital
    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 actual assets held earn income and the rate at which earnings are discounted in the MCEV calculation.

    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.

  • Scenario
    A predicted sequence of events.

    Scenario analysis
    Scenario analysis is a process of analysing possible future events by considering possible outcomes or scenarios.

    Scope 1
    Emissions that are direct greenhouse gas emissions from sources owned or controlled by the company (eg the burning of diesel as a generator fuel).

    Scope 2
    Emissions that are indirect, and associated with the purchase of electricity, cooling, heating or steam.

    Scope 3
    Other indirect emissions not covered in scope 2 (eg employee business travel, purchased materials and waste).

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

    Shareholders' funds
    TTotal 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.

    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 Requirement (SCR)
    The SCR is the capital required to ensure that the (re)insurance company will be able to meet its obligations over the next 12 months with a probability of at least 99.5%, calculated in accordance with the Solvency II rules.

    Solvency II
    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.

    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).

    Stakeholders
    Any person or organisation that has an interest or is affected in some way by Old Mutual. This might include employees, local communities or other businesses, non-governmental organisations, regulators and government.

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

    Standard formula
    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.

    Statistical distribution
    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.

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

    Stress and scenario testing
    Stress and scenario tests test the firm's resilience in the face of adverse conditions. For example, to test adverse market conditions, a set of economic stresses is defined, such as a rise in interest rates or drop in markets, and the firm must then calculate if it has sufficient capital to withstand these stresses.

    Sum assured
    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.

    Surrender
    Cancelling 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.

  • 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.

    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. Otherwise known as reserves.

    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.

  • UK Stewardship Code
    The UK Stewardship Code is a best practice code from the Financial Reporting Council that aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders.

    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 (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.

    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.

    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.

    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.  

  • 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.

    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.

  • 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 policy
    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.

    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
    The reduction in 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.

  • 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.

  • Yield
    Rate of return on an investment in percentage terms, taking into account annual income and any change in capital value.