Hansard Regulatory News (HSD)

Hansard Global plc

Results for the six months ended 31 December 2012

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its results for the six months ended 31 December 2012 ("H1 2013").

* Payment date - 3 April 2013

Summary

Our target is to grow new business through profitable relationships with intermediaries and to retain that business on the books over the longer term. The success of this in H1 2013 is demonstrated in our performance under both EEV and IFRS. The increasing proportion of regular premium policies results in increased new business margins of 12.1% which are market leading, and expectations of increased contract fee income in future financial periods.

Increased functionality developed for Hansard OnLine allows intermediaries and policyholders to transact with us more efffectively, reduces operational risk and allows us to embed process efficiencies and therefore reduce costs. As is reported, 90% of applications for regular premium policies are currently delivered to us electronically, as are approximately 60% of instructions for investment transactions within policy wrappers.

We are working to build our sales force over the next few months and we have identified a short-list of potential candidates to replace Joe Kanarek.

Dividend

In line with previous guidance, dividend payments for the year ended 30 June 2013 are expected to total 8.0p per share and it is the Board's intention to pursue a progressive policy thereafter. The Board has resolved to pay an interim dividend of 3.25p per share. This will be paid on 3 April 2013.

Current Trading

While total new business flows in H1 2013 are marginally below those of H1 2012 we are happy with the sales momentum from Q1 2013 into Q2 and which has continued into Q3. New business sales in Q3 2013 to date are significantly higher than Q3 2012, with the result that total new business sales for the year to date are now higher than the comparative period on all metrics used by the Group. The majority of this business is from the growth markets of the Far East and Latin America, with growth in Far Eastern markets particularly pronounced. We continue to explore other growth markets.

Hansard Europe Limited

With the success of the Group's strategy to build relationships with intermediaries in growth markets and the lack of prospects in the eurozone, we have concluded that it is in the long-term interests of the Group to reduce its exposure to Europe. Following a strategic review of the operations of Hansard Europe Limited we have decided to close that company to new business with effect from 30 June 2013.The company will then enter a period of orderly run-off.

We do not believe that this decision will have a significant impact on future levels of new business. The levels of new business from the countries serviced by Hansard Europe are less than 10% of the Group's total new business in H1 2013, using the Group's internal metric, Compensation Credit. Using the Present Value of New Business Premiums ("PVNBP"), new business flows are less than 15% of the Group's total. The majority of these flows are single premiums. 

Interim Management Statement

The second Interim Management Statement in respect of the year ending 30 June 2013 is expected to be published on 7 May 2013.

Gordon Marr, Chief Executive Officer, commented:

 "We have recorded a strong new business performance in the second quarter of this financial year, showing positive momentum in the Group that has continued into Q3. The initiatives and investments we have made in distribution, infrastructure and new products continue to bear fruit.

The decision to close Hansard Europe to new business will allow the Group to better focus its activities in future on higher margin growth markets. We remain confident that the outlook for growth remains positive for the Group."

For further information

Hansard Global +44 (0)1624 688000

Gordon Marr, Chief Executive Officer

Vince Watkins, Chief Financial Officer

Bell Pottinger LLP +44 (0)20 7861 3232

Daniel de Belder

Notes to editors:

·; Hansard Global plc is the holding company of the Hansard Group of companies. The Company was listed on the London Stock Exchange in December 2006. The Group is a specialist long-term savings provider, based in the Isle of Man.

·; The Group offers a range of flexible and tax-efficient investment products within a life assurance policy wrapper, designed to appeal to affluent, international investors.

·; The Group utilises a low-cost distribution model by selling policies exclusively through a network of independent financial advisors, and the retail operations of certain financial institutions who provide access to their clients in more than 170 countries. The Group's distribution model is supported by Hansard OnLine, a multi-language internet platform, and is scaleable.

·; The principal geographic markets in which the Group currently services financial advisors and policyholders are the Far East, Latin America and the Middle East, in the case of Hansard International Limited, and Western Europe in the case of Hansard Europe Limited, the Group's two life assurance companies.

·; The Group's objective is to grow its business by attracting new business and positioning itself to adapt rapidly to market trends and conditions. The scaleability and flexibility of the Group's operations allow it to enter or develop new geographic markets and exploit growth opportunities within existing markets without the need for significant further investment.

Forward-looking statements:

This announcement may contain certain forward-looking statements with respect to certain of Hansard Global plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve risk and uncertainties because they relate to future events and circumstances which are beyond Hansard Global plc's control. As a result, Hansard Global plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Hansard Global plc's forward-looking statements. Hansard Global plc does not undertake to update forward-looking statements contained in this announcement or any other forward-looking statement it may make. No statement in this announcement is intended to be a profit forecast or be relied upon as a guide for future performance.

Chairman's Statement

I am pleased to report that Hansard's performance in the first half of this financial year (H1 2013) demonstrates the benefits arising from the Group's focus on its product mix and on our OnLine proposition. Our focus on regular premium business sourced from growth markets continues to be rewarded with an increased proportion of regular premiums and market-leading new business margins of 12.1%.

As anticipated, new business sales in Q2 2013, on all metrics reported by the Group, were significantly above the levels of Q1 2013. This momentum has accelerated in Q3 2013 with the result that total new business sales for the year to date are now higher than the comparative period.

HANSARD EUROPE LIMITED

With the success of the Group's strategy to build relationships with intermediaries in growth markets and the lack of prospects in the eurozone, we have concluded that it is in the long-term interests of the Group to reduce its exposure to Europe. Following a strategic review of the operations of Hansard Europe Limited we have decided to close that company to new business with effect from 30 June 2013.

We do not believe that this decision will have a significant impact on future levels of new business. The levels of new business from the countries serviced by Hansard Europe are less than 10% of the Group's total new business in H1 2013, using the Group's internal metric. Using the Present Value of New Business Premiums ("PVNBP"), new business flows are less than 15% of the total. The majority of these flows are single premiums.

