Key performance indicators
The Companies Act requires that a fair review of the business contains financial and, where applicable, non-financial key performance indicators (KPIs). We consider that our financial KPIs are those that communicate to the members the financial performance and strength of the group as a whole. These KPIs comprise:
- Earnings per share
- Proposed ordinary dividend per share and dividend cover*
- Group operating profit before tax**
- Long-term savings new business sales
- Return equity shareholders' capital
Management also use a variety of Other Performance Indicators (OPIs) in both running and assessing the performance of individual business segments and units, rather than the group as a whole. OPIs include measures such as present value of new business premiums, new business margins, combined operating ratio and underwriting profit.
Full-year 2008
Our strategy is underpinned by focusing on a number of key financial performance measures. The key measures that are used to assess performance at a group level are set out below:
Earnings per share
To demonstrate our commitment to our vision of “one Aviva, twice the value”, we announced our ambition in February 2008 to double IFRS earnings per share by 2012. This ambition is based on total IFRS return, including investment volatility and non-operating items over the weighted average number of shares.
Our IFRS earnings per share for 2008 was a loss of 36.8 pence (2007 restated: 48.9 profit). This reflects the net adverse short-term fluctuations and economic assumption changes due to adverse market movement, continued investment in developing the business and strengthening our provisions for latent claims.
Group operating profit before tax**
We aim to achieve steady sustainable growth in our operating profit, both on a MCEV and IFRS basis. In seeking to achieve this growth, we continue to adopt strict financial management disciplines underpinned by strong corporate governance.
In 2008 we delivered strong MCEV operating profit at £3,358 million, up 10% against 2007 and IFRS operating profit of £2,297 million, up 4% against the prior year. These results reflect higher life and general insurance results offset by lower fund management returns.
Long-term savings new business sales
Total new business sales, including investment sales, increased by 1% in 2008 to £40,278 million (2007: £39,705 million) with growth in life and pension sales being offset by a fall in the sales of investment products. As a global group with 67% of our long-term savings sales coming from outside the UK we have benefited from currency movements in the year, mainly the appreciation of the euro and US dollar. However, while we have already met the target to double sales in North America a year earlier than planned, in the current economic climate top-line sales growth targets are not our priority. In 2009 we aim to maintain a strong franchise in each of our markets, but with an increased emphasis on capital efficiency. We will aim to perform in line with the market, but will prioritise profitability and efficient use of capital.
Proposed ordinary dividend per share and dividend cover*
Our intention is to increase the total dividend on a basis judged prudent using a dividend cover in the 1.5 to 2.0 times range as a guide, while retaining capital to support future business growth.
Our board has recommended a final dividend of 19.91 pence per share (2007: 21.10 pence) bringing the total dividend for the year to 33.00 pence. The total dividend has been maintained in line with 2007. Dividend cover is 1.9 times (2007: 1.6 times) within our target range.
Return on equity shareholders' capital
Return on equity shareholders’ capital is calculated as after-tax operating return, before adjusting items, on opening equity shareholders’ funds, including life profits on a market consistent embedded value (MCEV) basis†. The improvement in 2008 to 11.0% (2007 restated: 10.4%) reflects the increase in post-tax MCEV operating return, partly offset by an increase in opening shareholders’ funds of £2.6 billion.
Non-financial performance indicators
In addition to reporting on our financial performance, it is important that as a forward thinking company we are aware of our wider responsibilities and report on the non-financial aspects of our performance. We consider that our employees and customers are fundamental to the success of our business; as such, they form the basis for our non-financial measures, which include:
- Customer satisfaction
- Employee engagement and leadership
Customer satisfaction
All business units measure and track progress in customer advocacy, and, where feasible, benchmark performance against local competitors.
Aviva is committed to implementing a consistent measure of customer advocacy across the group, Net Promoter Score ® (NPS). Overall, 17 businesses carried out an overall NPS survey in 2008. For those that also benchmarked, eight businesses were at or exceeded the market average, with two placed in the upper quartile, and four scored below the market average. For those businesses unable to conduct a benchmark survey, four businesses' scores met or exceeded their targets and one missed.
Our UK Life, UK GI and Canadian businesses are transitioning across to NPS in 2009. In the UK, the life business met its broker satisfaction target, UK GI achieved its direct customer satisfaction target (at 94%) and our RAC business continued to receive very high levels of customer satisfaction (98%).
Employee engagement and leadership
Our global employee climate survey continues to provide measures of employee engagement and leadership. Employee engagement represents the degree to which people believe in Aviva being a great place to work and are contributing to help meet our collective goals and ambitions.
The survey results are used each year to determine and implement actions with the aim of achieving continuous improvement. The climate survey measures employees’ perceptions of leadership, verifying alignment with our strategic direction and immediate business plans. Our aim is to improve both measures over time and meet or exceed a global financial services benchmark.
In 2008 we saw improvements in every area of the survey including Aviva’s leadership, understanding of company values and levels of engagement. More employees said they felt more customer focused and empowered in the workplace. Awareness of Aviva’s diversity policies and practices was also higher and more employees felt that their talents were being managed effectively by their managers.
- * Dividend cover is measured on operating earnings after tax on an IFRS basis, expressed as a multiple of the ordinary dividend in respect of the financial year.
- ** Group MCEV operating profit is calculated using long-term savings operating profit on an MCEV basis before the impairment of goodwill. Group IFRS operating profit is calculated using long-term savings operating profit on an IFRS basis before the impairment of goodwill.
- † On an MCEV basis for 2008 and 2007. Prior years presented on an EEV basis.