Last checked at 19 Nov 2009 07:00
Hansard Global plc
("Hansard" or the "Company")
Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its interim management statement for the period from 1 July 2009 to date, in advance of its Annual General Meeting being held later today.
All figures refer to the four months ended 31 October 2009, except where indicated.
Summary
Encouraging new business results despite uncertain economic outlook;
New business APE (actual currency basis) for the four months ended 31 October 2009 is £6.1m (£8.4m for the same period last year);
Industry-leading margins of approximately 5.8% on PVNBP basis;
£1.1 billion Assets under Administration at 31 October 2009 up 13.4% since 30 June 2009. Positive policyholder cash flows have been maintained through the period;
Leonard Polonsky, Chief Executive of Hansard Global, commented:
"The performance of the Group in the first four months of this financial year was encouraging despite the uncertain economic outlook. The financial position of the Group continues very strong with no borrowings. We have achieved new business flows at industry-leading margins and have continued to generate strong cash flows from policyholders, underpinning growth in Assets under Administration to £1.1 billion.
While conditions are expected to remain challenging over the short-term, we are confident that the outlook for sustained growth in new business and profitability remains positive for the Group in the longer term, particularly given the strength of our Balance Sheet. Our focus on margins, cashflow, cost control and continued investment in distribution and systems leaves us well placed for the future."
For further information:
Hansard Global +44 (0) 1624 688000
Leonard Polonsky, Chief Executive
Gordon Marr, Managing Director
Vince Watkins, Chief Financial Officer
Bell Pottinger Corporate & Financial +44 (0) 20 7861 3232
Daniel de Belder
Ben Woodford Hansard Global plc
INTERIM MANAGEMENT STATEMENT
OVERVIEW
Against the backdrop of continuing market uncertainty and low investor confidence throughout the four months to 31 October 2009, the Group has continued to generate IFRS profits backed by strong business persistency and a balance sheet unencumbered by debt. The Group continues to manage administrative and related expenses strictly while investing in distribution infrastructure. The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory and policyholder expectations.
New business for the period is approximately 28% below the level of the corresponding period of the previous financial year, reflecting primarily a strong quarter in the prior year. New business flows in the period after 1 October 2009 are, however, marginally above the levels of flows experienced after 1 October 2008, illustrating an improvement in market conditions and the continuing level of interest in Hansard's products among intermediaries and their clients.
While the pricing of the Group's products has not been adjusted, expense levels at this volume of activity and our determination to continue the development of our distribution infrastructure, have continued to restrain new business margins. New business margins for the period ended 31 October 2009 are approximately 5.8%, slightly less than the margin of 6.1% earned in the year ended 30 June 2009.
EEV operating profits continue to be impacted by expense overruns and policyholder caution in relation to premium reductions as experienced in the previous financial year.
The Group believes that continued investment in distribution is critical and key for future recovery and growth. As the world moves out of recession, we will be well placed to benefit from the expected increase in investment activity.
Recruitment of Account Executives to provide local language and other support to intermediaries in the Group's target markets remains a key goal. As at 31 October 2009 the Group had a total of 18 Account Executives, and selective recruitment is continuing.
Despite the volatility in capital markets and further weakening of Sterling against the US Dollar, positive policyholder cash flows have been experienced in the period. The value of Assets under Administration ("AUA") as at 31 October 2009, at £1.113bn, has risen by 13.4% since 30 June 2009 (£1,002m).
International Financial Reporting Standards ("IFRS")
IFRS profit for the period was underpinned by high policyholder persistency, the strength of the book of existing policies, and positive foreign currency movements. We continue to manage our cost base effectively and are seeing the benefit of the initiatives implemented in the previous financial year to reduce administrative and other expenses, while continuing to invest in the Group's sales and distribution infrastructure.
Subsequent to the quarter end, the Group began to implement a number of projects to develop Hansard Online, implement new business initiatives, streamline administrative processes and to ensure that we continue to meet strategic expense management targets. We anticipate that expenditure totalling approximately £0.7m will be incurred in the current financial year on these projects and a similar amount in the following financial year.
As part of these developments, Group insurance companies have entered into agreements to outsource policyholder asset dealing, custody and investment administration activities to Capital International Limited, a member of the London Stock Exchange, with effect from 27 November 2009 to reduce operational risk and develop new business opportunities.
European Embedded Value ("EEV")
The profitable new business written during the period, the persistency of cash flows and the lack of options, guarantees or other such features within the products issued by the Group, have continued to generate EEV operating profit, reduced in part by the effects of premium reductions and other issues arising from the level of new business.
This profit, taken with the combined impact of foreign exchange rate movements and investment performance of policyholder funds over the four months to 31 October 2009, results in cumulative total EEV profit for the period of approximately £20m.
Capitalisation and Solvency
The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory and policyholder expectations. At 30 September 2009 the aggregate minimum regulatory margin remains covered approximately 16 times by the Group's capital resources.
The Group's solvency position is well insulated against the current challenging capital market conditions. At the date of this report, the Group's liquid assets are held with a wide range of deposit institutions and in highly-rated money market liquidity funds.