Note 4 to the condensed consolidated financial statements provides a range of metrics summarising the relative size of Hansard Europe Limited against the remainder of the Group.

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER 2012

Throughout the period we have continued to generate positive operating cash flows to fund new business and invest in our business. The Group's profit under International Financial Reporting Standards ("IFRS") has grown by £0.9m over H1 2012, to £6.1m after tax and although European Embedded Value ("EEV") Operating profit after tax has fallen to £9.5m (H1 2012: £10.2m) the effect of rising markets in Q2 2013 has reversed previous investment return variances and resulted in a EEV Profit of £10.5m after tax (compared with a loss of £2.6m in H1 2012).

The EEV of the Group, following the payment of a dividend of £11m in November 2012, is £223.9m, fractionally below the value at 30 June 2012.

ASSETS UNDER ADMINISTRATION ("AuA")

Increased levels of regular premiums have underpinned AuA performance in Q2 2013, despite continued levels of premium holidays enjoyed by policyholders and lower levels of single premiums. Taken with the effects of market gains in the quarter, AuA of £1.05bn as at 31 December 2012 is marginally above the level at 30 June 2012.

CAPITALISATION AND SOLVENCY

The Group continues to be substantially capitalised to satisfy operational, regulatory and policyholder expectations. The Solvency requirements of our regulators are covered almost 14 times by the Group's capital, which is held with a wide range of deposit institutions and in highly-rated money market liquidity funds to protect against capital market volatility.

DIVIDENDS

In line with previous guidance, dividend payments for the year ended 30 June 2013 are expected to total 8.0p per share and it is the Board's intention to pursue a progressive policy thereafter. The Board has resolved to pay an interim dividend of 3.25p per share (2012: 5.90p). This will be paid on 3 April 2013.

BOARD COMPOSITION

The business profile of the Group continues to change, as does the Board. I was delighted to appoint Gordon Marr as Group Chief Executive Officer. This development will enable Gordon to focus on the execution of our strategy during the next phase of our growth, and I remain committed to supporting Gordon and the Board in my new capacity of non-executive Chairman.

Joe Kanarek has announced his intention to retire from the Group with effect from 30 June 2013. We are grateful to Joe for his hard work over the last twelve years and will be working with him for the remainder of this financial year to execute the Group's strategy and oversee a smooth transition. We are making progress in finding a replacement for Joe and have drawn up a shortlist of potential candidates.

HANSARD ONLINE

We continue to develop Hansard OnLine in order to implement new business initiatives and meet the needs of policyholders and those intermediaries who introduce new business to us. We are gratified that an increasing proportion of independent financial advisors have used Hansard OnLine to transact with us electronically.

OUTLOOK

We continue to face economic uncertainty, but believe we have the right strategy in place to grow the business. There is a strong momentum, and we are confident of delivering further new business growth in the second half and beyond.

Dr L S Polonsky

Chairman

27 February 2013

REPORT OF THE GROUP CHIEF EXECUTIVE OFFICER

I am pleased to present my first report in my capacity of Group Chief Executive Officer. I believe that the Group's prospects are positive and, supported by the Board, we can together drive forward the business.

STRATEGY

Throughout H1 2013 Hansard has continued to generate positive cashflows to fund new business and dividends; continued to invest in distribution infrastructure; to improve support to Independent Financial Advisors ("IFAs") in our target markets, and to reduce our exposure to operational and business model risk.

The Group's executive are focused on three specific areas: sourcing new business from growth markets, controlling costs and managing business risk

·; We will continue to focus our distribution activities in order to gain an increasing proportion of regular premium flows from growth markets. We expect to achieve this through enhanced service levels; innovative support to IFA networks; improvements to our product range and by extending the reach of our OnLine offering.

·; Furthermore, we intend to embed process efficiencies to reduce our cost base and to press for resolution of those legal cases where it serves the Group's interest.

·; We intend to minimise future exposure to those assets that have given rise to significant policyholder complaints and to those jurisdictions where we have been subject to legal challenge. This will be achieved, in large part, by closing Hansard Europe Limited to new business with effect from 30 June 2013.

RESULTS FOR THE PERIOD

Our target is to grow new business through profitable relationships with intermediaries and to retain that business on the books over the longer term. This success is demonstrated in our results under both EEV and IFRS. The increasing proportion of regular premium policies results in both increased new business margins at time of issue, and increased contract fee income in future financial periods.

The results of H1 2012 were impacted by falls in investment values and the strength of sterling against euro. Market gains and strengthening of the euro have contributed to increased profits in H1 2013 as they impact directly upon the value of fees that we expect to collect from the existing book of policies in the future.

The results for H1 2013, compared with H1 2012, are as follows;

NEW BUSINESS DISTRIBUTION

While new business flows in H1 2013 are marginally below those of H1 2012 we are happy with the sales momentum from Q1 2013 into Q2. Strong growth in regular premium sales underpinned Q2 sales of £44.3m on the basis of Present Value of New Business Premiums ("PVNBP") which are 13.3% ahead of Q1 levels, reflecting the attractiveness of our long term investment products among financial advisors and their clients. This growth has continued into Q3 2013. New business sales in Q3 to date are significantly higher than Q3 2012, on all metrics used by the group. Performance in Far Eastern markets has been particularly strong.

Innovative methods of enhancing relationships have driven recent growth. The increased proportion of regular premium sales continues to drive growth in profitability and the Group's new business profits have increased by almost 10% over H1 2012, under EEV. Commentary on new business is contained in the report of the Chief Distribution Officer.

We are working to build our sales force over the next few months and we have identified a shortlist of potential candidates to replace Joe Kanarek.

HANSARD ONLINE

We are pleased with the progress of increased functionality developed for Hansard OnLine to allow intermediaries and policyholders to more efficiently transact with us, and which demonstrates further the value of the insurance wrapper.

