Marketing reflecting loyalty (‘affinity’) to a brand in the broadest sense (including charities and sports teams). This brand loyalty is then used to sell a new set of products or services, often provided by a third party (e.g. insurance policies branded by a supermarket).

Available for sale

Asset and liability management

The amount at which a financial asset or liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation/accretion of any premium/discount, and minus any write-down for impairment.

A bond or a note backed by loan paper (not being mortgages) or accounts receivable.

A company in which Fortis has significant influence but which it doesn’t control.

Australia, Dollars

The selling of insurance products through the banking channel.

Updated framework for the way banks and banking regulators calculate their credit risk capital requirement. It also introduces a new type of capital charge for operational risk such as fraud or IT issues. Basel II is based on the three pillars of minimum capital requirement, the supervisory review process and market discipline. The framework was prepared by the Basel Committee on Banking Supervision.

One hundredth of a percentage point (0.01%).

A transaction whereby one party sells securities (e.g. government bonds) to another, agreeing to repurchase (repo) the securities at a future date at a pre-agreed price.

Canada, Dollars

Compound Annual Growth Rate. The year-over-year growth rate applied to an investment or other element of a company’s activities over a period of several years. The formula for calculating CAGR is (Current Value/Base Value)^(1/number of years)-1.

A hedge to mitigate the exposure to variability in cash flows of a recognised asset or liability, or forecasted transaction, that is attributable to changes in variable rates or prices.

Convertible and Subordinated Hybrid Equity-linked Securities

Collateralised Debt Obligation. American term for type of bond backed by a pool of bonds, loans and other assets. Payment of the principal and interest of the CDO is financed with the cash flows generated by the underlying financial assets. CDO is a class of asset-backed securities.

Credit default swap

Cash generating unit

Switzerland, Francs

The fair value excluding the unrealised portion of the interest accruals.

Administrative settlement of securities, futures and options transactions through a clearing organisation and the financial institutions associated with it (clearing members).

China, Yuan Renminbi

The ratio between the insurer’s total expenses (claims burden, commissions and general expenses) and premiums received. The combined ratio is only applied to non-life insurance.

Department responsible for monitoring and managing the risks associated with a company’s compliance with legislation and regulations. Fortis’s Compliance Officers promote adherence to the internal code of conduct by advising management, businesses and individual employees.

Short or medium-term credit provided to members of the public for a special purpose, such as the purchase of durable consumer goods. It does not include housing-related spending.

Total available capital at group level (based on the banking definition of Tier 1 capital).

General term for capital market-related services to finance mergers, acquisitions, buyouts, etc.

A control framework on Enterprise Risk Management (ERM) issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) in the United States.

The ratio of operating costs and general expenses to net income. The lower the cost/income ratio, the more efficiently a company is operating. Also called ‘efficiency ratio’.

The ratio of specific provisions to average credit risk-weighted commitments. Also called ‘loan loss ratio’.

The yield differential between government bonds and corporate bonds or credits.

The strategy of using an existing customer base for one product as prospective customers for other products.

An agreement, usually between an investor and a bank (or possibly an agent or a trust company), whereby the investor deposits for safekeeping securities, gold or other valuables with the bank, which in turn takes the valuables into safekeeping for a fee.

The cost of acquiring new and renewed insurance business, principally commissions, underwriting, agency and policy issue expenses, all of which vary with and primarily are related to the production of new business.

A financial instrument such as a swap, a forward, a future contract and an option (both written and purchased). This financial instrument has a value that changes in response to changes in various underlying variables. It requires little or no net initial investment, and is settled at a future date.

Insurance against the financial consequences of long-term disability.

An approach to valuation, whereby projected future cash flows are discounted at an interest rate that reflects the time value of money and a risk premium that reflects the extra return investors demand for the risk that the cash flow might not materialise after all.

