Hansard Regulatory News (HSD)

24 February 2011

Hansard Global plc

Results for the six months ended 31 December 2010

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its results for the six months ended 31 December 2010 ("H1 2011").

The Group has had a good start to the financial year reflected in improved new business flows, continued positive operating cash flows and increased assets under administration.

Summary

* Payment date - 31 March 2011

Leonard Polonsky, Chairman of Hansard Global plc, commented:

"I am delighted that our continued investment in distribution infrastructure and focus on particular growth markets has delivered new business growth of 50% over the previous year.

The Group's confidence in its future prospects is reflected in the Board's decision to increase the interim dividend by 4.5% to 5.75 pence per share, which is covered by IFRS earnings in the period.

Even though we continue to face economic uncertainty, we shall continue to deliver excellent service to Independent Financial Advisors and their clients, maintain profitable growth and generate value for our shareholders."

For further information

Hansard Global +44 (0)1624 688000

Leonard Polonsky, Chairman

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer

Pelham Bell Pottinger +44 (0)20 7861 3232

Daniel de Belder

Chairman's Statement

I am pleased to report that Hansard's performance in the first six months of the financial year (H1 2011) indicates that the measures taken in prior periods to invest in distribution infrastructure and to focus on growth markets are bearing fruit. New business flows in the period are approximately 50% higher than those of H1 2010, on all metrics reported by the Group.

Whilst continued low interest rates and development expenditure have contributed to a reduction in IFRS profits to £8.4m after tax (H1 2010: £9.2m), we have continued to generate positive operating cash flows and have increased Embedded Value by 6.6% to £263.4m (30 June 2010: £247.0m).

It is satisfying to note that current levels of new business are approaching levels that we had seen before the global credit crisis. We remain determined to grow in volume and profitability and so the current levels of new business flows at industry-leading margins give cause for optimism for the remainder of the financial year and the longer term.

The Board has resolved to increase our interim dividend by 4.5% to 5.75 pence per share, which is covered by IFRS earnings of 6.1p per share in the period.

NEW BUSINESS

Improvements in market conditions, continued investment in Hansard OnLine and distribution infrastructure, investment in fast growing markets in Latin America and the Far East and the growing level of interest in Hansard's products among financial advisors and their clients have contributed to an increased flow of new business. New business flows in H1 2011 are approximately 50% higher than those of H1 2010, on all metrics reported by the Group. New business margins for H1 2011 of 7.4% (H1 2010: 6.9%) on the Present Value of New Business Premiums ("PVNBP") basis are market leading.

New business flows for the six-month period ended 31 December 2010 are summarised as follows (comparisons on an actual currency basis):

The Group's market-driven focus is producing results. Regular premium flows, particularly from Latin America and the Far East, have increased by 61%, compared with H1 2010. While we saw a small number of large single premium cases in Q1, the flow of single premium business in certain parts of the EU and EEA regions remains constrained by market conditions and current regulatory complexity. The Group remains committed to certain EU markets whilst reducing its exposure to others.

The Group's investment in strategic projects to develop Hansard OnLine, including the implementation of new business initiativesand more efficient administrative processes, is bearing fruit. At the time of writing, over 50% of applications received use the online mechanism.

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER 2010

Financial results are presented under International Financial Reporting Standards as adopted by the European Union ("IFRS"). Additionally, certain information relating to embedded value is presented using the European Embedded Value ("EEV") methodology. The Board believes that publishing EEV Information in conjunction with IFRS results provides more meaningful information on the financial position and performance of the Group than that provided by IFRS reporting alone.

The IFRS profit after tax for the period was £8.4m compared to the profit of £9.2m earned in the corresponding period of the previous financial year. Earnings per share were 6.1 pence (H1 2010: 6.7p).

The EEV of the Group, following the payment of a dividend of £10.6m in November 2010, has risen to £263.4m, an increase of 6.6% from the value at 30 June 2010. The EEV profit for the period is £27.0m (H1 2010: £25.9m).

ASSETS UNDER ADMINISTRATION

The value of assets under administration as at 31 December 2010, at £1.3bn, has risen by 14.9% since 30 June 2010, reflecting continued premium flows, new business and the improvement in capital markets over that period.

CAPITALISATION AND SOLVENCY

The Group continues to be substantially capitalised to satisfy operational, regulatory and policyholder expectations.

