Hansard Regulatory News (HSD)

9 March 2023

Hansard Global plc

Results for the six months ended 31 December 2022

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its results for the six months ended 31 December 2022. All figures refer to the six months ended 31 December 2022 ("H1 2023"), except where indicated. 

· IFRS profit before tax was £3.1m for the period, up from £1.9m in H1 2022;

· The current year result has improved as a result of reduced administrative expenses, improved interest rates and favourable foreign exchange movements. The prior year result included non-recurring provisions of £0.8m related to a range of funds in liquidation;

· Fees and commissions earned totalled £22.9m for H1 2023 compared to £25.2m for H1 2022, reflecting lower levels of new business in the current financial year;

· Lower fees and commissions were mitigated by reduced administrative and other expenses which were £14.1m for H1 2023 compared to £15.4m in H1 2022;

· Assets under administration were £1.10 billion as at 31 December 2022, largely unchanged from £1.09 billion as at 30 June 2022;

· Value of in-force as at 31 December 2022 was £124.9m (30 June 2022: £128.5m);

· The Board has declared an interim dividend of 1.8p per share (H1 2022: 1.8p);

· We continue to progress the launch of a new proposition in the Middle East to assist growing our business in that market and to develop distribution opportunities for our Japanese proposition;

· We remain on track to replace our policy administration systems to support our next generation of products and to realise future cost and efficiency gain

Outlook

We expect sales of long-term savings products through Independent Financial Advisors to continue to be impacted by global economic headwinds. Looking forward however we are confident that our new product pipeline will lead to increased sales and long term growth in the business.

NEXT TRADING UPDATE

The next trading update in respect of our financial year ending 30 June 2023 is expected to be published on 4 May 2023.

Graham Sheward, Group Chief Executive Officer, commented:

"While the overall environment has remained challenging for investment and long-term savings plans, it was pleasing to deliver a much improved profit result compared to the comparable prior year period.

We continue to make good progress with our strategic initiatives which are targeted to deliver future new business growth and cost efficiencies."

For further information:

Hansard Global plc +44 (0) 1624 688 000

Graham Sheward, Group Chief Executive Officer

Tim Davies, Chief Financial Officer

Email: investor-relations@hansard.com

Camarco LLP +44 (0) 7990 653 341

Ben Woodford, Hugo Liddy

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 controlled cost distribution model via 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 scalable.

· The principal geographic markets in which the Group currently services contract holders and financial advisors are the Middle East & Africa, the Far East and Latin America. These markets are served by Hansard International Limited and Hansard Worldwide Limited.

· Hansard Europe dac previously operated in Western Europe but closed to new business with effect from 30 June 2013.

· The Group's objective is to grow by attracting new business and positioning itself to adapt rapidly to market trends and conditions. The scalability 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.

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regime.

Legal Entity Identifier: 213800ZJ9F2EA3Q24K05

CHAIRMAN'S STATEMENT

I am pleased to present to you Hansard Global plc's ("Hansard" or "Group") financial results for the first six months of our 2023 financial year ("H1 2023"). 

While the external environment for new business remains challenging, we have continued to invest and position our business for the long term future. We believe 2023 will start to show the fruits of those initiatives and that we will emerge well positioned to capitalise on the opportunities before us.

Over the next 12 months, we expect to see key new products come to market via our new policy administration system and on-line portals. We will also migrate our existing policy book across to the new system enabling us to realise significant cost savings in 2024.

Our profits, shareholder funds and regulatory capital continue to remain robust with the recent changes in the interest rate environment improving the return on our cash reserves and product margins.

New Director appointment

We recently announced that Dr Christine Theodorovics would be joining our Board as an independent non-executive Director, effective 23 January 2023. Christine has more than 25 years' experience in financial services with a proven track record in management, business transformation, distribution, and strategic development across various senior positions in several countries.  Hansard will greatly benefit from the breadth of experience that Christine brings from a number of different areas including insurance. Christine's appointment will complement the Board and support Hansard's commitment to increasing international experience at the highest level.

New business

New business for H1 2023 was £43.4m on a Present Value of New Business Premiums ("PVNBP") basis, compared to £64.9m in H1 2022, reflecting on-going uncertainties in global economic conditions and a general hesitancy by clients to commit to long-term savings products.

Financial performance

The Group's profit before tax under International Financial Reporting Standards ("IFRS") of £3.1m for the period was £1.2m higher than the comparative period profit of £1.9m. 

The current year result has improved as a result of reduced administrative expenses, improved interest rates and favourable foreign exchange rate movements. The prior year period included non-recurring provisions of £0.8m related to a range of funds in liquidation. 

Consolidated fees and commissions were £22.9m (H1 2022: £25.2m), reflecting lower levels of new business. Costs were managed robustly during the period, resulting in administrative and other expenses reducing by £1.3m from H1 2022. 

Capitalisation and solvency

The Group continues to be well capitalised to meet the requirements of regulators, contract holders, intermediaries and other stakeholders. Free assets in excess of the Solvency Capital Requirements of the Group were £50.4m (166% coverage) (30 June 2022: £50.7m and 165%). We have maintained a prudent investment policy for shareholder assets which has provided a stable and resilient solvency position over recent years.

Dividends

Taking into account the current financial position and future outlook, the Board has resolved to maintain its interim dividend at 1.8p per share (H1 2022: 1.8p per share). This will be paid on 27 April 2023 with an ex-dividend date of 16 March 2023.

Philip Kay

Chairman

8 March 2023

INTERIM MANAGEMENT REPORT

REPORT OF THE GROUP CHIEF EXECUTIVE OFFICER

GRAHAM SHEWARD

Strategy implementation and new business distribution

The Group provides regular and single premium savings products to expatriate and local clients around the world seeking access to a range of international investments from a safe-haven jurisdiction. 

We continue to pursue our strategy of growing our business organically through Independent Financial Advisor ("IFA") client relationships and the pursuit of targeted opportunities to improve our scale.

Our strategic focus for 2023 remains the delivery of two significant projects:

· Launching our new locally-licenced investment product in Japan, and

· Replacing our policy administration systems to support our next generation of products whilst realising associated cost and efficiency gains.

Results for the period

IFRS profit for the period was £3.1m before tax (H1 2022: £1.9m). The current year result has improved as a result of reduced administrative expenses, higher interest income as central banks raised interest rates and favourable foreign exchange rate movements. The prior year period included a non-recurring £0.8m provision for fees and other balances related to a range of funds in the process of liquidation.