As is reported in section 3 of the Financial and Business Review, 90% of applications for regular premium policies are currently delivered to us electronically, as are approximately 60% of instructions for investment transactions within policy wrappers.

RISKS

The principal risks that impact on our strategy and results, and which are set out in section 4 of the Financial and Business Review, are those arising from regulatory interpretation, policyholder and intermediary behaviour and economic conditions. Our business model is such that the assets linked to policies, and which determine the policy values, are selected by policyholders or their advisors yeta significant portion of the complaints received by the Group relate to the selection and performance of assets. This is particularly true of more complex structured assets distributed throughout Europe that have been selected by policyholders and / or their advisors for inclusion in policies. We intend to minimise future exposure to assets of similar types.

LITIGATION

As discussed above the Group does not give any investment advice. However we have been subject to a number of policyholder complaints in relation to the selection and performance of assets linked to policies. Writs totalling €4.4m (approximately £3.7m) were served on Hansard Europe Limited in H1 2013, to bring the total of writs served to €14m (£11.6m). The significant components of this total are those relating to:

·; Norway (€7.2m) - where the appeal hearing is currently scheduled for February 2014;

·; Asset performance and other issues in Italy (€4m) - where a hearing has been set for next month and;

·; Madoff-related litigation (€1.7m) where the case has been stayed and we have no firm commencement date.

We remain confident that we will be successful following our appeal against the initial ruling in the Norwegian litigation.

Based on the advice received to date from legal counsel the Group has not made any provision in respect of any complaints. The Group intends to defend itself against all claims strenuously.

As reported in the Interim Management Statement that we issued on 9 November 2012, we continue to deal with Policyholder complaints, principally in relation to suspended assets and product questions arising in Italy and Belgium. A small number of cases have proceeded to mediation or arbitration in those jurisdictions. We estimate that current complaints could result in additional writs of up to £9m.

As is reported in note 15 to the financial statements, the Board is of the view that these complaints have no merit. While it is not possible to forecast or determine the final results of pending or threatened legal proceedings, based on the pleadings and advice received from the company's legal advisors, the Directors believe that the Group will be successful in its defence of these claims.

DIVIDEND

In line with previous guidance, the Board has resolved to pay an interim dividend of 3.25p per share (2012: 5.90p). This will be paid on 3 April 2013.

G S Marr

Chief Executive Officer

27 February 2013

Report of the Chief Distribution Officer 

Continued development of relationships with financial advisors, establishment of new relationships and introduction of new product initiatives, particularly in the Far East and Latin America, have underpinned new business in the period and have contributed to an increased percentage of more profitable regular premium sales. We believe that our strategic decision to focus on non-EU markets, and the Far East and Latin America in particular, continues to be vindicated given the continuing instability in the eurozone.

New business sales for Q1 2013 were weaker than we expected (and a comparison to a strong Q1 2012 compounded the apparent weakness) however the initiatives that we put in place in Q1 2013 to secure additional flows of new business resulted in growth of 20.5% in regular premium new business sales in Q2, over Q1. This growth has continued into Q3. Currently, new business sales for Q3 to date are significantly higher than Q3 2012 with the result that new business sales for the year to date are higher than the comparative period of the previous year, on all metrics used by the Group.

This is recognition of our ability to provide a proposition that meets the needs of policyholders and intermediaries, and of the efforts of those intermediaries. I would like to record my thanks to all members of the Group's distribution force and to all those IFAs and intermediaries who have introduced business to us.

New business for the six months ended 31 December 2012

New business sales are expressed in terms of the Group's internal metric, Compensation Credit ("CC"), and two bases generally made available to the market, Present Value of New Business Premiums ("PVNBP") and Annualised Premium Equivalent ("APE").

A summary of new business flows on each metric is set out below. Comparisons against the corresponding periods are on an actual currency basis. 

To allow comparison with results published by other companies, the following commentary relates to new business flows calculated on the basis of PVNBP.

We continue to direct our market development and other resources to attract sources of regular premium new business flows. This is reflected in regular premiums of £66.8m (H1 2012: £67.6m) which represent some 80% of total new business premiums (H1 2012: 75%). More particularly, this is reflected in continuing flows from the Far East and Latin America regions;

·; Relationships with independent financial advisors in the Far East continue to deliver significant new business. Sales of £42.4m for the six month period, which are primarily regular premium policies, have increased by 19% over H1 2012.

·; Renewed focus on relationships in Latin America and product initiatives have resulted in a resurgence of interest among advisors and their clients such that Q2 2013 new business flows of £11.1m are 58% higher than Q1 2013 and approaching levels experienced in prior periods.

The flow of single premium business in certain parts of the EU and EEA regions remains depressed as a result of volatile market conditions and current regulatory complexity. Single premium flows of £16.6m have fallen from £22.1m in H1 2012.

New business flows are received in a range of currencies.Approximately 40% (as a percentage of PVNBP) of new business premiums in the period were denominated in Japanese Yen, 33% in US Dollar, 14% in Euro and 11% in Sterling.

Hansard OnLine

The Group continues to invest in Hansard OnLine to allow financial advisors to provide a better service to their clients.We believe that all aspects of the lifecycle of a Hansard policy should be capable of OnLine transaction.

Currently 90% of new regular premium policies are introduced to us through Hansard OnLine.

This allows a significant reduction in paper flows and in turnaround time, and a significant increase in data security and efficiency. These facilities continue to be enhanced and we believe they will be more widely used by financial advisors and policyholders.

Hansard Europe Limited

The success of our strategy to develop increased flows of more profitable regular premium new business from growth markets has contributed to our decision to close Hansard Europe Limited to new business with effect from 30 June 2013.