The Group's capital is held with a wide range of deposit institutions and in highly-rated money market liquidity funds. The Group had no borrowings during the period or at the period end (31 December 2009: £Nil) and cash of £77.1m at the balance sheet date.

DIVIDENDS

The Board has resolved to increase the interim dividend by 4.5% to 5.75 pence per share (April 2010: 5.5p). This will be paid on 31 March 2011 (ex-dividend date: 2 March 2011).On 19 November 2010 the Company paid a final dividend of 7.7p per share. Including the interim dividend referred to above, this will result in amounts totaling 13.45p per share, or £18.5m, being paid as dividends during this financial year.

EMPLOYEES AND INTERMEDIARIES

These excellent new business results and continued development of the Group's proposition are a tribute to our employees, Account Executives and the independent financial advisors who introduce business to us. On behalf of the Board and shareholders I would like to thank everyone connected with Hansard for their dedication and contribution to these strong results.

OUTLOOK

Even though we continue to face economic uncertainty,.we shall continue to deliver excellent service to independent financial advisors and their clients, maintain profitable growth and generate value for our shareholders.

Dr L S Polonsky

Chairman

23 February 2011

MANAGING DIRECTOR'S REPORT

As I commented in the Annual Report for the year ended 30 June 2010, we have recognised that the decisions taken by Hansard in prior periods to invest in distribution infrastructure; to improve support to Independent Financial Advisors (IFAs) in our target markets, to reduce our exposure to operational and business model risk, and to control expenses, are beginning to bear fruit. This is reflected in a growing level of interest in Hansard's products among financial advisors and their clients and has contributed to an increased flow of new business in the period ended 31 December 2010 (H1 2011). New business flows have increased by approximately 50% over the levels of the period ended 31 December 2009 and in Q2 2011 we achieved a fifth consecutive quarter of new business growth on the PVNBP basis.

We also recognised that one impact of the extreme financial and market circumstances encountered over the last two years will be an increase in the Group's resources to address enhanced corporate governance, risk management and regulatory reporting, and to resolve uncertainties in policyholder asset values for those asset types whose weaknesses were exposed by the credit crisis. Recruitment for some of these resources began during the first half of the financial year, will continue into the second half of this financial year and will have an impact on the Group's expense base.

Despite this, the Group has continued in its efforts to maintain an environment in which we can benefit from profitable relationships with IFAs and their clients, while continuing to effectively manage related risks.

Throughout the period the Group has continued to:

·; Generate positive cashflows to fund new business and dividends;

·; Maintain expense disciplines;

·; Invest in distribution infrastructure, Hansard OnLine and other IT developments, and

·; Enhance its risk management frameworks.

These and other factors are disclosed in this interim management report, as follows:

1. IFRS Results for the six months ended 31 December 2010

2. Embedded Value Results for the six months ended 31 December 2010

3. Systems development activities in the period, and

4. Risk management

Commentary on new business is contained in the report of the Chief Distribution Officer.

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER 2010

We have again presented abridged financial information to improve the clarity of the financial performance of the Group under IFRS reporting. An abridged consolidated income statement, balance sheet and cash flow statement is set out below, together with commentary on salient figures.

1. IFRS Results

The performance of the Group under IFRS for H1 2011 remained resilient. Fees and commissions receivable have increased but the decision to reinstate pension contributions and salary reductions, together with the impact of continued investment in Hansard OnLine and other functionality has contributed to increased administrative and other expenses. Despite increased investment income we have experienced a reduction in profit, compared with the results of the comparative period (H1 2010).

The Group's profits arising from its Isle of Man-based operations continue to be taxable at zero percent, as was confirmed in the recent Isle of Man budget. Profit after taxation for the period is £8.4m (H1 2010: £9.2m). Earnings per share are 6.1 pence (H1 2010: 6.7p).

IFRS results also reflect continuing investment of the Group's capital in profitable policy contracts, funded by positive cashflows. During the period, £12.2m (H1 2010: £8.8m) was invested in the acquisition of new business with a value (under EEV) of £19.3m (H1 2010: £12.0m).

1.1 Abridged consolidated income statement

1.1.1 Fees and commissions

A summary of fees and commissions is set out below:

Fund management fees and commissions receivable from third parties are related directly to the value of assets under administration, and are received in the currency of the underlying assets or funds. Reported fees, in sterling, received during the period have been restricted as a result of the strength of sterling against the currencies in which assets are denominated, particularly the US dollar and Euro.