Operational expenses have been tightly controlled despite the major challenges presented by generationally high-inflation rates. Administrative costs excluding legal and bad debt provisions were £10.6m compared to £11.2m for H1 2022, a reduction of 5.4%.

A summary of the results for H1 2023 are as follows:

The Value of In-Force ("VIF") on a regulatory basis as at 31 December 2022 was £124.9m as compared to £128.5m at 30 June 2022. VIF has decreased due to dividend payments and lower new business volumes, offset by positive market movements.

Details of the results for the period are contained in the Business and Financial Review.

Capitalisation and solvency

A key financial objective is to ensure that the Group's solvency is managed safely through the economic cycle to meet the requirements of regulators, contract holders, intermediaries and shareholders. The Group remains well capitalised.

The Group's Solvency Capital Requirements under risk based solvency regulations have a coverage ratio of 166%, up slightly on the 30 June 2022 level of 165%. The Group's capital is typically held in a wide range of deposit institutions and in highly-rated money market liquidity funds.

Hansard OnLine

Our award-winning IT systems and online customer platform are key aspects of our proposition. Hansard OnLine is a powerful sales and business administration tool that is used by IFAs and clients the world over. It is an integral part of the Group's operating model and allows us to better service IFAs and clients, embed process efficiencies and be flexible in operational deployment.

Hansard OnLine provides IFAs and clients with a reliable online self-service model which they can access 24/7 from anywhere around the world with an internet connection. It provides an important foundation to our strategic goal of delivery of excellent customer service. It was a strong factor in facilitating the continued smooth operation of the business during the Covid-19 pandemic. We were delighted to see this recognised as part of winning International Investment's "Excellence in Fintech" award in October 2022.

As noted in our 2022 Annual Report, we continue to make good progress with our project to replace our administration systems and ensure our infrastructure remains fit for purpose for our next generation of products and strategic development. Phase One of this project has delivered the functionality for our Japanese product that is due to be launched. We expect the migration of our existing business to the new system to take place in late 2023.

Our people

Our people are critical to our success. We have a dedicated dynamic workforce across a number of locations around the world. During the current financial year, we have continued to build on our culture and engagement programme. This has seen us refresh and improve our performance management systems and review our approach to talent management and succession planning. We are planning to run an engagement survey in H2 of the financial year and use the insight from that to further iterate and improve engagement generally. I would like to thank all of my colleagues for their continued commitment, flexibility and resilience in a challenging and rapidly changing environment. 

We have a commitment to service and quality at the highest level in relation to servicing contract holders and intermediaries. It was therefore pleasing to have again been recognised externally in this area. We recently won three client service awards at the 2022 International Investment awards - for Asia, Africa and overall globally. 

Regulation and risk management

The pace, scale, and complexity of regulatory developments continues to evolve and the Group devotes significant resources in this area to meet these challenges.

The Group's Enterprise Risk Management ("ERM") Framework provides for the identification, assessment, management, monitoring and control of current and emerging risks, recognising that systems of internal control can only provide reasonable and not absolute assurance against material misstatement or loss. The Group's internal control and risk management processes have operated satisfactorily throughout the period under review. 

Hansard Europe dac ("Hansard Europe")

Hansard Europe was closed to new business in 2013 and the Group's objective is to run the business off in an efficient and well managed manner. We continue to meet the requirements of the company's policyholders, regulators and stakeholders while utilising operational efficiencies through the use of Hansard OnLine. The servicing of policy contracts and other administrative operations are performed at the Group's head office in the Isle of Man. Regulatory control and management of outsourced activities are exercised from the company's offices in Dublin. The company remains strongly capitalised with net assets of £14.8m.

We continue to robustly defend litigation arising out of circumstances where policyholders believe that the performance of an asset linked to a particular contract is not satisfactory. As outlined more fully in section 11 of the Business and Financial Review, total writs were £23.6m as at 31 December 2022 (30 June 2022: £21.2m).

Dividend

The Board has resolved to pay an interim dividend of 1.8p per share (H1 2022: 1.8p). This dividend will be paid on 27 April 2023.

Graham Sheward

Chief Executive Officer

8 March 2023

BUSINESS AND FINANCIAL REVIEW

1. BUSINESS MODEL

Hansard is a specialist long-term savings provider that has been providing innovative financial solutions for international clients since 1987. We focus on helping financial advisors and institutions to provide their clients (individual and corporate investors) with savings and investment products within secure insurance wrappers to meet long-term savings and investment objectives. We administer assets in excess of £1 billion for just under 35,000 client accounts around the world.

The Company's head office is in Douglas, Isle of Man, and its principal subsidiaries operate from the Isle of Man, The Bahamas and the Republic of Ireland.

Hansard International Limited ("Hansard International") is regulated by the Financial Services Authority of the Isle of Man Government. It has a branch in Malaysia, regulated by the Labuan Financial Services Authority, and one in Japan to support its Japanese proposition, regulated by the Japanese Financial Services Agency.

Launched in 2019, Hansard Worldwide underwrites international and expatriate business around the world. It is regulated by the Insurance Commission of The Bahamas.

Hansard Europe is regulated by the Central Bank of Ireland. Hansard Europe ceased accepting new business with effect from 30 June 2013.

Our products are designed to appeal to affluent international investors, institutions and wealth-management groups. They are distributed exclusively through IFAs and the retail operations of financial institutions.

Our network of Regional Sales Managers provides local language-based support services to financial advisors in key territories around the world, supported by our multi-language online platform, Hansard OnLine.

2. VISION AND STRATEGY

Our vision for the Hansard Group is:

"to share success with our clients by providing simple, understandable and innovative financial solutions".

To deliver this vision, client outcomes will be the central focus within our business and consequently we will seek to evolve all aspects of our products, processes and distribution in order to constantly improve.

Our talented people are the foundation of our business. We have created an empowering culture, which values innovation, quality, integrity and respect.

Our strategy to improve, grow and future-proof our business will be delivered through three key areas of strategic focus:

i. Improve our business: We will continue to improve customer outcomes through the introduction of new disclosures, the provision of new products and services, focusing on the quality of our IFAs with whom we work with and continuing to drive up the engagement of our people within our business.

ii. Grow our business: In recent years we established a new life company in The Bahamas and entered into a strategic alliance with Union Insurance in the UAE. We have acquired the necessary licence and approvals to access the Japanese market. We will continue to seek out opportunities for locally licenced business in other targeted jurisdictions over the coming years.

iii. Future-proof our business: We actively consider new and innovative technologies, propositions and business models. It remains critical to support the online and digital needs of our clients alongside improving organisational efficiency and scalability.

