GLOSSARY
Actuary
An actuary applies mathematical, economic and financial analyses as well as risk assessment to financial contracts, in a wide range of
practical business problems.
AGAAP
AGAAP (Australian Generally Accepted Accounting Principles) were used by the Group to prepare financial reports up to and including the year
ended 30 June 2005. From 1 July 2005, the financial reports were
required to be prepared under AIFRS (defined below).
AIFRS
The Group was required to adopt AIFRS (Australian equivalents of International Financial Reporting Standards) when preparing its financial report for the year ended 30 June 2006.
APRA
APRA (Australian Prudential Regulation Authority) is the prudential regulator of insurance companies, banks, superannuation funds,
credit unions, building societies and friendly societies in Australia.
APRA is responsible for ensuring that policyholders, depositors and
superannuation fund members are protected by, for example, ensuring
that companies have enough capital to be able to meet their ongoing
business needs, including reserving to pay claims.
Business volume
This measures the volume of business at a point in time. The basis of the measure depends on the class of business. In the personal lines class, the relevant volume measure is ‘risks in force’. In commercial classes, the volume measure is ‘policies in force’. The difference in the definition is required to capture the distinct nature of IAG’s business mix.
Claims reserves
The portion of premium set aside to cover obligations for unexpired insurance contracts, claims and expenses to be incurred. This amount is invested and the returns on these investments form part of pricing
and profit from insurance operations.
CO2e emissions
In this instance, CO2e emissions are calculated for electricity use, office
paper and print paper consumption, tool of trade fuel consumption
and air travel using emission factors obtained from the Australian
Greenhouse Office (AGO). The 2005 conversion factors are taken from
the December 2005 AGO workbook. Green power electricity emissions
are not included.
Customer satisfaction index
This measures the end to end customer experience when enquiring,
taking out, renewing or making a claim for direct personal insurance.
Customer satisfaction levels are determined by a third party through
telephone interviews with a random sample of customers contacted.
During the year, there has been a change in the survey provider; however
only the customer satisfaction index for the retained provider has been
included (results for the 6 months to June 2006). The measure for 2006
also includes customer experience when making a claim.
Employee engagement score
Determined through six mandatory questions in the ‘Your Voice’
employee survey conducted by a third party. The survey assesses the
extent to which employees consistently say positive things about working
at IAG, want to stay with IAG and strive to achieve above and beyond
what is expected of them. Participation in the survey is voluntary but is
made available to all employees, with the exception of those who have
been employed for less than three months.
FTE
FTE (full-time equivalent) is a measure of the size of employees that takes account of part-time employees. It is determined by dividing
working hours (excluding overtime) for all employees by the standard
full-time hours. The FTE includes all permanent full-time and part-time
employees but excludes casual employees, guests, employees
on a fixed-term contract and employees on extended leave (over 28
consecutive calendar days) on the day that we report the data.
Funding of the OH&S department
This measure includes funding of occupational health and safety (OH&S)
initiatives such as spending on medical costs for employees, fire
protection, first aid training and an employee assistance program, as well
as funding of the OH&S department’s salaries and on-costs.
Funds for community investment
This measures direct financial support of community groups and
programs, as well as indirect support to help promote and raise
awareness of these community organisations. This also includes direct
IAG management and administration-related costs. Figures reported are
exclusive of GST.
Head count
The number of people employed by IAG, regardless of hours worked, excluding casuals, guests and employees on a fixed-term contract.
Insurance cycle
Insurance is a cyclical business. The insurance cycle represents the
peaks and troughs of insurance premiums and profitability. When
capacity (ie the availability of capital from insurers to underwrite risks)
increases in a market, insurers may reduce premiums, which is called
a ‘soft cycle’. When there is limited capacity, and premiums rise, this
is called a ‘hard cycle’.
Long-tail and short-tail insurance
In general terms, this name stems from the length of time (the ‘tail’)
that it takes for a claim to be made and settled. For ‘short-tail’ insurance
products, claims are usually known and settled within 12 months,
and are generally based around property. For ‘long-tail’ insurance
products, claims may not even be reported within 12 months, and
settlements can take many years, and are generally based around injury
compensation (eg medical, legal and loss of income) or other risks such
as professional indemnity.
Lost time injury frequency rate
This measures the number of work-related injuries resulting in a lost
time injury, per million hours worked. A lost time injury is an injury
that has resulted in at least one shift/day’s absence from work and for
which a workers’ compensation claim has been lodged as at 30 June
2006. Million hours worked includes all scheduled hours, plus overtime
less scheduled leave (ie annual leave) and also includes the hours
worked by casual employees.
Market capitalisation
The size of a company is often measured by its market capitalisation.
This is calculated by multiplying the total number of shares on issue
by the market price of the shares.
Minimum capital requirement
APRA (defined above) requires licensed insurers to have a minimum
amount of capital to meet its prudential standard. The amount of capital
required is determined by APRA based on formulae designed to reflect
the risk profile of each insurer’s business and balance sheet, and is
called the minimum capital requirement (MCR). Licensed insurers must
report their MCR and surplus above it, which is generally stated as a
multiple of MCR.
Number of employee volunteer hours
This measures the total number of hours that IAG employees have
logged for community/charity leave, defence forces leave and emergency
services leave for the year. Defence forces leave and emergency services
leave were newly included in 2006.
Policies in force
Policies in force is a measure of the total number of policies covered by
an insurance company at a point in time.
Recycled commingled waste
This is a measure of paper, cardboard and commingled material collected
for recycling at nine IAG sites (in 2005 only two IAG sites were included),
as well as documents destroyed on behalf of IAG in Australia.
Reinsurance
Insurers pay premiums to other insurers (reinsurers) to spread their risk
or cover major losses from specific events such as large hailstorms. This
is called reinsurance.
Risks in force
Risk refers to the subject matter that an insurance policy or contract protects (eg number of vehicles, houses, employees). An insurance policy may cover one risk or many risks, depending on the terms of the
policy. ‘Risks in force’ is a measure of the total number of risks covered
by an insurance company at a point in time.
S&P
S&P stands for Standard & Poor’s, a global financial ratings company
that analyses the financial strength of companies and individual
securities, and assigns them ratings. S&P has many ratings categories,
the highest of which is AAA.
S&P/ASX-100 and S&P/ASX-200
S&P/ASX 100 and S&P/ASX 200 are indices made up of the top 100
and 200 companies listed on the ASX. The companies are included
based on their size in terms of market capitalisation (defined above).
Shareholders’ funds
The investment portfolio other than claims reserves and investments in related entities. It essentially represents the shareholders’ capital that is not being utilised in day-to-day operations.
Short-tail insurance
See long-tail insurance.
Staff turnover
Turnover percentage is the sum of the monthly turnover rates determined by dividing the total number of terminations by head count each month. Termination includes all permanent full-time and part-time
employees but excludes casual employees, guests and employees on a
fixed-term contract.
Underwriter
This is the company or person who assumes the risk under an insurance policy.
For a controlled version of the IAG Annual Report 2006, glossary and KPMG assurance statement please download IAG Annual Report.pdf
IAG Annual Report 2005
IAG Annual Report 2004
www.iag.com.au
Full (5540kb)
Concise (5810kb)
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