1.1.2 Investment income attributable to the Group

An analysis of investment income is set out below:

Interest income on the Group's capital balances has increased as a result of action taken in the previous financial year to take advantage of higher interest rates by investing certain amounts longer-term.

Volatility in foreign exchange markets has contributed to unrealised gains on translation of net operating assets held in foreign currencies, particularly Euro and US dollar. Any continued strengthening of Sterling against these currencies over the remainder of this financial year will cause a reversal of these gains.

1.1.3 Origination costs

Origination costs include new business commissions, intermediary incentives and other distribution-related expenditure.

Origination costs and other directly attributable incremental costs incurred on the issue of a policy are deferred and amortised over the life of the relevant contract. Other origination costs incurred reflect investment in distribution resources in line with our strategy.

1.1.4 Administrative expenses

We continue to manage our cost base effectively while investing in the Group's sales and distribution infrastructure, responding to increasing regulatory requirements and better linking employee incentives with investor interests.

The decision to reinstate pension contributions (£0.4m) and approve salary increases with effect from 1 July 2010, coupled with the estimated bonuses of £0.1m payable under group-wide incentive arrangements have contributed to an increase of £1.1m in salaries and other costs, when compared with H1 2010.

Other expenses and professional fees in the period include amounts totalling £0.3m (H1 2010: £nil) for administration, custody, dealing and other charges paid to Capital International Limited under the terms of the outsourcing arrangement that commenced in November 2009.

The Group is continuing a series of strategic projects to develop Hansard OnLine, develop new business initiatives and streamline administrative processes. Amounts totalling £0.5m (H1 2010: £0.2m), including salary and related costs of £0.4m, are included in expenses in relation to these activities. We anticipate that expenditure of a further £0.6m will be incurred in the remainder of the financial year on these projects.

Reflecting the issues referred to above, administrative and other expenses attributable to Group activities are £9.5m, an increase of £1.6m from H1 2010.

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

1.2 Abridged consolidated balance sheet

The condensed consolidated balance sheet presented under IFRS reflects the financial position of the Group at 31 December 2010. As a result of its method of presentation, the consolidated balance sheet incorporates the assets under administration held to back the Group's liability to policyholders, and also incorporates the equivalent liability to policyholders of £1.3bn (31 December 2009: £1.0bn). Additionally, the Group's own capital resources of £77.1m are disclosed in different positions based on maturity date of bank deposits.

The abridged consolidated balance sheet presented below, allows a better understanding of the Group's own capital position and reflects positive operating cash flows despite continued investment in new business. The final dividend of 7.7p per share paid in November 2010 exceeded IFRS earnings per share for the half-year, and has therefore caused a small reduction in Shareholders' equity since 30 June 2010.

1.2.1 Deferred origination costs

Deferred origination costs represent the unamortised balance of accumulated origination costs. 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 in value since 30 June 2010 reflects continuing investment of the Group's capital in profitable policy contracts funded by positive cashflows, net of amounts amortised. Direct distribution costs of £10.9m (H1 2010: £6.9m) were invested in the acquisition of new business in the period.

1.2.2 Cash and bank deposits

The Group's cash and deposit balances, excluding those held to cover liabilities under investment contracts, at 31 December 2010 stood at £77.1m. This is a decrease of £4.7m from the value of £81.8m reported at 30 June 2010, following a dividend of £10.6m paid during the period. This further reflects the Group's continued cash generative capability.

The Group's capital is held with a wide range of deposit institutions and in highly-rated money market liquidity funds. The Group had no borrowings during the year or at the balance sheet date (30 June 2010: £Nil).

1.2.3 Deferred income reserve

Deferred income reserve represents the unamortised balance of accumulated initial amounts received on new business, which exceeds the level of expected annual fees for that contract. These amounts are released to the income statement on a straight-line basis over the life of each contract.

The decrease in value since 30 June 2010 reflects the sales mix of new business. Being primarily regular premium business, fees are received over the initial period of the contract, rather than being received up front.

 1.3 Abridged consolidated cash flow statement

Positive operating cash flows in the period allowed the Group to fund new business from its own resources and continue to invest in its sales force and support teams.

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

1.4 Dividends

A final dividend of 7.7p per share in relation to the previous financial year was paid in November 2010. This amounted to £10.6m.