3. HANSARD ONLINE

Hansard OnLine is a powerful and secure tool that is used by our IFAs around the world. Available in multiple languages, it allows them to access information about their clients, to generate reports for their clients, to submit new business applications online, to place dealing and switch instructions online, to access all client correspondence and to access a library of forms and literature.

Almost all investment transactions are processed electronically by intermediaries, on behalf of their clients, using Hansard OnLine and over 90% of all new business applications are submitted via the platform.

The straight-through processing of contract holder 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 contract holders and intermediaries, irrespective of geographical boundaries. Data validation happens in real-time to ensure there are no delays to the investment of client funds.

Hansard OnLine Lite provides prospective IFAs with easy access to a subset of the online system. Its purpose is to showcase our online proposition to prospective and new IFAs and to allow easy access to non-sensitive documents and functionality. Users can access our online document library, the Unit Fund Centre, company news and submit new business online.

The benefit of Hansard OnLine is recognised by many IFAs as market leading and our online proposition has been nominated for and won a number of independent industry awards in recent years. Most recently this included winning International Investment's "Excellence in Fintech" award in October 2022.

Online Accounts

Whilst many of our IFAs are technologically sophisticated and have been utilising our online offering for years, our client base has typically lagged behind. However, we are now observing a growing trend amongst our clients to take more control of their financial wellbeing by embracing mobile technology to better monitor and manage their finances.

To support our commitment to delivering 'excellent customer service', we believe it is vital to provide our clients with a modern and secure online platform that allows them to access their finances easily and comprehensively, 24/7. We provide this through our client-facing version of Hansard OnLine, called Online Accounts.

Similar to our IFA-facing online platform, the client's Online Account allows them to access all their policy information, valuation statements, transaction history, premium reports, switch funds online, access all correspondence, access a library of forms and literature, and more.

A large and increasing number of clients have signed up for this service which allows them to view all documentation and communications relating to their contracts via their Online Account as well as choosing to receive post electronically, rather than in hard-copy form. This not only provides a more secure, faster and more cost efficient means of communication with clients but also the convenience to manage their own contract within a timeframe which is more suitable. 

Cyber security

As cyber crime continues to increase and target commercial and public enterprises alike, Hansard has continued to invest in its cyber security. This includes continuous upgrades to our firewall protection, encryption of data, tokenisation of sensitive data and annual external review and testing.

4. New business

PROPOSITION

The Group's proposition is to develop and enhance relationships with contract holders and intermediaries through the use of our people, products and technology in a way that meets shared objectives.

The results of activities in each region in H1 2023 are reported in the table below.

New business performance for the six months ended 31 December 2022

New business for the first six months of our 2023 financial year ("H1 2023") was £43.4m on a PVNBP basis, down 33.1% from £64.9m in the comparative period ("H1 2022"). This reflected ongoing uncertainties in global economic conditions and a general hesitancy by clients to commit to long-term savings products.

New business levels for H1 2023 are summarised as follows:

The following tables show the breakdown of new business calculated on the basis of PVNBP:

PVNBP and other terms are defined in the Glossary contained within the Group's annual financial statements, which are available from the Group's website (www.hansard.com).

We continue to receive new business from a diverse range of financial advisors around the world. The majority of new business premiums are denominated in US dollars at approximately 91% (H1 2022: 81%), with approximately 6% denominated in sterling (H1 2022: 15%), and the remainder in euro or other currencies.

In our largest region, Middle East and Africa, new business was down 13.7% for the six months ended 31 December 2022. Having recruited additional sales management for this region, we have been working closely with both new and existing distribution partners to expand our proposition, targeting for example pensions and higher net worth clients. In addition, we continue to make good progress towards launching a set of products for the Middle East that will leverage our new administration system and incorporate a new best in breed fund range.

New business in Latin America was down 4.9%. Similar to the Middle East and Africa region, we are working on building business with new distribution partners to supplement our existing distribution.

The Rest of World region was down 64.1% due to a decline in single premium business and business acceptance restrictions arising out of the Russia-Ukraine conflict.

The 61.6% reduction in Far East business reflects a fluctuating smaller base of new business which experienced a spike in the prior year comparative. We have recently relocated a regional sales manager to our branch in Malaysia to drive business growth in this region.

In addition to our new proposition developed for the Middle East, we also continue to make encouraging progress with distribution opportunities for our Japanese proposition and remain optimistic for future new business in that jurisdiction.

5. IFRS RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2022

The Group administers, and earns fees from, a portfolio of unit-linked investment contracts distributed to contract holders around the world.

The nature of the Group's products means that new business flows have a limited immediate impact on current earnings reported under IFRS, as initial fees and acquisition costs from the contracts sold are mostly deferred and amortised over the life of the contract. The benefit of sales to fee income levels are felt in future financial periods, noting also that our newer products have a longer earning period than our older products.

The Group also continues to invest strategically for the future, particularly in relation to new markets and new licensing opportunities.

Results under IFRS

Consolidated profit before taxation for the period was £3.1m (H1 2022: £1.9m). The current year result has improved as a result of reduced administrative expenses, higher interest income as central banks raised interest rates and favourable foreign exchange rate movements. The prior year period included a non-recurring £0.8m provision for fees and other balances related to a range of funds in the process of liquidation. 

The following is a summary of key items to allow readers to better understand the results of the period. 

Abridged income STATEMENT

The condensed consolidated statement of comprehensive income which is presented within these half-year results reflects the financial results of the Group's activities during the period under IFRS. This 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 gains attributable to contract holder assets were £21.6m (H1 2022: £22.4m). These assets are selected by the contract holder or an authorised intermediary and the contract holder bears the investment risk and are also reflected within 'Change in provisions for investment contract liabilities'.

· Third party fund management fees collected and paid onwards by the Group to third parties having a relationship with the underlying contract. In H1 2023 these were £2.7m (H1 2022: £2.9m). These are reflected on a gross basis in both income and expenses under IFRS.