A contractual right to receive, as a supplement to guaranteed benefits, additional benefits: (a) that are likely to be a significant portion of the total contractual benefits; (b) whose amount or timing is contractually at the discretion of the issuer; and (c) that are contractually based on: (i) the performance of a specified pool of contracts or a specified type of contract; (ii) realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or (iii) the profit or loss of the company, fund or other entity that issues the contract.

The sale of assets. Also called ‘disposal’.

Denmark, Kroner

Discretionary participation features

A derivative instrument that is embedded in another contract - the host contract. The host contract might be a debt or equity instrument, a lease, an insurance contract or a sale or purchase contract.

All forms of considerations given by an entity in exchange for service rendered by employees, in addition to their pay or salary.

Earnings per share

Euro inter bank offered rate

Embedded value

A form of corporate financing in which a company transfers outstanding debts to a factoring company that, for a fee, assumes responsibility for the debtor records, risk coverage and financing.

The amount for which an asset (liability) can be bought (incurred) or sold (settled), between knowledgeable, willing parties in an arm’s length transaction.

A hedge of an exposure to changes in the fair value of a recognised asset or liability (or a portion thereof) or a firm commitment. The exposure is attributable to a particular risk and will affect reported net income.

A lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.

Floating rate equity linked subordinated hybrid bond

Assets (e.g. shares, bonds and property) managed by a financial services provider or fund manager on behalf of its clients.

A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price.

Britain (United Kingdom), Pounds

This represents the excess of the fair value of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the business combination over Fortis’ interest in the fair value of assets acquired and liabilities and contingent liabilities assumed.

Sum of gross written premiums and investment contracts without DPF (Discretionary Participation Feature).

Total premiums (whether or not earned) for insurance contracts written or assumed during a specific period, without deduction for premiums ceded.

Hedge accounting recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item.

Type of investment fund aimed at professional investors and characterised by a high-risk investment strategy (bull operation and bear operation in financial instruments, leverage, swap operations, arbitrage, etc.).

Held to maturity

Incurred but not reported

International Financial Reporting Interpretations Committee

International Financial Reporting Standards, used as a standard for all listed companies within the European Union as of 1 January 2005 to ensure transparent and comparable accounting and disclosure.

A decline in value whereby the carrying amount of the asset exceeds the recoverable amount. In such a case, the carrying amount will be reduced to its recoverable amount through the income statement.

A contract under which one party (Fortis) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder.

An identifiable non-monetary asset which is recognised at cost if and only if it will generate future economic benefits and if the cost of the asset can be measured reliably.

A Life insurance policy contract that transfers financial risk without transferring significant insurance risk.

Property held by Fortis to earn rental income or for capital appreciation.

A strategic alliance undertaken jointly by two or more parties bringing in capital and know-how, but otherwise retaining the separate identities.

Japan, Yen

Liability adequacy test

An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt.

A hedge used to eliminate the risk of a portfolio of assets.

Value attributed to the company by the stock market. Market capitalisation corresponds to the number of shares outstanding multiplied by the share price at a given time.

Mandatory Convertible Securities

Markets in Financial Instruments Directive. This directive, which has been in effect since 1 November 2007, aims to enhance investor protection, increase transparency, integrity and efficiency of the markets, and facilitate the creation of a pan-European trading platform.

Malaysia, Ringgits

A hedge used to reduce the financial risks of a reporting entity’s share in the net assets of a foreign entity by entering into transactions that give an offsetting risk profile.

Amount of currency units, number of shares, a number of units of weight or volume or other units specified in a derivative contract.

A contract that allows the use of an asset against periodic payments, but does not convey rights similar to legal ownership of the asset and where the financial risks related to the asset are with the issuer of the lease contract.

The difference between revenue growth and cost growth.

Operating income divided by net premium. Operating income is the profit or loss stemming from all operations, including underwriting and investments.

A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.

The growth rate of a company excluding any growth from acquisitions, divestments or exchange rate movements.

Over the counter

Equity securities of companies that are not listed on a public exchange. Investors looking to sell their stake in a private company have to find a buyer in the absence of a marketplace.