The Board has considered the results for H1 2011 and the Group's continued cash flow generation and has resolved to increase the interim dividend by 4.5% to 5.75p per share (April 2010: 5.5p). This will be paid on 31 March 2011.

1.5 Assets under Administration

Retention of Assets under Administration ("AUA") remains strong. New business, net positive premium flows from policyholders and strengthening capital markets, despite the weakness of foreign currencies against Sterling, have underpinned the growth in AUA to £1.3bn at 31 December 2010, up 14.9% from 30 June 2010.

Deposits to investment contracts in H1 2011 total £106.9m, aided by single premiums of £66.6m. This compares with deposits of £67.3m in H1 2010 (after a reduction of £14m representing the cancellation of two single premium cases that were issued prior to June 2009, within their contractual cooling off period). 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.

During the period we have seen an increase in liquidations and other efforts to resolve uncertainty over policyholder asset values.

The selection and performance of assets provides a significant portion of the complaints received by the Group. In all cases the assets linked to policies, and which determine the policy values, are selected by policyholders or their duly appointed (or nominated) advisors.The Group does not provide investment advice and, accordingly, the Board is of the view that these complaints have no merit.

A small portion of policyholder assets are exposed to funds connected to Bernard Madoff and we have appointed reputable lawyers to strongly refute the claims made in relation to our policyholder assets and who are liaising with other defence counsel.The Group has no exposure to Keydata funds or to compensation claims from the Financial Services Compensation Scheme in relation to those funds.

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.

1.6. Capitalisation and Solvency

The Group continues to be substantially capitalised to satisfy operational, regulatory and policyholder expectations. Following increases in the aggregate minimum regulatory margins in the period, the required margins are covered 13.4 times (30 June 2010: 15.1 times) by the Group's capital resources.

The relatively low minimum solvency requirement reflects the fact that the Group does not have options or guarantees on its investment portfolio, 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.

The investment policy for non-linked assets remains prudent, with no exposure to equity investments. Non-linked liabilities are matched by highly-rated money market funds and bank deposits. This policy continues to immunise the capital base from stock market falls.

1.6.1 Solvency II

We recognise that 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 Solvency II will initially apply only to EU-based insurers, we continue to enhance the risk management framework throughout the Group. The documentation of corporate policies and risk assessments will provide a more informed basis for both decision making and solvency assessment.

2. Embedded Value Results

EEV results for the period reflect the fact that the Group continues to issue profitable new business and to generate positive cash flows to fund new business and pay dividends.

The operating profit performance of the Group in H1 2011 has improved relative to H1 2010, despite volatile markets and uncertain economic outlook. The value of £8.5m added from new business is 67% higher than in H1 2010. EEV operating profit after tax has increased by 36.6% to £9.7m (H1 2010: £7.1m).

Increases in market levels and other external conditions, which will impact on future asset-based income streams, gave rise to EEV investment return profits of £17.3m in the period (H1 2010: £18.8m).

The Embedded value at 31 December 2010 is £263.4m, an increase of £16.4m or 6.6% since 30 June 2010 following a dividend payment of £10.6m in that period.

2.1 EEV Profit

EEV profit provides a measure of the Group's performance over the half-year ended 31 December 2010. EEV profit after tax has increased by 4.2% to £27.0m (H1 2010: £25.9m), a return on EEV of 10.9% in the period (H1 2010: 10.9%).

The components of EEV profit after tax are set out in the table below. Additional analysis is contained within the EEV Information section of this report.

2.1.1 Operating profit performance - new business

New business volumes, expressed as Present Value of New Business (PVNBP), have increased by 56% compared to H1 2010. The Group has retained its focus on profitability and has earned £8.5m from new business activities in the period (H1 2010: £5.1m).

The new business margin for the period, being the contribution from new business expressed as a percentage of PVNBP, has increased to 7.4%. This is primarily as a result of increased volumes and action taken by the Group to increase the proportion of sales attributable to regular premium products, which typically have a higher margin than single premium products. An adverse reduction in margin arising from the larger single premium cases issued in Q1 has been offset by an increase in profitability from other products.

As a result of the introduction of online new business functionality for regular premium products and the relative scaleability of the Group's systems, the increase in new business volumes in the first-half of the year has been achieved without a corresponding increase in acquisition expenses.