We do not believe that this decision will have a significant impact on future levels of new business. As can be seen below the levels of new business from the regions serviced by Hansard Europe are less than 10% of total new business in H1 2013, using the Group's internal metric. Using PVNBP, new business flows are less than 15% of the total. The majority of these flows are single premiums. 

Market Growth

We continue to believe that the way to build long lasting profitable partnerships with intermediaries is to leverage the local relationship supported by a strong technology platform and an appropriate product range. During the last 12 months we have further enhanced our OnLine proposition, and launched two new products.

In South East Asia and Latin America we have also recently introduced a number of targeted local initiatives, with more to follow. This targeted tactical and flexible approach for some markets is providing us with a number of new opportunities. We, therefore, believe that the success generated in the Far East by taking a segmented approach can be replicated in these two regions.

Joseph Kanarek

27 February 2013

FINANCIAL AND BUSINESS REVIEW

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER 2012

1. IFRS Results

The performance of the Group under IFRS for H1 2013 remained resilient in difficult economic conditions in Europe. Profit after taxation for the period is £6.1m (H1 2012: £5.2m) reflecting a consistent underlying performance. While volatility in foreign exchange markets continued throughout the period, the IFRS effect of the performance of sterling against both the Euro and US Dollar was largely neutral. This compares with unrealised losses of £0.7m on translation of net operating assets held in Euro (principally regulatory capital of Hansard Europe Limited) that reduced IFRS profit in H1 2012.

Recent new business flows have contributed to increased levels of policy fees and, as a result of the Group's accounting policies, increased amortisation of Deferred Origination Costs applicable to that income. Efficiency gains from continued investment in Hansard OnLine, coupled with reduced Administrative and other expenses have contributed to increased IFRS profits.

The IFRS results reflect continuing investment of the Group's capital in profitable contracts, funded by positive cashflows. During the period, £13.2m (H1 2012: £13.8m) was invested in the acquisition of new business with a value (under EEV) of £22.3m (H1 2012: £21.6m). 

The success of our endeavours is not immediately reflected under IFRS reporting. New business flows will contribute to income streams over many years, but continued investment in systems and other resources will outweigh the initial growth in income. Our business is long term in nature, and for this reason we present the results on an EEV basis, which better reflects the true profitability of new business, in addition to the statutory IFRS basis. EEV results are set out in section 2 below.

To provide additional clarity on the financial performance of the Group, we have again presented abridged financial information. An abridged consolidated income statement, balance sheet and cash flow statement is set out below, together with commentary on salient figures.

1.1 Abridged consolidated income statement

The consolidated income statement presented under IFRS which is presented within these half-year results reflects the financial results of the Group's activities during the period. This income statement however, as a result of its method of presentation, incorporates a number of features that might affect a clearer understanding of the results of the Group's underlying transactions. This relates principally to:

·; investment income, gains and losses relating to the assets administered by the Group to back its liability to policyholders. These assets are selected by the policyholder or an authorised intermediary and the policyholder bears the investment risk arising from the performance of the asset. The general strengthening of markets over the period can be seen in investment gains made on policyholder assets of £46.2m (H1 2012: losses of £152.5m; FY 2012: losses of £146.5m).

·; fund management fees paid by the Group to third parties having a relationship with the underlying contract. While fund management fees paid are properly recorded in the Group's income statement under IFRS, this distorts results compared with an understanding of the Group's own entitlement to fund management fees and any requirement to pay such fees for services rendered in respect of the Group's own assets. In the current year third party fund management fees attributable to policyholder assets were £2.3m (H1 2012: £2.1m; FY 2012: £4.3m). These are reflected in both income and expenses under the IFRS presentation.

An abridged consolidated income statement is presented below, excluding the items of income and expenditure indicated above.

1.1.1 Fees and commissions

A summary of fees and commissions attributable to Group activities is set out below:

Fees and commissions for the half-year have increased to £26.2m, compared to £25.2m in H1 2012.

Elements of contract fee income are largely fixed in nature, representing both the smoothing of up-front income required under IFRS, and policy servicing charges applied to the policy book annually or as required by the policy terms and conditions. Increased levels of contract fee income reflect the strength of the existing book of business, as the fees from increased levels of new business in previous periods are reflected under IFRS.

The composition of contract fee income in the period under review reflects both the continued acquisition of profitable new business and policyholder concerns over economic conditions. Contract fees based on policyholder activity, such as transaction charges, lapse and surrender profits are all below those of H1 2012 while deferred fees, such as actuarial funding, have increased and will be amortised to income over the life of the contract, as can be seen in Section 1.3.2.

Approximately 30% of the Group's fees and commissions, being fund management fees and commissions receivable from third parties, are related directly to the value of assets under administration ("AuA") and are thus exposed to market movements and valuation judgements. Income of £7.2m from these sources in the period is in line with the comparative periods which reflect consistent levels of AuA. 

1.1.2 Origination costs

Our target is to grow new business through profitable relationships with intermediaries. Under IFRS, new business commissions paid, together with the directly attributable incremental costs incurred on the issue of a policy contract, are deferred and amortised over the life of that policy. The life of a typical single premium contract is 15 years. The life of a regular premium contract is deemed to be the term of the individual policy typical terms range between 10 years and 25 years.This accounting policy reflects that the Group will continue to earn income over the long-term from policies issued in a given financial year. The impact on current year fee income of contracts issued this year is minimal.

Other origination costs incurred, for example recruitment costs and initial payments to new Account Executives, which reflect investment in distribution resources in line with our strategy, are expensed as incurred.

As new business levels in H1 2013 are largely in line with those of H1 2012, direct policy origination costs remain in line. This reflects the Group's commitment to maintain margins. These costs are deferred to match the longer-term income streams expected to accrue from the policies issued in this period.

Amounts totalling £9.3m (H1 2012: £8.3m) have been expensed to match contract fee income earned this year from policies issued in previous financial years.