Provisions are liabilities involving uncertainties in the amount or timing of payments. Provisions are recognised if there is a present obligation to transfer economic benefits, such as cash flows, as a result of past events and a reliable estimate can be made at the balance sheet date.

The liability components that qualify as Tier 1 capital (equity) under banking solvency regulations.

The Risk-Adjusted Return On Risk-Adjusted Capital (RARORAC) is a performance yardstick that establishes a consistent relationship between the risks and returns of a company’s various activities. RARORAC is calculated by dividing the risk-weighted return by the economic capital, after incorporation of diversification benefits. The riskweighted return is itself determined on the basis of the result before divestments, with provisions for credit risks being replaced by estimated, cycle-neutral expected losses.

The ratio (in per cent) between the net profi t and the average shareholders’ equity for a fi nancial year. A measure of profitability of equity indicating the return that a company achieves on the capital it employs.

The purchase of securities with an agreement to resell them at a higher price at a specific future date.

Total commitments calculated on the basis of the risks relating to the various balance sheet terms.

A loan of a security from one counterparty to another, who must eventually return the same security as repayment. The loan is often collateralised. Securities lending allows an entity in possession of a particular security to earn enhanced returns.

Sweden, Kronor

Single Euro Payments Area. Introduced on 1 January 2008, SEPA creates a single, integrated pan-European market for euro payments services.

According to IFRS 4 an insurer is permitted, but not required, to change its accounting policies so that a recognised but unrealised gain or loss on an asset affects the measurement of the insurance liabilities. The related deferred adjustment to the insurance liability (or deferred acquisition costs or intangible assets) is recognised in equity only if the unrealised gains or losses are recognised directly in equity.

The residual interest in the assets of the entity after deducting all of its liabilities. Financial institutions are obliged to keep sufficient shareholders’ equity to meet their obligations towards customers.

A fundamental and wide-ranging review of the current solvency rules for European insurance companies in the light of current developments in insurance, risk management, finance techniques and financial reporting.

Special purpose entity

Securities created by repackaging cash flows from financial contracts and encompassing asset-backed securities (ABS), mortgage-backed securities (MBS) and collaterised debt obligations (CDO’s).

A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings.

A loan offered to an individual who does not qualify for a loan at the prime rate due to their credit history. If a lender thinks that there is an above-average risk involved in giving a loan to a certain individual, they will sometimes offer them a subprime loan, which has an interest rate higher than the prime rate.

Any company, of which Fortis, either directly or indirectly, has the power to govern the financial and operating policies so as to obtain the benefits from its activities (‘control’).

A bond issued by an entity on behalf of a second party, guaranteeing that the second party will fulfil an obligation or series of obligations to a third party. In the event that the obligations are not met, the third party will recover its losses via the bond.

The result generated by the underwriting of insurance contracts including financial revenues and capital gains related to these contracts. Only used in the insurance business.

Thailand, Baht

Core capital of a bank expressed as a percentage of the risk-weighted balance sheet total.

Total capital of the bank expressed as a percentage of total risk-weighted commitments. The minimum standard set by the Bank for International Settlements is 8%.

The date when Fortis becomes a party to the contractual provisions of a financial asset.

Turkey, New Lira

Taiwan, New Dollars

United Nations Development Programme’s Millennium Development Goals.

United States of America, Dollars

The discounted present value of the future distributable shareholder net cash flows expected from the block of new business written in a specified period.

The present value of future profits from acquired insurance contracts. VOBA is recognised as an intangible asset and amortised over the premium or gross profit recognition period of the policies acquired.

Abbreviation of value at risk. A technique which uses the statistical analysis of historical market trends and volatilities to estimate the likelihood that a given portfolio’s losses will exceed a certain amount.

A working relationship between a leasing company and a vendor to provide leasing to the vendor’s customers.

In general, it refers to financing provided by investors to startup firms and small businesses with perceived, long-term growth potential.

South Africa, Rand