The underlying profitability of new business written by the Group remains consistently above levels enjoyed by a majority of competitors. The Internal Rate of Return of new business written during the year remains in excess of 15% per annum, while initial capital invested in underwriting new business is returned, on average, within three years.

2.1.2 Operating profit performance - in-force business

Operating profit for in-force business in the period was £1.2m (H1 2010: £2.0m) which was lower than expected. This was influenced, primarily, by a reduction in the risk discount rate, our response to changes in the behaviour of policyholders, and increased expense assumptions. Additionally improvements to our actuarial modelling systems to better forecast behaviour have resulted in an addition of £2.1m to EEV operating profit.

Throughout the period the Group experienced a lower rate of policy lapses, and a higher proportion of policyholders requesting premium reductions. The net effect has increased EEV operating profit by £0.2m (H1 2010: £0.6m loss).

The Group incurred expenses of £0.5m higher than expected. A portion of these costs related to additional investment in governance, risk management and administration resources. Management considered the outlook for future administrative costs and decided to take a more cautious position, as reflected within changes to operating assumptions. Further details are in section 3.1.4 of the EEV Information.

2.1.3 Investment returns

Investment performance is a key driver of the EEV profit as it reflects future expectations of asset-based income streams. Increased investment returns on policyholder assets under administration have which contributed £16.1m (H1 2010: £13.7m) to EEV profit. Assets under administration have increased by 14.9% since 30 June 2010 to £1.3bn.

2.2 EEV balance sheet

The Group's embedded value has proved resilient. The Group's EEV at 31 December 2010 has risen to £263.4m, an increase of £16.4m or 6.6% in the six months from 30 June 2010, demonstrating the continued acquisition of profitable new business.

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

Net worth is the market value of shareholders' funds, determined on an IFRS basis, adjusted to exclude certain assets recognised in the Value of future profits. The decrease in net worth, followingthe payment of a dividend of £10.6m in November 2010, reflects the impact of the Group's progressive dividend record.

At the balance sheet date the net worth of the Group is represented by liquid cash balances.

2.3 Profit emergence

In general, the faster that future cash flows (recognised in the VIF) are expected to emerge into net worth, the more confidence there is that those cash flows will be received at their anticipated levels and hence the more confidence there is about the EEV itself.

As at 31 December 2010, the value of future profits is £200.9m. Over a quarter of these profits are expected to convert into net worth within 2 years, half within 5 years and three quarters within 9 years. Relative to most life insurance companies, this reflects a fast conversion of future cash flows to net worth, as required by the Group's pricing methodology.

2.4 Net Asset Value

The net asset value per share ("NAV") at 31 December 2010, on the EEV basis, is 191.8p. This represents an increase of 6.6% from the NAV at 30 June 2010. The NAV is based upon the EEV at the balance sheet date divided by the number of shares in issue at that date, being 137,282,656 shares.

3. Systems Developments

A number of projects are underway to develop Hansard OnLine, implement new business initiatives and streamline administrative processes.

3.1 Hansard OnLine

Hansard OnLine is the Group's internet platform: it joins together financial advisors around the world with Hansard's offices, and with their clients (via client sites administered by the Group). Hansard OnLine is a secure extranet platform hosting a rich and deep set of up-to-date and historic information about the policies and clients introduced via each intermediary. Widely and independently regarded as best in class, Hansard OnLine, launched in 1999, is a valuable sales and administration tool.

Hansard OnLine continues to be developed to meet the needs of independent financial advisors and policyholders, as can be seen in the report of the Chief Distribution Officer.

3.2 OnLine new business

In particular, a wide range of financial advisors have used secure upload and online new business functionality in the six-month period.

A pilot version of online new business was launched early in 2010: the facility was enthusiastically taken up by financial advisors and as a result, the facility has been the subject of a rolling programme of enhancements, thus extending its reach, and cutting out any re-keying of data. At the time of writing, over 50% of applications received use the online mechanism. Online new business ensures clean and speedy submission of business while limiting the requirement for paper.

A facility to allow straight through processing of selected single premium contracts is being developed.

3.3 Hansard OnLine refresh

The look and feel of Hansard OnLine has been updated, taking advantage of the tools and techniques that simply were unavailable at Hansard OnLine's launch over ten years ago.