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

Fees and commissions

Fees and commissions attributable to Group operations for H1 2023 were £20.2m (H1 2022: £22.4m). A summary of fees and commissions attributable to Group activities is set out below:

Included in contract fee income is £8.4m (H1 2022: £8.2m) representing the amounts prepaid in previous years and amortised to the income statement, as can be seen in section 7 in the reconciliation of deferred income.

Net fund management fees, together with commissions receivable, totalling £6.2m (H1 2022: £6.8m), are related to the value of contract holder Assets under Administration ("AuA") but also have elements amortised from previous periods.

Fees and commissions relating to Hansard Europe were £0.3m lower than the prior period, reflecting its on-going run-off having closed to new business in 2013.

Investment and other income

The Group's own liquid assets are held predominantly in sterling and invested in highly-rated money market funds and bank deposits.

Further information about the Group's foreign currency exposures is disclosed in note 4.1 to these condensed consolidated financial statements.

Origination costs

Under IFRS, new business commissions paid, together with the directly attributable incremental costs incurred on the issue of a contract, are deferred and amortised over the life of that contract to match the longer-term income streams expected to accrue from it. Typical terms range between 6 and 16 years, depending on the nature of the product. Other elements of the Group's new business costs, which reflect investment in distribution resources in line with our strategy, are expensed as incurred. 

This accounting policy reflects that the Group will continue to earn income over the long-term from contracts issued in a given financial year.

Origination costs in the period were:

Reflecting the long-term nature of the Group's income streams, amounts totaling £6.8m (H1 2022: £7.1m) have been expensed to match contract fee income of £8.4m (H1 2022: £8.2m) earned in H1 2023 from contracts issued in previous financial years. This reflects the profitability of the existing book.

Origination costs incurred in H1 2023 have decreased as a result of lower levels of new business.

Summarised origination costs for the period were:

Administrative and other expenses

We continue to manage our expense base robustly to control administrative expenses while investing strategically in our systems infrastructure and our Japanese proposition.

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

Salaries and other employment costs have decreased by £0.3m over the comparative period to £5.4m. This reflects a cost conscious approach to headcount, salaries and variable compensation where reward was focussed towards our lower-earning colleagues by way of a cost-of-living allowance. The average Group headcount for H1 2023 was 184 compared to 189 for the full 2022 financial year. Headcount at 31 December 2022 was 184.

Other administrative expenses are consistent with the comparative period at £4.0m year to date.

Professional fees including audit (excluding litigation defence costs) have decreased by £0.4m over the comparative period to £0.8m with savings across a number of areas.

Growth investment spend of £0.4m represents internal and external costs to generate opportunities for growth. This includes the costs of our head office strategy team and development costs associated with our Japanese proposition.

Litigation costs in defending claims against Hansard Europe of £0.6m for the period were on par with H1 2022. No further strengthening of the provision for claim settlements was required in H1 2023.

Provision for doubtful debts reflects the provision for fees and other balances considered unlikely to be recoverable. In H1 2022, a significant provision was made following fair value impairments to a range of funds currently in liquidation.

6. CASH FLOW ANALYSIS

The sale of the Group's products typically produces an initial cash strain as a result of the commission and other costs incurred at inception of a contract.

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

Initial new business cash strain is shown within "net cash investment in new business" and varies depending on the level and type of new business written. £3.2m was spent during the period primarily on the project to upgrade the Group's IT infrastructure.

The factors described above, together with the payment of our final dividend for 2022, led to a net cash outflow of £3.9m (H1 2022: £0.1m outflow) in the Group's own cash resources since 1 July 2022. The Group continues to maintain significant cash reserves to cover short-term outflows during this period of strategic investment. 

Bank deposits and money market funds

The Group's liquid assets at the balance sheet date are held in highly-rated money market liquidity funds and with a wide range of deposit institutions, predominantly in sterling. This approach protects the Group's capital base from stock market falls.

Deposits totalling £13.7m (H1 2022: £6.8m) have original maturity dates greater than 3 months and are therefore excluded from the definition of "cash and cash equivalents" under IFRS.

The following table summarises the total shareholder cash and deposits at the balance sheet date.

7. Abridged consolidated balance sheet

The condensed consolidated balance sheet presented under IFRS reflects the financial position of the Group at 31 December 2022. As a result of its method of presentation, the consolidated balance sheet incorporates the financial assets held to back the Group's liability to contract holders, and also incorporates the net liability to those contract holders of £1,099.0m (31 December 2021: £1,230.2m). Additionally, that portion of the Group's capital that is held in bank deposits is disclosed in "cash and cash equivalents" based on original maturity terms, as noted above.

The abridged consolidated balance sheet presented below, adjusted for those differences in disclosure, allows a better understanding of the Group's own capital position. Additional factors impacting upon the Group's capital position at the balance sheet date are summarised in section 9 of this Review.

Deferred origination costs

The deferral of origination costs ("DOC") reflects that the Group will earn fees over the long-term from contracts issued in a given financial year. These costs are recoverable out of future net income from the relevant contract and are charged to the consolidated statement of comprehensive income on a straight-line basis over the life of each contract.

The table below shows lower origination costs deferred during the period as a result of lower levels of new business sold compared to last year.

Deferred income

The treatment of deferred income ensures that initial fees are taken to the consolidated statement of comprehensive income in equal instalments over the longer-term, reflecting the services to be provided over the period of the contract. This is consistent with the treatment of deferred origination costs. Deferred income at the balance sheet date is the unamortised balance of accumulated initial amounts received on new business.

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

The majority of initial fees collected during the period relate to charges taken from contracts issued in prior financial years demonstrating the cash generative nature of the business. Regular premium contracts issued in this financial year will generate the majority of their initial fees over the next 18 months on average.

The movement in value of deferred income over the period is summarised below.

8. Assets under administration ("AuA")

In the following paragraphs, AuA refers to net assets held to cover financial liabilities as analysed in note 13 to the condensed consolidated financial statements presented under IFRS. Such assets are selected by or on behalf of contract holders to meet their investment needs.

The Group receives investment inflows to its AuA from single and regular premium contracts which are offset by charges, withdrawals, premium holidays affecting regular premium policies and by market valuation movements.

The majority of premium contributions and AuA are designated in currencies other than sterling, reflecting the wide geographical spread of those contract holders. The currency denomination of AuA at 31 December 2022 is similar to that of 31 December 2021 and consists of approximately 71% denominated in US dollars, 20% in sterling and 8% denominated in euro as reflected in note 4.1 to the condensed consolidated financial statements.

