Basis of preparation
The results are prepared on two bases: International Financial Reporting Standards (IFRS) and European Embedded Value (EEV). The results prepared under IFRS form the basis of the Group’s statutory financial statements. The EEV financial results have been prepared in accordance with the amended EEV Principles issued by the European Insurance CFO Forum in 2016. The Group’s EEV basis results are stated net of tax and include the net of tax IFRS financial results of the Group’s asset management and other operations.
The Group provides supplementary analysis of profit before tax attributable to shareholders in order to distinguish operating profit based on longer-term investment returns from the other elements of total profit shown.
EEV and adjusted IFRS operating profit is based on longer-term investment returns and is stated before the effect of short-term fluctuations in investment returns against long-term assumptions and other corporate transactions. Furthermore, for EEV basis results, operating profit based on longer-term investment returns excludes the effect of changes in economic assumptions and the mark-to-market value movement on core borrowings.
Adjusted shareholders’ equity is defined as IFRS shareholders' equity plus contractual service margin net of reinsurance and related tax adjustments. See note C3.1 in the IFRS financial results for further information.
Operating free surplus generation is the financial metric we use to measure the internal cash generation of our business operations and for our life operations is generally based on the capital regimes that apply locally in the various jurisdictions in which the Group operates (with adjustments so that the free surplus better reflects resources potentially available for distribution to the Group). It represents amounts emerging from the in-force business during the year, net of amounts reinvested in writing new business (where applicable). For asset management businesses, it equates to post-tax adjusted operating profit for the year.
Exchange translation
The IFRS and EEV results are presented in US dollars. The comparative results have been prepared using previously reported actual exchange rates.