3.4 Client sites

Client sites are an extension of Hansard OnLine: a client site can be set up when business is first received, or at any time during a product's lifetime. The intermediary directs the facilities that will be available to each client (policyholder), and is alerted every time a client visits. There are over 10,000 active client sites.

At its simplest, Hansard OnLine and client sites provide valuation, premium collection, fund and investment performance information on products from both Hansard insurance companies and in the following languages: English, Dutch, French, German, Japanese, Mandarin, Norwegian, Portuguese, Spanish and Swedish.

Work to support the Group's plans to extend the reach, functionality and penetration of client sites is progressing.

Clients can now change contact information online - the first example of technology allowing Hansard clients to manage their own data - and plans to extend the ease of access, without reducing security, are well progressed. During February 2011, a development to alert clients to incoming post, and to allow them to view the post online, has been implemented. This development is designed to make client sites more attractive by providing a secure, speedy and convenient way to communicate, thus lessening the reliance on postal communication.

3.5 Strategic IT developments

The Group's plans to upgrade its unit fund management software and tighten its core administration systems are well progressed and should realise benefits over the coming six to twelve months.

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. 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 the funds.

The shareholders' exposure on this unit-linked business is limited to the extent that income arising from asset management charges 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 to the consolidated financial statements.Additionally, the EEV Information includes 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 two years may impact on the Group's strategic objectives, profitability or capital requirements.

The following table provides examples of the principal risks that may impact on the Group's strategic objectives, profitability or capital in the remainder of this financial year. These risks and uncertainties have not changed materially since the 2010 Annual Report. Where necessary, the Group will develop alternative strategies to minimise the impact of any changes to its risk profile.

G S Marr

Managing Director

23 February 2011

Report of the Chief Distribution Officer 

Continued investment in Hansard OnLine and distribution infrastructure, improvements in market conditions, and the growing level of interest in Hansard's products among financial advisors and their clients has contributed to an increased flow of new business. Through the continued application of our new business strategy, the Group has continued to harness new business momentum and in Q2 2011 we achieved a fifth consecutive quarter of new business growth on the PVNBP basis.

New business for H1 2011 of £114.5m on the PVNBP basis is 55.8% above the level of the corresponding period of the previous financial year (H1 2010: £73.5m). We have continued to direct our market development and other resources to attract further sources of regular premium new business flows from growth markets. These increased regular premium flows support market leading new business margins of 7.4% for the period (H1 2010: 6.5%).

New business for the six months ended 31 December 2010

New business sales volumes 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 period are on an actual currency basis. 

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

Throughout the period we continued to direct our market development and other resources to attract further sources of regular premium new business flows from growth markets. This is reflected in regular premiums of £47.9m which is 48.8% above the flows of H1 2010. More particularly, this is reflected in the continuing growth in flows from Latin America and the Far East regions which, at £49.7m, are approximately 59% above the combined total for those regions for H1 2010.

Single premium flows of £66.6m have increased by 61.3% over H1 2010, aided by some exceptionally large cases from the Rest of the World regions in Q1 2011. Five contracts accounted for approximately £20.3m. This illustrates the sensitivity of the Group's PVNBP reporting to large single premium cases.

While this reflects a recovery in investor confidence, the flow of single premium business in certain parts of the EU and EEA regions remains restrained as a result of volatile market conditions and current regulatory complexity. Differing interpretation and application of regulations, particularly within the EU, has caused us to reconsider our exposure to certain markets. For example, we have suspended taking new business from Norway.

We receive business from a well-diversified network of financial advisors around the world, which results in new business being received in a range of currencies. In line with the Group's principal new business production areas, approximately 43% (as a percentage of PVNBP) of new business premiums in the period were received in US Dollar, with a further 28% received in Euro and 13% in Sterling.

OnLine new business

The Group continues to invest in Hansard OnLine to allow financial advisors to provide a better service to their clients.

In particular, a wide range of financial advisors have used secure upload and online new business functionality in the six-month period. A total of 700 policies have been introduced electronically in the period by financial advisors using those facilities, which represents 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 are being extended to other intermediary groupings.

New business margins

The Group continues to issue new business on terms that meet target returns and contribute to profit. The new business margin is sensitive to volumes and the product mix: as a result of the substantial value of regular premium business issued in Q2 2011, which is more profitable to the Group than single premium business, the overall new business margin for H1 2011 is 7.4% (H1 2010: 6.9%).