Certain collective investment schemes linked to customers' contracts can from time to time become illiquid, suspended or be put into liquidation. In such cases, the Directors are required to exercise their judgement in relation to the fair value of these assets. The cumulative impact on the balance sheet is not material.

The following table summarises Group AuA movements for H1 2022:

Group AuA increased to £1,099.0m during H1 2023, an increase of £6.7m from the position at 30 June 2022, reflective of positive global stock markets during the period. Since 31 December 2021, AuA have declined £131.2m (10.7%) reflective of negative global stock markets during H2 of the prior year.

The analysis of AuA held by each Group subsidiary to cover financial liabilities is as follows:

Premiums acquired by Hansard Worldwide are reinsured to Hansard International and therefore are included within Hansard International's total AuA.

Since it closed to new business in 2013, Hansard Europe's AuA has been declining broadly in line with expectations as withdrawals are made or contracts mature.

9. CAPITALISATION AND SOLVENCY

The Group's life insurance subsidiaries continue to be well capitalised with free assets in excess of the regulatory requirements in each relevant jurisdiction. There has been no material change in the Group's management of capital during the period.

Solvency capital is a combination of future margins, where permitted by regulation, and capital. Where future margins are denominated in non-sterling currencies, it is vulnerable to the weakening of those currencies relative to sterling. All of the Group's excess capital is invested in a wide range of deposit institutions and highly-rated money market liquidity funds, predominantly in sterling. This approach protects the Group's capital base from stock market falls.

The in-force portfolio has no material investment options or guarantees that could cause capital strain and retains very little of the mortality risk that it has accepted (the balance being reinsured with premium reinsurers). There is no longevity risk exposure.

Policy on capital maintenance

It is the Group's policy to maintain a strong capital base in order to:

· satisfy the requirements of its contract holders, creditors and regulators;

· maintain financial strength to support new business growth and create shareholder value;

· match the profile of its assets and liabilities, taking account of the risks inherent in the business;

· generate operating cash flows; and

· fund dividend requirements.

Within the Group each subsidiary company manages its own capital. Capital generated in excess of planned requirements is returned to the Company by way of dividends. Group capital requirements are monitored by the Board. The capital held within Hansard Europe is considered not to be available for dividend to Hansard Global plc until such time as the legal cases referred to in section 11 below are substantially resolved.

10. DIVIDENDS

A final dividend of 2.65p per share in relation to the previous financial year was paid in November 2022. This amounted to £3.5m.

The Board has considered the results for H1 2023, the Group's continued cash flow generation and its future expectations and has resolved to pay an interim dividend of 1.8p per share (H1 2022: 1.8p). This dividend will be paid on 27 April 2023.

11. complaints and potential litigation

The Group continues to deal with contract holder complaints, principally in relation to asset performance issues arising from contract holders resident in Europe. Even though the Group does not give any investment advice, as this is left to the contract holder directly or through an agent, advisor or an entity appointed at their request or preference, the Group has been subject to a number of complaints in relation to the performance of assets linked to contracts.

Some of these complaints escalate into litigation. As at the date of the 2022 Annual Report, the Group faced litigation based on writs totalling €24.6m or £21.2m. The corresponding figure as at 31 December 2022 was €26.6m or £23.6m (31 December 2021: €26.7m or £22.4m). The increase since 30 June 2022 was driven primarily by a number of additional claims and appeals, primarily in Italy and Belgium. Between 31 December 2022 and the date of this report, there have been no material changes.

We expect that a significant amount of the £23.6m of contingent liabilities referred to above would be covered by insurance should those cases be ruled against us. In such instances, the Group will settle the claim and then recover the amount from the Group's insurers. As of 31 December 2022, we estimate coverage to be in the range of £3m to £10m.

While it is not possible to forecast or determine the final results of such litigation, based on the pleadings and advice received from the Group's legal representatives and experience with cases previously successfully defended, we believe we have a strong chance of success in defending these claims. Other than smaller cases where based on past experience it is expected a settlement might be reached, the writs have therefore been treated as contingent liabilities and are disclosed in note 20 to the condensed consolidated financial statements.

12. Net asset value per shaRE

The net asset value per share on an IFRS basis at 31 December 2022 is 15.6p (31 December 2021: 16.7p) based on the net assets in the consolidated balance sheet divided by the number of shares in issue, being 137,557,079 ordinary shares (31 December 2021: 137,557,079).

13. Risk Management

The Group is naturally exposed to both existing and emerging internal and external risks as it pursues its strategic and business plan objectives. All such risks, are identified, assessed, monitored, managed and reported under the governance, risk management and internal control protocols, which constitute the Group's ERM Framework, and which remain central to the Board's oversight, direction and control of the Company.

For the period ended 31 December 2022 the Board has continued to monitor sources of potential risk in the internal and external environments, including climate transition risks, factors presenting increased cyber vulnerabilities, barriers to international mobility, supply chain disruptions, protectionism, geopolitical instabilities and inflationary pressures.

The Board has also remained cognisant of the ongoing Russia-Ukraine conflict and actual or potential impacts, including those to economic and global financial markets, rising inflation and supply chain disruption. The nature and duration of the conflict and the potential for further escalation, additional sanctions and global reactions to ongoing developments warrant close scrutiny. 

Approach

Having regard to the Financial Reporting Council's 'Guidance on Risk Management, Internal Control and Related Financial and Business Reporting', the ERM Framework encompasses the policies, processes, tasks, reporting conventions, behaviours and other aspects of the Group's environment, which cumulatively:

· Support the Board's assessment of existing and emerging risks, together with combinations of those risks in the form of plausible stresses and scenarios, which have the potential to threaten the Company's business model, future performance, solvency, liquidity or reputation. Such assessment includes analysis of the likelihood, impact and time horizon over which such risks, or combinations of risks might emerge or crystallise.

· Facilitate the effective and efficient operation of the Group and its subsidiary entities by enabling a consolidated and comprehensive approach to the management of risks across the Group, with specific attention to aggregate impacts and effects, enabling appropriate responses to be made to significant business, operational, financial, compliance and other risks to business objectives, so safeguarding the assets of the Group.

· Help to ensure the quality of internal and external reporting. This requires the maintenance of proper records and processes that generate a flow of timely, relevant and reliable information from within and outside the Group, enabling the Board to form their own view on the effectiveness of risk management and internal control arrangements through the regular provision of relevant information and assurances.