Origination costs in the period are:

1.1.3 Administrative expenses

We continue to manage administrative and other expenses robustly and we have implemented process and other efficiencies driven by our investment in prior years in Hansard OnLine and other systems. While expenses for the period reflect continued investment in the Group's proposition and distribution capabilities, they have reduced by 3.7% from H1 2012 to £10.3m. 

A summary of administrative and other expenses attributable to the Group is set out below:

Legal fees for asset performance and policyholder-related litigation work have increased marginally over H1 2012. Given the expected profile of the various cases to which we are subject, we do not expect such costs to exceed amounts spent in FY 2012.

The Group is continuing to invest for future growth in the business. Strategic projects to develop Hansard OnLine, develop new business initiatives,streamline administrative processes and reduce operational risk have continued in the period. Progress on these key developments is discussed in detail in section 3 of the Financial and Business Review.

The impact on operational costs of the drive by management to improve systems and processes can be seen in the following tables. We have seen a significant reduction in headcount (primarily through natural wastage) as system and process improvements have been implemented.

The Group continues to focus on maintaining high levels of customer service while addressing regulatory and other complexities brought about, in large part, by the global financial crisis. Despite the decrease in net headcount from 30 June 2012, recent recruitment has focused on senior people to help cope with the changing nature of our business landscape.

1.1.4 Foreign Exchange

The Group's own assets are held predominantly in sterling but Hansard Europe is required to hold Euro currency balances to support its regulatory capital requirements.

As mentioned above, volatility in foreign exchange markets continued throughout the period but the IFRS effect of the weakening of sterling against the Euro was offset by its performance against US Dollar. This compares with unrealised losses of £0.7m on translation of net operating assets held in Euro in H1 2012.

You can find further information about the Group's foreign currency exposures in note 14 to these condensed consolidated financial statements. 

1.1.5 Taxation

The Group's profits arising from its Isle of Man-based operations remain taxable at zero percent. The rate of corporation tax for the Republic of Ireland is expected to be retained at 12.5%.

1.2 Abridged consolidated cash flow statement

In the current low interest rate environment the Group feels that the best use of its capital is to ensure continued investment in profitable regular premium contracts. These investments earn a return of at least 15% p.a. As can be seen below, the Group invested £13.3m in new business during the period which was funded by strongly positive cash flows from the existing policy book.

The operational surplus of £20.1m (fees deducted from contracts and commissions received, less operational expenses) in H1 2013 has increased by £2.4m over the comparative period. The change in the mix of new business has changed the profile of the income collected from policies, with initial fees taken as premiums are received on regular premium policies, rather than upfront as with single premium contracts.

This demonstrates that the in-force policy book continues to generate the cash required to support the Group's main business objectives of investing in new business, enhancing distribution and other infrastructure, and paying dividends.

The following summarises the Group's own cash flows in the period:

Following this investment in new business, cash at 31 December 2012 stood at £65.5m. This is a marginal increase from the value of £65.3m reported at 30 June 2012, despite the payment of a dividend of £11m during the period. This further reflects the Group's continued cash generative capability.

The Group's liquid assets at the balance sheet date are held with a wide range of deposit institutions and in highly-rated money market liquidity funds.

As can be seen in the abridged consolidated cash flow statement above, short-term creditors (representing primarily amounts due to policyholders for surrender requests and policy maturities) have increased since year end. These liabilities are included in other payables in the abridged balance sheet below.

1.3 Abridged consolidated balance sheet

The condensed consolidated balance sheet presented under IFRS elsewhere in this report reflects the financial position of the Group at 31 December 2012. As a result of its method of presentation, the consolidated balance sheet incorporates the value of assets under administration held to back the Group's liability to policyholders, and also incorporates the equivalent liability to policyholders. Additionally, some elements of the Group's own capital resources of £65.5m are disclosed in different positions based on maturity date of bank deposits.

The abridged consolidated balance sheet presented below, excluding those assets and liabilities, allows a better understanding of the Group's own capital position and reflects continued investment in profitable new business. The successful implementation of the Group's strategy to focus on regular premium new business results in an increase of deferred origination costs ("DOC"), and a smaller increase in the deferred income reserve ("DIR") since 30 June 2012.

The dividend of £11.0m paid during the period exceeded IFRS profit of £6.1m in H1 2013, and has therefore caused a reduction in Shareholders' equity since 30 June 2012.

1.3.1 Deferred origination costs

As mentioned above, deferral of origination costs reflect that the Group will continue to earn income over the long-term from policies issued in a given financial year. These costs are recoverable out of future net income from the relevant contract and are charged to the income statement on a straight-line basis over the life of each contract.

The increase of £2.9m in value since 30 June 2012 reflects continuing investment of the Group's capital in profitable policy contracts funded by positive cashflows, net of amounts amortised. Direct distribution costs of £12.2m (H1 2012: £12.3m) were invested in the acquisition of new business in the period.

The movement in value of DOC over the period is summarized below.

1.3.2 Deferred income reserve

Consistent with the treatment of deferred origination costs, the treatment of deferred income ensures that initial fees are taken to the consolidated income statement in equal instalments over the longer-term, reflecting the services provided over the period of the contract. The deferred income reserve represents the unamortised balance of accumulated initial fees collected on new business.

The proportion of income deferred in any one year is dependent upon the mix and volume of business flows; the Group's focus on profitable regular premium business means that these fees are received over the initial period of the contract, rather than being received up front, as is typically the case with single premium contracts.

The majority of initial fees collected during the period relates to charges taken from policies issued in prior financial years demonstrating the cash generative nature of the business. Policies issued in this financial period will generate the majority of their initial fees over the next 18 months on average. The movement in value of DIR over the period is summarized below:

1.4 Dividends

A final dividend of 8.0p per share in relation to the previous financial year was paid in November 2012. This amounted to £11.0m.