Market development

In the first half of this financial year the Group increased its exposure to the growth markets of China, Japan, Malaysia, Mexico and Venezuelawhich has had a significant impact on the number of relationships with financial advisors in those areas, and also on new business flows in the period. This increase was aided by graduates of the Market Development Manager programme who have developed relationships with financial advisors and are on target for what was included in new business production projections for their part.

While remaining committed to sourcing single premium contracts, the Group reduced exposure to certain regions within Western Europe. The Group has retained its exposure to certain markets in the Middle East but writes insignificant amounts of business in North Africa. 

Selective recruitment of distribution resourcescontinues, in line with the Group's policy of expanding its reach amongst suitable financial advisorsin the Group's target markets, and the next training course for Market Development Manager recruits is expected to be held early in the next financial year.

Outlook

Barring dramatic changes in economic circumstances we expect regular premium new business flows to continue through the remainder of this financial year at rates experienced in the first half, although we noted a recent reduction in some new business flows as a result of the timing of the Chinese New Year. While we expect a continuing flow of single premium business we do recognise that larger cases have a distorting impact on reported numbers.

Joseph Kanarek

23 February 2011

Condensed consolidated financial statements for the half-year ended 31 December 2010

(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 22 to30 form an integral part of these condensed consolidated half-yearly financial statements.

The notes on pages 22 to 30 form an integral part of these condensed consolidated half-yearly financial statements.

The notes on pages 22 to 30 form an integral part of these condensed consolidated half-yearly financial statements.

The notes on pages 22 to 30 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 23 February 2011.

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 2010 on 22 September 2010. 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 2010 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 2010, 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 Directors have reclassified deposits held by or on behalf of policyholders as financial investments and not cash and cash equivalents, as these assets do not constitute cash equivalents held for the purpose of meeting short-term commitments. The comparative figure (£145.6m) in the consolidated balance sheet, consolidated cash flow statement and related notes has been restated accordingly.

In addition, a classification adjustment was made to the comparative figures for other receivables (£2.2m) and other payables (£2.2m), in respect of periodic fees due from policyholders at 31 December 2009.

3 Accounting policies

The significant accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2010 and can be accessed on the Company's website: www.hansard.com.

The International Accounting Standards Board has amended IAS 34 - Interim financial reporting, in connection with disclosures around fair value and classification of financial instruments and changes in contingent assets and liabilities (Effective for accounting periods commencing on or after 1 January 2011). The Group has not early adopted this amendment and is in the process of assessing its likely effect on future interim financial statements, if any.

4 Segmental information

In the opinion of the Group's Executive Committee, deemed to be the Chief Operating Decision Maker (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 origination costs during the period:

Expenses are reported to the Group's Executive Committee on a monthly basis on an aggregate basis, as distinct from the classification of costs between origination and administration and other expenses for IFRS reporting purposes, and may be reconciled as follows:

All Group assets are deemed to belong to the single segment.

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.

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

 5 Fees and commissions

6 Administrative and other expenses

Included in Administrative and other expenses is the following:

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.

9 Dividends

The Board have resolved to pay an interim dividend of 5.75p per share. This amounts to £7.9m and will be paid on 31 March 2011 to shareholders on the register at 2 March 2011.

10 Financial investments held to cover liabilities under investment contracts

The following investments, other assets and liabilities are held to cover financial liabilities under investment contracts. They are included within the relevant headings on the consolidated balance sheet.

11 Called up share capital

 12 Foreign exchange rates

The closing exchange rates used by the Group for the translation of balance sheet items from US$ and € to Sterling were as follows:

13 Related party transactions

Intra-Group transactions are eliminated on consolidation and are not disclosed separately here.

There have been no significant related party transactions in the period nor changes to related parties. Related party transactions affecting the results of previous periods and an understanding of the Group's financial position at previous balance sheet dates are as disclosed in the Annual Report & Accounts for the year ended 30 June 2010.

There have been no significant awards during the period under the Save As You Earn (SAYE) share-save programme for employees. The estimated fair value of the scheme and the imputed cost for the period under review is not material to these financial statements.

14 Financial risk management

The Group's operations expose it to a variety of financial risks. The Group's objective in the management of financial risk is to minimise, where practicable, its exposure to such risk, except when necessary to support other objectives. The principal method by which the Group seeks to manage risk is through the operation of unit-linked business, whereby the policyholder bears the financial risk relating to the financial assets and liabilities arising from such contracts.