· Seek to ensure continuous compliance with applicable laws and regulations as well as with internal policies governing the conduct of business.

· Drive the cultural tone and expectations of the Board in respect of governance, risk management and internal control arrangements and the delegation of associated authorities and accountabilities.

The Board has overall responsibility for the effective operation of the ERM Framework and the Directors retain responsibility for determining, evaluating and controlling the nature and extent of the risks which the Board is willing to accept across the spectrum of risk types, taking account of varying levels of strategic, financial and operational stresses, potential risk scenarios and emerging as well as existing risk exposures. This approach ensures that risk appetite remains an integral element of decision-making by both the Board and the Executive Management Team, including in the setting of strategy, ongoing business planning and business change initiatives. 

The ERM Framework has been designed to be appropriate to the nature, scale and complexity of the Group's business at both corporate and subsidiary level. The Framework components are reviewed on at least an annual basis and refined, if necessary, to ensure they remain fit for purpose in substance and form and continue to support the Directors' assessment of the adequacy and effectiveness of the Group's risk management and internal control systems. Such assessment depends upon the Board maintaining a thorough understanding of the Group's risk profile, including the types, characteristics, interdependencies, sources and potential impact of both existing and emerging risks on an individual and aggregate basis.

The disciplines of the ERM Framework seek to coordinate risk management in respect of the Group as a whole, including for the purpose of ensuring compliance with capital adequacy requirements, liquidity adequacy requirements and regulatory capital requirements, in line with the Isle of Man Financial Services Authority Risk-Based Capital Regime.

Governance, risk management and internal control protocols remain structured upon a 'three lines' model, which determines how specific duties and responsibilities are assigned and coordinated. Front line management are responsible for identifying risks, executing effective controls and escalating risk issues and events to the Group's Control Functions. The Group Risk and Compliance Functions oversee and work in collaboration with the First Line, ensuring that the business is conducted in a manner consistent with rules, limits and risk appetite constraints. The Group Internal Audit Department provides independent assurance services to the Board and Executive Management Team on the adequacy and effectiveness of the Group's governance, risk management and internal control arrangements.

The ERM Framework seeks to add value through embedding risk management and effective internal control systems as continuous and developing processes within strategy setting, programme level functions and day-to-day operating activities. The ERM Framework also acknowledges the significance of organisational culture and values in relation to risk management and their impact on the overall effectiveness of the internal control framework.

Emerging Risks

The ERM Framework promotes the pursuit of its overarching performance, information and compliance objectives through focus on five interrelated elements, which enable the management of risk at strategic, programme and operational level to be integrated, so that layers of activity support each other. The five interrelated elements are defined as: -

· Management oversight and the control culture

· Risk recognition and assessment

· Control activities and segregation of duties

· Information and communication

· Monitoring activities and correcting deficiencies

Risk management processes are undertaken on both a top-down and bottom-up basis, structured to promote improved organisational performance through better integration of strategy, risk, control and governance. 

The top-down aspect involves the Board assessing, analysing and evaluating what it believes to be the principal risks facing the Group, with focus on current and forward-looking risks. The bottom-up approach involves the identification, review and monitoring of risk issues and emerging risks at functional and divisional levels, with analysis and formal reporting to the Group Risk Forum on a quarterly basis and onward analytical reporting to the Board. 

Stress and scenario testing is used to explore emerging risks as well as to analyse and assess any changes in existing aspects of the 'Risk Universe', which are monitored via the ERM Framework. Such analyses use both quantitative tests and qualitative assessments to consider reasonably plausible risk events, including those stresses and scenarios that could lead to failure of the business, approximated to the range of impact types which can be envisaged. The results of the stress and scenario testing are considered and explored by the Group Risk Forum, the Audit and Risk Committee and the Board, as necessary and appropriate.

The system of internal control is designed to understand and manage rather than eliminate risk of failure to achieve business objectives and can only provide reasonable, rather than absolute assurance against material misstatement or loss.

Review of risk management and internal control systems

The results of the risk management processes combine to facilitate identification of the principal business, financial, operational and compliance risks and any associated key risks at a subordinate level. Established reporting cycles enable the Board to maintain oversight of the quality and value of risk management and internal control activities throughout the year and ensure that the entirety of the governance, risk management and internal control frameworks, which constitute the ERM Framework, are operating effectively and as intended. These processes have been in place throughout the year under review and up to the date of this report.

Independently of its quarterly and ad hoc risk reporting arrangements the Board has conducted its annual review of the effectiveness of the Company's risk management and internal control systems including financial, operational and compliance controls. This review is undertaken in collaboration with the Audit and Risk Committee and is based upon analysis and evaluation of:

· Attestation reporting from the key subsidiary companies of the Group as to the effective functioning of the risk management and internal control frameworks and the ongoing identification and evaluation of risk within each subsidiary.

· Formal compliance declarations from senior managers at divisional level that key risks are being managed appropriately within the functional and operational areas falling under their respective span of control and that controls have been examined and are effective.

· The cumulative results of cyclical risk reporting by senior and executive management via the Group Risk Forum, covering financial, operational and compliance controls.

· Independent assurance work by the Group Internal Audit Department to identify any areas for enhancements to internal controls and work with management to define associated action plans to deliver them.

The Board has determined that there were no areas for enhancement which constituted a significant weakness for the year under review and they are satisfied that the Group's governance, risk management and internal control systems are operating effectively and as intended.

Financial reporting process

Integral to ERM monitoring and reporting arrangements are the conventions which ensure that the Board maintains a continuous understanding of the financial impacts of the Group failing to meet its objectives, due to crystallisation of an actual or emerging risk, or via the stress and scenario events, which the Board considers to be reasonably plausible. This includes those stresses and scenarios that could lead to a failure of the business. Planning and sensitivity analyses incorporate Board approval of forecast financial and other information. The Board receives regular representations from Senior Executives in this regard.

Performance against targets is reported to the Board quarterly through a review of Group and subsidiary company results based on accounting policies that are applied consistently throughout the Group. Financial and management information is prepared quarterly by the Chief Financial Officer (CFO) and presented to the Board and Audit & Risk Committee. The members of the Audit & Risk Committee review the interim financial statements for the half year ending 31 December and for the full financial year and meet with the CFO to discuss and challenge the presentation and disclosures therein. Once the draft document is approved by the Audit & Risk Committee, it is reviewed by the Board before final approval at a Board meeting.