The Board has considered the results for H1 2013, the Group's continued cash flow generation and its future expectations and has resolved to pay an interim dividend of 3.25p per share (2012: 5.90p). This will be paid on 3 April 2013.

1.5 Assets under Administration

In the following paragraphs, assets under administration ("AuA") refers to net assets held to cover financial liabilities as analysed in note 10 to the condensed consolidated financial statements presented under IFRS.

The Group has retained positive cash flows from the large number of regular premium contracts that the Group administers on behalf of policyholders around the world. Increased levels of regular premiums have underpinned AuA performance in Q2 2013, despite continued levels of premium holidays enjoyed by policyholders. Taken with the effects of market gains in that quarter, AuA of £1.05bn as at 31 December 2012 is marginally above the level at 30 June 2012.

Notwithstanding increasing levels of new regular premium contracts, the changing mix of new business has caused a steady decline in the flow of single premium contracts over the last few years. While this has affected the value of gross policyholder cash flows we believe that increasing the level of regular premium contracts (with more stable, recurring cash inflows) will be value enhancing in the longer term.

The flexible nature of our products, allowing policyholders the ability to determine the investment mix held within policy contracts has, we believe, helped maintain benefits paid out on those contracts at the previous year's levels and further emphasises the value of the insurance wrapper.

1.6 Capitalisation and Solvency

The Group continues to be substantially capitalised to satisfy the requirements of regulators, intermediaries and policyholders. The required minimum solvency margins are covered 13.3 times (31 December 2011: 13.9 times; 30 June 2012: 13.6 times) by the Group's capital resources.

The solvency position is well insulated against the difficult investment markets, as the Group invests its excess capital resources in a wide range of deposit institutions and in highly-rated money market liquidity funds. The in-force portfolio has no material investment options or guarantees that could cause capital strain, is not exposed to longevity risk through an annuity book and uses a prudent reassurance programme to manage the mortality and morbidity risks of the life businesses. This policy continues to immunise the Group's capital base from stock market falls.

The introduction of Solvency II will see a fundamental change in the way EU-based insurers assess their capital requirements and risk management standards. Based on current guidance we do not expect additional capital requirements as a result of these legislative changes. While it seems likely that the implementation of Solvency II may be deferred beyond 1 January 2014, the Group will have developed its requirements by that date.

2. Embedded Value Results

Our business is long term in nature and therefore we present the results on a European Embedded Value ('EEV') basis as well as a statutory IFRS basis. The EEV is a discounted valuation of the future profits expected to emerge in the future on certain assumptions. The EEV takes into account the expected timing of those profits.

Regardless of the measurement basis used, the projected total profit from the issue of a new insurance contract is the same. That said:

·; The EEV basis recognises profit from new insurance contracts as a lump sum addition to the Value of In-force ('VIF') equal to the discounted value of future profits (called the New Business Contribution or 'NBC'). The VIF is converted to cash ('Net Worth') in future years as the business progresses. The NBC reflects the shareholder value added from new business: the change in EEV will reflect the cash impact of writing new business as well as other changes within the business.

·; The IFRS basis smoothes the recognition of profit from new insurance contracts by spreading the initial revenues and corresponding costs evenly over their expected lives. The IFRS new business result therefore reflects neither the shareholder value added from writing new business, nor its cash impact.

Results for H1 2013 under European Embedded Value

The EEV profit is primarily driven by value added from new business, cash generated from the existing portfolio and changes in investment/currency values (the latter impact being largely driven by policyholder choices and movements in financial markets). In the period, new business added positive value, the existing portfolio generated cashflows largely to the degree expected and the impact of investment/currency values was relatively benign.

The VIF of £173.9m at 30 June 2012 generated £21.7m of cash in H1 2013, of which £13.2m has been re-invested in new business: this capital is generally repaid plus interest within 3 years. The Group paid dividends of £11.0m in the half year from its cash resources.

Prior to dividend payments, the EEV grew to £234.9m over the period. After dividend payments of £11.0m, the EEV was £223.9m (at 30 June 2012: £224.3m), a reduction of £0.4m over the period. The NBC at point of sale was £10.1m (H1 2012: £9.3m).

The profitability of new business has increased as a proportion of the present value of new business premiums ('PVNBP'): the new business margin was 12.1% (H1 2012: 10.4%) reflecting the continuing change in business mix towards more profitable products. PVNBP in the period was £83.4m (H1 2012: £89.7m).

EEV profit after tax

The Group's EEV profit after tax is significantly higher than the comparable period last year: a profit of £10.5m (H1 2012: loss of £2.6m). This follows the very small impact of the investment return variance and economic assumption changes (generally outside the Group's control) thus allowing the impact of new business to be translated almost directly to the EEV profit after tax.

The most significant component of EEV profit after tax was the NBC of £10.1m (H1 2012: £9.3m). As reported above, this increase reflects the continuing change in new business mix towards more profitable products.

The business is closely monitoring policyholder lapse and premium reduction behaviour, which is the primary driver of the experience variance in the period.

The components of EEV profit after tax are set out in the table below:

Operating performance

Under EEV reporting, sales are measured in terms of PVNBP, the capitalised value of expected premiums, and in terms of NBC, the discounted value of future profits, both using EEV assumptions. Dividing one by the other gives the new business margin ('NBM'): in essence the rate at which shareholder value is increased from premiums from new business.

Sales in PVNBP terms have fallen in the half year to £83.4m (H1 2012: £89.7m), largely reflecting reduced single premiums in the period. The Group's strategy, arising from its continual focus on profitability, is to increase the proportion of sales of regular premium products, which typically have a higher NBM than single premium products. This strategy has been successful, with the proportion of regular premium business increasing to 80% of PVNBP (H1 2012: 75%) and the consequent increase in NBM to 12.1% (H1 2012: 10.4%).