Under the unit-linked investment contracts that are written by the Group, policyholders bear the investment risk on the assets in the unit-linked funds, as the policy benefits are directly linked to the fair value of the assets. These assets are managed consistent with the expectations of the policyholders. By definition, there is a precise match between the investment assets and the policyholder liabilities, and so the market risk and credit risk lie with policyholders.

The shareholders' exposure is limited to the extent that certain contract income is based on the value of assets in the unit-linked funds.

Information concerning the operation of the frameworks to manage financial and other risks is contained in pages 33-35 of the Report & Accounts for the year ended 30 June 2010, and in note 22 thereto, 'Financial risk management'. There have been no significant changes to the frameworks in the period to 31 December 2010.

The more significant financial risks to which the Group is exposed, and an estimate of the potential financial impact of each on the Group's IFRS earnings, are set out below. For each category of risk, the Group determines its risk appetite and sets its investment, treasury and associated policies accordingly.

14.1 Market risk

This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, analysed between price, interest rate and currency risk.

(a) Price risk

An overall change in the market value of the unit-linked funds would affect the annual management charges accruing to the Group since these charges, which are typically 1% pa, are based on the market value of assets under administration. Similarly, due to the fact that some of these charges may be deducted from policies in foreign currency, a change in foreign exchange rates relative to Sterling can result in fluctuations in management fee income and expenses reflected in these financial statements. The approximate impact on shareholder profits and equity of a 10% change in unit-linked fund values, either as a result of price or currency fluctuations, is £1.6m (H1 2010: £1.5m) in a financial year.

(b) Interest rate risk

Interest rate risk is the risk that the Group is exposed to lower returns or loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets arising from changes in underlying interest rates.

The Group is primarily exposed to interest rate risk on the balances that it holds with credit institutions and in Money market funds. The Group has mitigated its exposure to cash flow interest rate risk by placing a proportion of its cash holdings on longer-term fixed deposits.

After the placing of a proportion of shareholder cash onto longer-term, fixed-rate deposits, a change of 1% p.a. in interest rates will result in an increase or decrease of approximately £0.8m (H1 2010: £0.7m) in the Group's equity and annual investment income.

(c) Currency risk

Currency risk is the risk that the Group is exposed to higher or lower returns as a direct or indirect result of fluctuations in the value of, or income from, specific assets and liabilities arising from changes in underlying exchange rates.

The sensitivity of the Group to the currency risk inherent in investments held to cover financial liabilities under investment contracts is incorporated within the analysis set out in (a) above.

(c) (i) Group foreign currency exposures

The Group is exposed to currency risk on the foreign currency denominated bank balances and other net operating assets that it holds to the extent that they do not match liabilities in those currencies. The Group's currency risk is minimised by frequent repatriation of excess foreign currency funds to sterling. At the balance sheet date the Group had exposures in the following currencies:

Amounts totalling €12.0m held at the balance sheet date (H1 2010: €10.9m) represent capital in Hansard Europe Limited held in currency to meet regulatory and other commitments.

(c) (ii) Financial investments by currency

Certain fees and commissions are earned in currencies other than sterling, based on the value of financial investments held in those currencies from time to time.

At the balance sheet date the analysis of financial investments by currency denomination is as follows:

14.2 Credit risk

Credit risk is the risk that the Group is exposed to lower returns or loss if another party fails to perform its financial obligations to the Group.

The Group's main exposure to credit risk is in relation to deposits with credit institutions and investments in highly-rated Money market funds. These investments are made in accordance with established policy regarding minimum credit rating profile.

An analysis of the Group's cash and cash equivalent balances and liquid investments is as follows:

 Maximum counterparty exposure limits are set both at an individual subsidiary company level and on a Group wide basis. There have been no changes to fair value as a result of credit risk.

14.3 Liquidity risk

Liquidity risk is the risk that the Group, though solvent, does not have sufficient financial resources to enable it to meet its obligations as they fall due, or can only secure them at excessive cost. The Group's exposure to liquidity risk is considered to be low since it maintains a high level of liquid assets to meet its liabilities.

Statement of directors' responsibilities

The directors, whose names are reflected on the company's website, www.hansard.com, confirm that, to the best of their knowledge, this condensed set of consolidated half-yearly financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·; An indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·; Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.