Basis of preparation
This business review complies with the recommendations of the European Union (EU) Modernisation Directive, the Companies Act 1985 (Operating and Financial Review and Directors’ Report) Regulations 2005 (the Companies Act) and is in line with current best practice. It is addressed to, and written for, the members of Aviva plc with the aim of providing a fair review of our business development, performance and position at the current time. In producing this review, we aim to present a view that is balanced and comprehensive and that is consistent with the size and complexity of our business. The review is written in the context of the risks and uncertainties facing our business. We anticipate that the format and content of the review will evolve over time, along with developments in our business and the external environment.
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 (IFRS basis)
- Operating profit (European Embedded Value basis)
- Operating profit (International Financial Reporting Standards basis)
- Long-term new business sales (PVNBP)
- Proposed ordinary dividend per share and dividend cover
- Return on equity shareholders’ funds
Management also uses 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 new business margins, combined operating ratio and underwriting profit.
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, and include:
- Leadership and employee engagement
- Customer satisfaction
Forward-looking statements
This business review contains “forward-looking statements” about:
- Our future plans
- Our current goals
- Our expectations of our future financial condition, performance and results
By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events that are beyond our control. For example, certain insurance risk disclosures are dependent on our choices about assumptions and models, which by their nature are estimates. As such, actual future gains and losses could differ materially from those that we have estimated. Other factors that could cause actual results to differ materially from those estimated by the forward-looking statement include, but are not limited to:
- Global economic business conditions
- Monetary and interest rate policies
- Foreign currency exchange rates
- Equity and property prices
- The impact of competition, inflation and deflation
- Changes to regulations, taxes and legislation
- The timing and impact of acquisitions and business combinations in relevant industries
- Natural and other disasters
- Changes to consumer saving and spending habits
- Our success in managing the above factors.
Consequently, our actual future financial condition, performance and results could differ materially from the plans, goals and expectations set out in our forward-looking statements. We undertake no obligation to update the forward-looking statements contained in this review or any other forward-looking statements we make.
Accounting basis of preparation
In addition to presenting our results and financial position on an International Financial Reporting Standards basis, we also use European Embedded Value (EEV) as an alternative performance measure. Details of the accounting basis of preparation are set out in the financial reporting section.