The underlying profitability of the Group's new business remains consistently above those levels enjoyed by a majority of competitors. This reflects the capital efficiency of the Group's products, its relationships with intermediaries and its ability to identify and target profitable segments in the marketplace. The Internal Rate of Return of new business written in the year remains in excess of 15%p.a., reflecting the product design which sees initial capital invested in new business being returned, on average, within three years.

Operating performance - In-force business

Experience Variances

The expense variance was comprised of two items - a positive variance for recurring costs, offset by an adverse impact arising from one-off costs. Policyholder behaviour was slightly different to expectation, resulting in a £2.4m adverse variance. There are several causes of this small variance, shown in summary in the table below:

Operating Assumption Changes

Operating assumptions are generally reviewed once per year, unless experience suggests that an earlier change would give a more accurate result. Experience in the half year suggests no change is appropriate (HY 2012: (£0.2m)).

Investment performance

Investment performance and exchange rate movements affect EEV profit. These movements principally reflect the investment and currency choices made by policyholders and associated market movements, which are generally outside the Group's control. In the half year, better than expected returns on assets under administration were offset by a strengthening of sterling, as shown in the table below.

EEV balance sheet

Following the payment of dividends totalling £11.0m (HY 2012: £11.0m), the Group's EEV has decreased by £0.4m to £223.9m (30 June 2012: £224.3m).

The table below provides a summarised breakdown of the EEV at the valuation dates:

Net worth is the market value of shareholder funds on an IFRS basis with adjustments to exclude certain assets (such as deferred origination costs) and liabilities (such as deferred income reserve). At the balance sheet date, the net worth of the Group is represented by liquid cash balances. A proportion of the Net worth, £16.8m is retained to meet prudential capital requirements.

The value of future profits or Value of In Force ('VIF') is the capitalised value of future profits with due allowance for policyholder behaviour based on the policyholder assets under administration at 31 December 2012 and using EEV methodology and assumptions. Given the Group's product design, the cash generation from the VIF is rapid: some 50% is expected to be converted into cash within 5 years.

Net asset value per share

On an EEV basis, the net asset value per share at 31 December 2012 is 163.0p (H1 2012: 177.3p), a decrease of 8%, based on the EEV at the balance sheet date divided by the number of shares in issue at that date, being 137,379,634 ordinary shares (H1 2012 137,372,255 shares).

The net asset value per share at 31 December 2012, on an IFRS basis is 29.1p, a decrease of 14.4% from the value of 34.1p at 31 December 2011.

3. OnLine Systems

There is momentum behind the delivery of system projects with tangible benefits being experienced in operational areas. Recent system deliveries, particularly OnLine switching and OnLine new business, have helped to introduce process efficiencies and facilitate a reduction in staffing numbers whilst maintaining service standards.

Hansard OnLine

Hansard OnLine is the Group's multi-language internet platform. A secure extranet platform hosting all information about the policies administered by the Group, Hansard OnLine ("HOL") is a valuable sales and administration tool that was first introduced in 1999 and continues to be developed to meet the needs of policyholders, intermediaries and the Group's administrative functions. Functionality continues to be developed to improve access; increase security; increase scalability and speed of processing and reduce operational risks.

Meeting policyholders' requirements

Local needs in local languages

Policy information (policy valuations, premium collection, unit fund and investment performance information) is available OnLine to policyholders and intermediaries with content presented in 11 different languages.

Secure communications 

We provide access to relevant portions of our information to Policyholders and Intermediaries to allow them to better manage their objectives.

·; Through an OnLine account policyholders can view all the documentation relating to their policy. Over 12,000 OnLine accounts are used regularly.

·; Over 40% of policyholder correspondence is no longer posted. Clients access electronic copies via their OnLine Account. The number of clients choosing not to receive hard copy post has shown a steady increase since launch.

Supporting intermediaries' business models

Hansard OnLine joins together IFAs and other intermediaries around the world with Hansard's offices, and with their clients. IFAs and their clients get fast, easy and secure access to current data and analytical information around the world, around the clock.

·; In response to intermediary feedback, HOL reports have been enhanced, to provide better information, others are being developed;

·; We are developing functionality to allow intermediaries to get an aggregated view of all the policies of a particular policyholder held with a range of product providers, to allow them to better serve their clients.

Reducing Operational risk

The straight-through processing of policyholder instructions (whether received directly or through their appointed agents) reduces the Group's operational risk exposures, as does the ability of the Group to communicate electronically with intermediaries and policyholders, irrespective of geographical boundaries. In certain circumstances this allows the Group to reduce its operational expense base.

OnLine processing

OnLine new business, OnLine fund switching and OnLine dealing have now been rolled-out to all intermediaries.

·;  OnLine processing of new business applications

We have seen a steady increase in the proportion of new business applications processed through HOL. 90% of all new business applications are now received OnLine.

·;  OnLine processing of policy investment transactions

The majority of Fund Advisors now transact policy-related investment dealing Online. Over 65% of all available transactions are now processed OnLine. Development of a facility to allow Fund Advisors to transact in aggregate throughout their client range has been developed and is in test.

4. Risks relating to the Group's financial and other exposures

Hansard's business model involves the controlled acceptance and management of risk exposures. The steps taken to minimise those exposures include the operation of unit-linked insurance business by Group subsidiary companies. Under the terms of the unit-linked investment contracts issued by the Group, the policyholder bears the investment risk on the assets in the unit-linked funds, as the policy benefits are directly linked to the value of the assets in those funds.

The Group's exposure on this unit-linked business is limited to the extent that income arising from asset management charges and commissions is generally based on the value of assets in the funds, and any sustained falls in value will reduce earnings. The Group's exposure to financial risks is addressed within note 14 of these condensed consolidated financial statements. Additionally, details prepared on an EEV basis set out in pages 16 to 19 and 40 to 46 ("EEV Information") include a summary of the sensitivity of the Group's EEV results to economic and other factors.