Outsourcing

The majority of investment dealing and custody processes in relation to contract holder assets are outsourced to Capital International Limited (CIL), a company authorised by the Isle of Man Financial Services Authority and a member of the London Stock Exchange.

These processes are detailed in a formal contract that incorporates notice periods and a full exit management plan. Delivery of services under the contract is monitored by a dedicated Relationship Manager against a documented Service Level Agreement, which includes Key Performance Indicators.

CIL is required to confirm on a monthly basis that no material control weaknesses have been identified in their operations; this is overseen via service delivery monitoring performed by the Relationship Manager. Each year CIL are required to confirm and evidence the adequacy and effectiveness of their internal control framework through a formal Assurance Report on Internal Controls, with an external independent review performed every second year. The last such independent report was issued on 9 July 2021 and did not reveal any material control deficiencies in the relevant period. CIL's Internal Audit department conducted the 2022 review and issued their report dated 30 June 2022. This report did not reveal any material control deficiencies for the period.

Risks relating to the Group's financial and other exposures

Hansard's business model involves the controlled acceptance and management of risk exposures. Under the terms of the unit-linked investment contracts issued by the Group, the contract holder 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. These assets are administered in a manner consistent with the expectations of the contract holders. By definition, there is a precise match between the investment assets and the contract holder liabilities, and so the market risk and credit risk lie with contract holders.

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. In addition, there are certain financial risks (credit, market and liquidity risks) in relation to the investment of shareholders' funds. The Group's exposure to financial risks is explained in note 4 to the consolidated financial statements.

The Board believes that the principal risks facing the Group's earnings and financial position are those risks which are inherent to the Group's business model and operating environment. The regulatory landscape continues to evolve at both a local and international level and the risk management and internal control frameworks of the Group must remain responsive to developments which may change the nature, impact or likelihood of such risks, or the time horizon within which they might crystallise.

Principal Risks

The following table sets out the principal inherent risks that may impact the Group's strategic objectives, profitability or capital and provides an overview of how such risks are managed or mitigated. The Board robustly reviews and considers its principal risks on at least an annual basis and for the period ended 31 December 2022 have continued to consider specifically the likelihood, impacts and timescales within which such risks might crystallise, together with assessment of contingent uncertainties and any emerging risks.  

Further details around financial risks are outlined in note 4 (Financial Risk Management) to the condensed consolidated financial statements. 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 interim financial statements has been prepared in accordance with IAS 34 as adopted by the United Kingdom 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 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 on the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The notes on pages 32 to 51 form an integral part of these condensed financial statements.

The notes on pages 32 to 51 form an integral part of these condensed financial statements.

The notes on pages 32 to 51 form an integral part of these condensed financial statements.

The condensed financial statements on pages 28 to 51 were approved by the Board on 8 March 2023 and signed on its behalf by:

Graham Sheward Tim Davies

Director Director

The notes on pages 32 to 51 form an integral part of these condensed financial statements.

Notes to the Condensed Consolidated Financial Statements

1 General information

Hansard Global plc ("the Company") is a limited liability company, incorporated in the Isle of Man, who shares are publicly traded. The principal activity of the Company is to act as the holding company of the Hansard Group ("the 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 interim financial statements are unaudited and do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards and the Isle of Man Companies Acts 1931 - 2004. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements. The condensed consolidated interim financial statements were approved by the Board of Directors on 8 March 2023.

The Board of Directors approved the Group's statutory financial statements for the year ended 30 June 2022 on 21 September 2022. The report of the independent auditor on those financial statements was unmodified and did not contain an emphasis of matter paragraph.

2 Basis of presentation

These condensed consolidated interim financial statements for the half-year ended 31 December 2022 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority ("DTR") and with IAS 34 "Interim Financial Reporting" as adopted by the United Kingdom ("UK"). The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2022, which were prepared in accordance with International Financial Reporting Standards as adopted by the UK.

The condensed consolidated interim financial statements have been prepared under the historical cost convention as modified by the revaluation of financial investments and financial liabilities at fair value through profit or loss.

Except where otherwise stated, all figures included in the condensed consolidated interim financial statements are stated in pounds sterling, which is also the functional currency of the Company, rounded to the nearest hundred thousand pounds.

The following new standards, amendments and interpretations are in issue but not yet effective for these financial statements and have not been early adopted by the Group. The following amended standards are not expected to have a material impact on the Group's reported results:

• IFRS 17 Insurance Contracts (and amendments) - effective from January 2023

• Classification of liabilities as current or non-current (Amendments to IAS 1) - effective from January 2023

• Disclosure of Accounting Policies (Amendments to IAS1 and IFRS Practice Statement 2) - effective from January 2023

• Definition of Accounting Estimate (Amendments to IAS 8)

• Deferred Tax related Asset and Liabilities Arising from a Single Transaction - Amendments to IAS 12 Income Taxes - effective 1 January 2023

• Sale or Contribution of Assets between and Investor and its Associate or Joint Ventures (Amendments to FRS 10 and IAS 28)

• Non-current liabilities with covenants (Amendments to IAS 1) - effective from 1 January 2024

• Lease liability in a Sale and Leaseback (amendments to IFRS 16) - effective from 1 January 2024

There are no other standards, amendments or interpretations to existing standards that are not yet effective, that would have a material impact on the Group's reported results.

Going Concern

As shown within the Business and Financial 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 recurring cash inflows arising from existing business. 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.

In making this statement, the Directors have reviewed financial forecasts that include plausible downside scenarios as a result of Covid-19, the Russia-Ukraine conflict and resultant impacts on the global economy. These show the Group continuing to generate profit over the next 12 months and that the Group has sufficient cash reserves to enable it to meet its obligations as they fall due. 

The Directors expect the acquisition of new business will continue to be challenging throughout the remainder of the financial year. The impact of this however is not immediate to the Group's profit and cash flows and therefore allows for longer term adjustments to operations and the cost base. Long periods of lower new business or indeed lower AuA would be addressed by reducing the cost base and where necessary, the dividend paid.

The following factors are considered as supportive to the Group's resilience to business and external environment challenges:

· The Group's business model focuses on long term savings products, a majority of which are regular premium paying products which continue to receive cash inflows regardless of the amount of new business sold.

· The Group earns approximately a third of its revenues from asset-based income which is not immediately dependent on sourcing new business. 

