Key performance indicators
In 2007, the group’s strategy was 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 have announced our ambition 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 2007 was 49.2 pence (2006: 87.5 pence). This reflects the reduction in operating profit, mainly due to lower results in the general insurance segment as a result of adverse weather in the UK and increased competition, and net adverse short-term fluctuations and economic assumption changes due to closing market conditions.
Earnings per share (IFRS)
Group operating profit before tax*
We aim to achieve steady sustainable growth in our operating profit, both on an EEV and IFRS basis. In seeking to achieve this growth, we continue to adopt strict financial management disciplines underpinned by strong corporate governance.
Our EEV operating profit remained strong at £3,286 million (2006 restated: £3,251 million). On an IFRS basis, operating profit was £2,228 million (2006 restated: £2,609 million). These results reflect strong performances in the life segment offset by lower results in the general insurance segment as a result of adverse weather and increased competition.
Group operating profit before tax
Long-term savings new business sales
During 2007 we announced regional growth targets for our life businesses. These are as follows:
- UK to grow at least in line with the market
- Europe to grow sales by an average of 10% per year to 2010
- North America to double sales within three years of AmerUs acquisition (2009)
- Asia Pacific to grow sales by an average of 20% per year to 2010.
Our total new business sales, including investment sales, increased by 25% in 2007 to £38,583 million (2006: £30,762 million). This reflected strong growth across all our regions, performing in line with their individual targets.
Total long-term savings
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 21.10 pence per share (2006: 19.18 pence), bringing the total dividend for the year to 33.00 pence (2006: 30.00 pence). This is a 10% increase (2006: 10%). Dividend cover is 1.60 times (2006: restated 2.26 times), within our target range.
Proposed ordinary dividend per share and dividend cover
Return on equity shareholders’ funds†
We aim to deliver an after-tax operating return on opening equity shareholders’ funds, including life profits on a European Embedded Value (EEV basis), equivalent to 12.5%.
Our post-tax operating return on equity shareholders’ funds was 11.3% (2006: 13.1%). The reduction against 2006 reflects higher opening shareholders’ funds, which have increased by £2.6 billion. The return is below our target of 12.5% due to the impact of the adverse weather in the United Kingdom which has suppressed the return on our general insurance operations.
Return on equity shareholders’ funds
Employee engagement and leadership
Our global employee climate survey continues to provide measures of employee engagement and leadership. For Aviva, employee engagement represents the degree to which people believe in this 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.
During 2007, we showed progress on both our engagement and leadership scores which is reflective of the work undertaken to focus and embed the people strategy. While we have shown progress against external benchmarks, we recognise that we need to continue to improve as we are slightly lower than the global financial services norm on both measures.
Aviva climate survey results 2007
Customer satisfaction
All Business Units measure and track progress in customer advocacy, and, where feasible, benchmark performance against local competitors.
In 2007, over three quarters of our business units exceeded their 2007 target levels of customer performance and stretching targets have been set for 2008 to drive continuous improvement.
We are committed to greater harmonisation of customer measures across the group and a common ‘dashboard’ of ten key customer KPIs was introduced at the end of 2007 for the UK businesses, and will be rolled out internationally in 2008.
* Group EEV operating profit is calculated using long-term savings operating profit on an EEV basis before adjusting items. Group IFRS operating profit is
calculated using long-term savings operating profit on an IFRS basis before adjusting items. 2004 to 2006 have been restated to reflect the new definition
of IFRS operating profit – see note 2 for details.
** 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.
† Return on equity shareholders’ funds is calculated using after-tax return based on operating profit, including long-term savings profit on a European
Embedded Value (EEV) basis before adjusting items, and opening equity capital.