The Board believes that the principal risks facing the Group are those relating to the operation of the Group's business model and to the environment within which the Group operates. The Group has designed its products, distribution methods and cost base with a view to reducing operational and financial risk, and has in place a risk management framework that is continually being refreshed to better support our objectives and to recognise regulatory and legislative change.

While the Group's business model has served to minimise the principal risks facing the Group, the responses to the extreme financial and market circumstances encountered over the last few years continues to impact on the Group's strategic objectives, profitability or capital requirements.

A comprehensive review of the principal risks and uncertainties facing the business, and the Group's approach to managing these risks and uncertainties, are outlined on pages 36 to 39 of the 2012 Annual Report. These principal risks and uncertainties have not changed materially since the 2012 Annual Report was published.

A summary of those principal key risks and uncertainties which could impact the Group for the remainder of the current financial year are outlined below. Where necessary the Group will develop alternative strategies to minimise the impact of any changes to its risk profile.

Condensed consolidated financial statements for the half-year ended 31 December 2012 (Unaudited)

The Group has no other items of Comprehensive Income and as such has not presented a separate consolidated Statement of Comprehensive Income.

The notes on pages 27 to 38 form an integral part of these condensed consolidated half-yearly financial statements.

The notes on pages 28 to 37 form an integral part of these condensed consolidated half-yearly financial statements.

The notes on pages 28 to 37 form an integral part of these condensed consolidated half-yearly financial statements.

The notes on pages 28 to 37 form an integral part of these condensed consolidated half-yearly financial statements.

 Notes to the Condensed Consolidated Financial Statements

1 General information

The principal activity of the Company is to act as the holding company of the Hansard Group of companies. The activities of the principal operating subsidiaries include the transaction of life assurance business and related activities.

The Company has its primary listing on the London Stock Exchange.

These condensed consolidated half-yearly financial statements were approved for issue on 27 February 2013.

These condensed consolidated half-yearly financial statements do not comprise statutory financial statements and are unaudited. The board of directors approved the statutory financial statements for the year ended 30 June 2012 on 20 September 2012. The report of the auditor on those financial statements was unqualified and did not contain an emphasis of matter paragraph.

2 Basis of presentation

These condensed consolidated half-yearly financial statements for the half-year ended 31 December 2012 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority ("DTR") and with IAS 34 "Interim Financial Reporting" as adopted by the European Union ("EU"). The condensed consolidated half-yearly financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2012, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU.

Except where otherwise stated, all figures included in the condensed consolidated half-yearly financial statements are stated in pounds sterling, which is also the functional currency of the Company, rounded to the nearest hundred thousand pounds. The comparative classification of financial investments has been restated to reflect better the underlying assets.

Going Concern

As shown within the Financial and Business Review, the Group's capital position is strong and well in excess of regulatory requirements. The long-term nature of the Group's business results in considerable positive cash flows arising from existing business. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.

The Directors are satisfied that the Company and the Group have adequate resources to continue to operate as a going concern for the foreseeable future and have prepared the condensed consolidated financial statements on that basis.

3 Accounting policies

The principal accounting policies applied, and the critical accounting estimates and judgements in applying them, are consistent with those of the annual financial statements for the year ended 30 June 2012 which can be accessed on the Company's website: www.hansard.com.

4 Segmental information

Disclosure of operating segments in these condensed consolidated financial statements is consistent with reports provided to the Chief Operating Decision Maker ("CODM") which, in the case of the Group, has been identified as the Executive Committee of Hansard Global plc.

In the opinion of the CODM, the Group operates in a single reportable segment, that of the distribution and servicing of long-term investment products through the Group's subsidiaries.

The Group's Executive Committee uses two principal measures when appraising the performance of the business: net issued compensation credit (NICC) and expenses. NICC is a measure of the value of new in-force business and top-ups on existing single premium contracts. NICC is the total amount of basic initial commission payable to intermediaries for business sold in a period and is calculated on each piece of new business. It excludes override commission paid to intermediaries over and above the basic level of commission. The Group maintains a close control over the margins realised on new business, which are consistent across the Group's products and, hence, NICC is a reliable indicator of income.

The following table analyses NICC geographically and reconciles NICC to direct origination costs during the period:

Revenues and expenses allocated to geographical locations contained in sections 4.1 to 4.4 below, reflect the revenues and expenses generated in or incurred by the legal entities in those locations.

Revenues and expenses allocated to geographical locations contained in section 4.5 below, using a number of the new business measurement bases used by the Group, reflect the forecast revenues and expenses expected to be generated in or incurred by the legal entities in those locations. 

4.1 Geographical analysis of fees and commissions by origin

4.2 Geographical analysis of profit before taxation

4.3 Geographical analysis of gross assets

4.4 Geographical analysis of gross liabilities

4.5 Geographical analysis of new business results

5 Fees and commissions

 6 Administrative and other expenses

7 Taxation

The Group's profits arising from its Isle of Man-based operations are taxable at zero percent.

Corporation tax for the Republic of Ireland-based operations is based on the effective annual rate for taxable income of 12.5%, applied to the expected taxable profits for the period.

8 Earnings per share

Earnings per share is based upon the profit for the period after taxation divided by the average number of shares in issue throughout the period. There is no significant difference between earnings per share and fully-diluted earnings per share.

The Directors believe that there is no material difference between the weighted average number of shares in issue for the purposes of calculating either basic or diluted earnings per share. The figure under both measures is 4.4p pence per share.

9 Dividends

Interim dividends payable to shareholders are recognised in the year in which the dividends are paid. Final dividends payable are recognised as liabilities when approved by the shareholders at the annual general meeting.

The following dividends have been paid by the Group during the period:

The Board have resolved to pay an interim dividend of 3.25p per share. This amounts to £4.5m and will be paid on 3 April 2013 to shareholders on the register at 8 March 2013.

10 Financial investments held to cover liabilities under investment contracts