ISLE OF MAN - TAXATION AND ECONOMIC CIRCUMSTANCES
The Isle of Man remains on the OECD "white list". Despite more favourable comments in the Foot Report and by the Tax Justice Network, announcements by the UK Government and the European Union in the last few weeks have caused renewed focus on the Isle of Man's economic circumstances and its taxation legislation.
The Isle of Man Government is considering an appropriate, orderly, economic course of action. The effect, if any, on the Group's earnings through possible changes to direct or indirect taxation will not be clear for some time. We do not anticipate that there will be any impact on the Group in this financial year or the next.
New Business Flows - Four months ended 31 October 2009
Despite challenging market conditions, the Group has achieved continuing new business flows while retaining its margins.
The flow of single premium business remains significantly restrained as a result of volatile market conditions and economic concerns affecting investor confidence. This has particularly impacted new business flows from Europe and Scandinavia. Regular premium flows from Latin America have begun to pick up although economic conditions continue to impact new business production in the Far East.
New business flows for the four-month period ended 31 October 2009 are summarised as follows (comparisons on actual currency basis).
| 2009 | 2008 | % | |
| Basis | £m | £m | change |
| Compensation Credit ("CC") | £3.3m | £4.6m | (28.3)% |
| Present Value of New Business Premiums ("PVNBP") | £46.7m | £63.6m | (26.6)% |
| Annualised Premium Equivalent ("APE") | £6.1m | £8.4m | (27.4)% |
Compensation Credit
Compensation Credit ("CC") is the Group's prime indicator of new business activity. CC measures the relative value of each piece of new business to allow the Group to maintain margins and protect capital. The Directors consider CC to be a more meaningful measure of new business volume than APE, which has limited correlation with the profitability of new business.
New business flows totalled £3.3m CC for the period compared with £4.6m in the comparative period of the last financial year.
Present Value of New Business Premiums ("PVNBP")
New business premiums on the PVNBP basis during the period totalled £46.7m. This represents a decrease of 26.6% compared with £63.6m in the corresponding period. Single premium contracts totalled £27.7m or 59.3% of new business flows on this basis (2008: £35.0m or 55%).
New business margins for the period were approximately 5.8%, slightly less than the margin of 6.1% earned in the year ended 30 June 2009. These margins are well above industry average, principally due to the Group's continued focus on the value of new business. Restrained new business flows and continued investment in the Group's distribution infrastructure to improve its sales proposition have contributed to the reduction in the margin.
Hansard receives business from a strong and well-diversified range of intermediaries around the world, which results in new business being received in a number of currencies. The principal currency receipts (as a percentage of PVNBP) in the four months to 31 October are set out below.
| | 2009 | 2008 |
| Currency | % | % |
| US Dollars | 40.0 | 43.0 |
| Euro | 28.0 | 40.0 |
| Sterling | 23.0 | 12.0 |
The reduced proportion of Euro currency receipts reflects fewer single premium cases. Approximately £9.0m of single premium business was issued in Euro in the corresponding period under the terms of a localised incentive arrangement.
Assets under Administration
Despite the volatility in capital markets and further weakening of Sterling against the US Dollar, positive policyholder cash flows have been experienced in the period. The value of Assets under Administration ("AUA") as at 31 October 2009, at £1.113bn, has risen by 13.4% since 30 June 2009 (£1,002m).
Over the period the MSCI World index has risen by 16.1%, and the FTSE 100 index has increased by 19.8%. The difference in growth over the period reflects the cautious investment attitudes and fund selection of our policyholders.
There have been no significant changes since year end in the volumes of illiquid assets or impaired fund structures held in AUA, nor in the currency composition of AUA.
Under the terms of the unit-linked contracts issued by the Group, the Policyholder bears the financial risk attaching to assets to which the contracts are linked. Any reductions in AUA will cause declines in the Group's asset-based income but will not affect the Group's capital position.
Results for the half-year
New business figures for the half-year ending 31 December 2009 are expected to be announced on 28 January 2010. Trading results for the half-year are expected to be announced on 25 February 2010.
Outlook
The Group's business model remains resilient in the face of challenging market conditions. We expect to continue to deliver profits and a steady dividend stream.
The increased levels of global capital markets over the last few months, coupled with the decline in the level of the VIX volatility index over that period, have contributed to an increased level of interest in Hansard's products among intermediaries. While conditions remain challenging, we are cautiously optimistic as recent new business flows marginally exceed those of the corresponding period.
With continuing investment in its distribution infrastructure, systems and online platform, Hansard is confident that its business model and prospects remain strong. The Group's robust balance sheet means that Hansard has the strength to continue to withstand volatile market conditions and is well positioned for growth in volume and profitability when the environment improves.
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 on 18 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 financial services intermediaries, independent financial advisers and the retail operations of certain financial institutions (collectively "Intermediaries"), who provide access to their clients in more than 170 countries. The Group's distribution model is supported by Hansard OnLine, an award-winning, multi-language internet platform, and is scaleable.
The principal geographic markets in which the Group currently services Intermediaries and policyholders are the Far East, the Middle East, and Latin America in the case of Hansard International Limited, and Western Europe in the case of Hansard Europe Limited, the Group's two life assurance companies.
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.