Governance Financial Statements
Strategic Report
27
Return on equity is the measure used by management to monitor the Group’s generation of underlying operating profit from its tangible net asset base. In 2024, Return on equity increased as underlying operating profit after tax rose by 31%. Return on equity is based on underlying operating profit, which is reconciled to IFRS profit, and tangible net asset value, which is reconciled to IFRS total equity in the Business Review. IFRS profit/(loss) before tax is the primary IFRS statutory KPI used by management to monitor the profit/(loss) before tax attributable to equity holders. We delivered £504m of underlying operating profit. After operating experience, assumption changes, strategic costs and various other non-operating items, and deferral of profit to CSM, the IFRS profit before tax was £113m (2023: £172m). The 2022 result was impacted by investment and economic losses, which did not (and are not expected to) repeat. New business strain is a key measure of our pricing discipline, reflecting the amount of capital invested as a percentage of premium to write the new business volumes. It is assessed against our target of below 2.5% of premium. Continued outperformance against target is driven by pricing discipline, risk selection and business mix. Tangible net asset value represents the tangible net assets attributable to the shareholders and is our primary metric used to measure the increase in shareholder value delivered. 2024 TNAV has increased by 64p (34%) since 2022. Tangible net asset value is reconciled to IFRS total equity in the Business Review. Solvency capital and its trajectory is a key focus for the Board in capital and business planning. It expresses the regulatory view of the available capital as a percentage of the required capital. In 2024, the capital coverage ratio rose, driven by higher interest rates and management actions. Proforma solvency capital coverage ratio is presented after the pre-funded debt repayment in February 2025. The reconciliation to the regulatory capital position is explained in note 30. Underlying organic capital generation provides insight into the ongoing capital sustainability of the business. It is the amount of capital generated by the in-force business less the day to day running costs including expenses, finance costs and funding our ambitious growth plans through new business strain. The reduction in 2024 was due to a large proportion of cash generation being invested to write higher new business volumes. UOCG forms part of the movement in excess own funds in the Business Review.
IFRS PROFIT BEFORE TAX £ 113 m
£113m
2023 2024
£172m
£(494)m
2022
LINK TO STRATEGIC PRIORITIES
Return on equity 1 15.3 %
15.3%
2023 2024
13.5%
10.3%
2022
LINK TO STRATEGIC PRIORITIES
Tangible net asset value per share 1 254 P
254p
2024
224p
2023
190p
2022
LINK TO STRATEGIC PRIORITIES
NEW business strain 1 1.3 %
1.3%
2024
0.9%
2023
1.9%
2022
LINK TO STRATEGIC PRIORITIES
Underlying Organic capital generation 1 £ 23 m
£23m
2024
£57m
2023
£34m
2022
LINK TO STRATEGIC PRIORITIES
SOLVENCY CAPITAL COVERAGE RATIO 2
204%
2024
197% 199%
2023
(Proforma) 204 %
2022
LINK TO STRATEGIC PRIORITIES
Powered by FlippingBook