· New business channels are geographically dispersed and therefore less exposed to specific regional challenges.

· The largest expense associated with new business is commission expenditure which reduces directly in line with reduced sales. 

· The Group has, and continues to the date of this report to have, a strong capital position with significant levels of liquidity and cash (as outlined in the Business and Financial Review).

· The business has demonstrated operational resilience in being able to operate remotely from its offices where required without any material impact to processing and servicing levels. Its control environment continued to operate effectively during this time.

· The Group places its shareholder assets into conservative, highly-liquid, highly-rated bank deposits and money market funds. These are typically not subject to price fluctuation and protect the Group's assets against potential market volatility. 

· The Group has no borrowings.

·

3 Principal accounting policies

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, this condensed set of consolidated financial statements has been prepared applying the accounting policies and standards that were applied, and the critical accounting estimates and judgements in applying them, in the preparation of the Group's published consolidated financial statements for the year ended 30 June 2022. The published consolidated financial statements for the year ended 30 June 2022 can be accessed on the Company's website: www.hansard.com.

4 Financial risk management

Risk management objectives and risk policies

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 Group seeks to manage risk through the operation of unit-linked business whereby the contract holder bears the financial risk. In addition, shareholder assets are invested in highly rated investments.

Overall responsibility for the management of the Group's exposure to risk is vested in the Board. To support it in this role, an Enterprise Risk Management ("ERM") framework is in place comprising risk identification, risk assessment, control and reporting processes. Information concerning the operation of the ERM framework to manage financial and other risks is contained within the Report and Accounts for the year ended 30 June 2022, and particularly in note 3 thereto, "Financial risk management".

The main significant financial risks to which the Group is exposed are set out below. For each category of risk, the Group determines its risk appetite and sets its investment, treasury and associated policies accordingly.

4.1 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. The Group adopts a risk averse approach to market risk, with a stated policy of not actively pursuing or accepting market risk except where necessary to support other objectives. However, the Group accepts the risk that the fall in equity or other asset values, whether as a result of price falls or strengthening of sterling against the currencies in which contract holder assets are denominated, will reduce the level of annual management charge income derived from such contract holder assets and the risk of lower future profits.

Sensitivity analysis to market risk

The Group's business is unit-linked and the direct associated market risk is therefore borne by contract holders (although there is a secondary impact as shareholder income is dependent upon the fair value of contract holder assets). Other financial assets and liabilities held outside of contract holder unitised funds primarily consist of units in money market funds, cash and cash equivalents, and other assets and liabilities. Cash held in unitised money market funds and at bank is valued at par and is unaffected by movements in interest rates. Other assets and liabilities are similarly unaffected by market movements.

As a result of these combined factors, the Group's financial assets and liabilities held outside unitised funds are not materially subject to market risk, and movements at the reporting date in interest rates and equity values have an immaterial impact on the Group's profit after tax and equity. Future revenues from annual management charges may be affected by movements in interest rates, foreign currencies and equity values. The Group does not control the asset selection strategy as assets are chosen by the contract holders.

(a) Price risk

Unit linked funds are exposed to securities price risk as the investments held are subject to prices in the future which are uncertain. The fair value of financial assets (designated at fair value through profit or loss) exposed to price risk at 31 December 2022 was £1,010.0 (31 December 2021: £1,145.1m). In the event that investment income is affected by price risk then there will be an equal and opposite impact on the value of the changes in provisions for investment contract liabilities in the same accounting period. The impact on the profit or loss before taxation in a given financial year is negligible.

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% per annum, are based on the market value of contract holder assets under administration. The approximate annual impact on the Group's profits and equity of a 10% change in fund values, either as a result of price, interest rate or currency fluctuations, is £1.7m (H1 2022: £1.7m).

(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.

Taking into account the proportion of Group funds held on longer-term, fixed-rate deposits, a change of 1% p.a. in interest rates will result in an increase or decrease of approximately £0.7m (H1 2022: £0.7m) in the Group's annual investment income and equity.

A summary of the Group's liquid assets at the balance sheet date is set out in note 4.2.

(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.

(c) (i) Group foreign currency exposures

The Group is exposed to currency risk on the foreign currency denominated bank balances, contract fees receivable and other liquid assets that it holds to the extent that they do not match liabilities in those currencies. The impact of currency risk is minimised by frequent repatriation of excess foreign currency funds to sterling. The Group does not hedge foreign currency cash flows as a matter of course, but may take advantage of historically strong or weak sterling exchange rates to do so where appropriate.

At the balance sheet date the Group had exposures in the following currencies:

The approximate effect of a 5% change in the value of US dollars to sterling is £0.1m (H1 2022: £0.1m); in the value of the euro to sterling is less than £0.1m (H1 2022: £0.1m); and in the value of the yen to sterling is less than £0.1m (H1 2022: less than £0.1m).

 (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. 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.

At the balance sheet date, the analysis of financial investments by currency denomination is as follows; US dollars: 71% (31 December 2022: 68%); sterling: 20% (31 December 2022: 21%); euro: 8% (31 December 2022: 9%); other: 1% (31 December 2022: 2%).

4.2 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 has adopted a risk averse approach to such risk and has a stated policy of not actively pursuing or accepting credit risk except when necessary to support other objectives.

The clearing and custody operations for the Group's security transactions are mainly concentrated with one broker, namely Capital International Limited, a member of the London Stock Exchange. At the balance sheet date, substantially all contract holder cash and cash equivalents, balances due from broker and financial investments are placed in custody with Capital International Limited. These operations are detailed in a formal contract that incorporates notice periods and a full exit management plan. Delivery of services under the contract is monitored by a dedicated relationship manager against a documented Service Level Agreement and Key Performance Indicators.

The Group has an exposure to credit risk in relation to its deposits with credit institutions and its investments in unitised money market funds. To manage these risks; deposits are made, in accordance with established policy, with credit institutions having a short-term rating of at least F1 or P1 from Fitch IBCA and Moody's respectively and a long term rating of at least A or A3 respectively. Investments in unitised money market funds are made only where such fund is AAA rated. Additionally maximum counterparty exposure limits are set both at an individual subsidiary company level and on a Group-wide basis.

These assets are considered to have a high degree of credit worthiness and no assets of a lower credit worthiness are held. The following table sets out information about the credit quality of the Group's deposits with credit institutions and its investments in unitised money market funds.