Market segment united by its 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).
Amortised cost
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.
Asset backed security
A bond or a note backed by loan paper (not being mortgages) or accounts receivable.
Associate
A company in which Fortis has significant influence but which it doesn’t control.
Assurfinance
The selling of banking products through insurance brokers.
The selling of insurance products through bank branches.
Basel II
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.
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.
Cash flow hedge
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.
CDO
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.
CFD
Contract for differences. An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities.
Clean fair value
The fair value excluding the unrealised portion of the interest accruals.
Clearing
Administrative settlement of securities, futures and options transactions through a clearing organisation and the financial institutions associated with it (clearing members).
Combined ratio
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.
Compliance
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.
Consumer finance
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 housingrelated spending.
Core capital
Total available capital at group level (based on the banking definition of Tier 1 capital).
Corporate finance
General term for capital market-related services to finance mergers, acquisitions, buyouts, etc.
COSO ERM framework
A control framework on Enterprise Risk Management (ERM) issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) in the United States.
Cost/income ratio
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’.
Credit loss ratio
The ratio of specific provisions to average credit risk-weighted commitments. Also called ‘loan loss ratio’.
Credit spread
The yield differential between government bonds and corporate bonds or credits.
Cross-selling
The strategy of using an existing customer base for one product as prospective customers for other products.
Custody
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.
Derivative
A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e. ‘derived from’) the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement.
Discounted cash flow method
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.
DPF
Discretionary Participation Feature. This relates to the right of holders of certain insurance contracts and/or financial instruments to receive a supplemental return (in addition to guaranteed benefits). Its amount and/or time is contractually at the discretion of the issuers.
Disability insurance
Insurance against the financial consequences of long-term disability.
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.
Employee benefits
All forms of considerations given by an entity in exchange for service rendered by employees, in addition to their pay or salary.
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.
Fair value
The amount for which an asset (liability) can be bought (incurred) or sold (settled), between knowledgeable, willing parties in an arm’s length transaction.
Fair value hedge
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.
Finance lease
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.
Fintro
Fortis’s assurfinance network in Belgium. Fortis Bank is the sole supplier of banking products and loans. Fortis AG is the preferred supplier of insurance products.
Forward distribution integration
To gain access to (and control over) a distribution channel, e.g. bancassurance.
Funds under management
Assets (e.g. shares, bonds and property) managed by a financial services provider or fund manager on behalf of its clients.
Future
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.
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’s interest in the fair value of assets acquired and liabilities and contingent liabilities assumed.
Gross inflow
Sum of gross written premiums and investment contracts without DPF (Discretionary Participation Feature).
Gross written premiums
Total premiums (whether or not earned) for insurance contracts written or assumed during a specific period, without deduction for premiums ceded.
International Financial Reporting Standards, previously International Accounting Standards (IAS), 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.
Impairment
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.
Insurance contract
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.
Intangible asset
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.
Intermodal sector
Container transport sector.
Investment contract
A life insurance policy contract that transfers financial risk without transferring significant insurance risk.
Investment property
Property held by Fortis to earn rental income or for capital appreciation.
Intermediary
Person or institution facilitating a transaction between a buying and a selling party. In the insurance business independent intermediaries market insurance products to customers. In the banking business Fortis Bank acts as intermediary in its capacity of securities broker.
A hedge used to eliminate the risk of a portfolio of assets.
Marked-to-market
Valuation at market prices, as of the balance sheet date, of securities and derivatives held for trading purposes.
Market capitalisation
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.
Mortgage backed security
An investment instrument that represents ownership of an undivided interest in a group of mortgages. Principal and interest from the individual mortgages are used to pay investors' interest on the securities as well as to repay the principal investment.
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.
Non-performing loans
Loans that are impaired and/or uncollectible.
Notional amount
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.
Operating leverage
The difference between revenue growth and cost growth.
Operating margin
Operating income divided by net premium. Operating income is the profit or loss stemming from all operations, including underwriting and investments.
Option
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.
Organic growth
The growth rate of a company excluding any growth from acquisitions, divestments or exchange rate movements.
Insurance for individuals and families, such as car and homeowners’ insurance.
Private equity
Equity securities of companies that are not listed on a public exchange. Transfer of private equity is strictly regulated; therefore, investors looking to sell their stake in a private company have to find a buyer in the absence of a marketplace.
Provision
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 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 risk-weighted return is itself determined on the basis of the result before tax and discontinued operations, with provisions for credit risks being replaced by estimated, cycle-neutral expected losses.
Return on equity (ROE)
The ratio (in percent) between the net profit and the average shareholders’ equity for a financial year. A measure of profitability of equity indicating the return that a company achieves on the capital it employs.
Reverse repurchase agreement
The purchase of securities with an agreement to resell them at a higher price at a specific future date.
Risk-weighted commitments
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 collateralized. Securities lending allows an entity in possession of a particular security to earn enhanced returns.
Shadow accounting
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.
Shareholders’ 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.
Solvency II
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.
Straight-through processing
Processing of financial transactions without manual or visual intervention.
Structured credits
A general term used to describe either the practice or the result of creating securities by repackaging cash flows from financial contracts.
Subordinated bond (loan)
A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings.
Subsidiary
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’).
Suretyship
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.
Tier 1 ratio
Core capital of a bank expressed as a percentage of the risk-weighted balance sheet total.
Total capital ratio
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%.
Trade date
The date when Fortis becomes a party to the contractual provisions of a financial asset.
The discounted present value of the future distributable shareholder net cash flows expected from the block of new business written in a specified period.
Value of Business acquired (VOBA)
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.
VaR
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.
Vendor leasing
A working relationship between a leasing company and a vendor to provide leasing to the vendor’s customers. In some sense, the leasing company acts as an extension of the vendor, providing credit checking, billing and documentation collection services, and customer service.
Venture capital
In general, it refers to financing provided by investors to startup firms and small businesses with perceived, long-term growth potential.
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