Interim Management Statement

RNS Number : 2996S

Hansard Global plc

15 May 2009

 



Hansard Global plc

('Hansard' or the 'Group')

Interim Management Statement

Hansard Global plc, the specialist long-term savings provider, announces its second interim management statement in the financial year ending 30 June 2009, covering the ten months period ended 1 May 2009, except where indicated.  

In spite of difficult market conditions, the Group continues to trade in line with expectations.

Highlights

• The Group's financial position remains strong with no debt, and well capitalised at 17.3 times minimum solvency requirements at 31 March 2009

• Retention of Assets under Administration is strong. At 1 May 2009 Assets are £1.03 billion, down only 5.9% since 31 December 2008

• Continuing new business flows at industry leading margins:

  - Present Value of New Business Premiums ('PVNBP') for the ten months ended 1 May 2009 is £138.7m (2008: £197.9m, a decrease of 29.9%)

  - Margins of approximately 6.5% on PVNBP basis continue to be restrained by new business volumes

• Positive operating cash flows, despite continuing financial market uncertainty

• Increased interim dividend of 5.25p per share paid on 1 April 2009

• Continued strengthening of sales management team, with five Account Executives appointed since 1 July 2008

• The Group entered the FTSE 250 index on 23 March 2009

Leonard Polonsky, Chief Executive of Hansard Global, commented:

'Against the backdrop of volatile market conditions and global economic concerns affecting investor confidence throughout the ten months to 1 May 2009, we have continued to generate profits backed by positive operating cash flows. We have also paid an increased interim dividend of 5.25p per share. The financial position of the Group remains very strong with no borrowings, and the Group has continued to generate strong inflows from policyholders. 

The Board remains confident that Hansard's business model remains robust, and expects continued profitability. We maintain a positive outlook for resumption in new business growth in the longer term. We remain confident in maintaining the Group's dividend policy, underpinned by the Group's strong balance sheet.'

For further information

Hansard Global                                             01624 688 000

Leonard Polonsky, Chief Executive

Gordon Marr, Director

Vince Watkins, Chief Financial Officer

Bell Pottinger                                               020 7861 3232

Ben Woodford

Daniel de Belder

OVERVIEW

Against the backdrop of volatile market conditions and global economic concerns affecting investor confidence throughout the ten months to 1 May 2009 the Group has continued to generate profits backed by positive operating cash flows. We paid an increased interim dividend of 5.25p per share on 1 April 2009. The financial position of the Group remains very strong with no borrowings, and the Group has continued to generate strong inflows from policyholders. 

New business for the period is approximately 30% below the levels of the corresponding period of the previous financial year. In common with industry peers, market conditions have further restrained new business flows since the Group reported its half-yearly results. We expect continuing uncertainty in the financial markets to have a similar ongoing effect in the near term. Expense levels at this volume of activity, continued investment in distribution infrastructure and in Account Executives, and action to secure continuing regular premium flows have led to a narrowing of new business margins. These factors, together with recent relative strengthening of Sterling against major currencies, have reduced growth in embedded value since 31 December 2008.

We are pleased to note that recent uncertainties over the status of the Isle of Man as an 'Offshore Tax Haven' have been clarified by the OECD. The clarification that the Island has substantially implemented the internationally agreed tax standard represents an endorsement of the Isle of Man and its long-term regulatory strategy.

FINANCIAL PERFORMANCE AND POSITION - NINE MONTHS TO 31 MARCH 2009

International Financial Reporting Standards ('IFRS')

IFRS profit for the period to 31 March 2009 was as expected based on the half-year results, underpinned by high policyholder persistency and the strength of the book of existing policies. The relative strengthening of Sterling against Euro and US Dollar towards the end of the period caused a slight reduction in cumulative FX gains from the position at 31 December 2008. 

We continue to manage our cost base effectively and are seeing the benefit of the initiatives implemented to reduce administrative and other expenses, while continuing to invest in the Group's distribution infrastructure and in its sales proposition. 

European Embedded Value ('EEV')

Economic and other issues affecting the level of new business have continued to impact EEV operating profit for the nine months to 31 March 2009. Additionally, in order to secure continued favourable long-term relations with Policyholders, the Group has decided to waive collection for one year of inflationary increases in policy servicing charges to which it would have been entitled with effect from 1 July 2009. This has the effect of reducing future margins and EEV operating profit for the period to March 2009, by approximately £2m. However, as a result of profitable new business written during the period, the persistency of cash flows and the lack of options, guarantees or other such features within the products issued by the Group, the cumulative EEV operating profit for the nine months remains marginally above the operating profit for H1. 

The combined impact of foreign exchange rate movements and investment performance of policyholder funds over the three months to 31 March has reduced the cumulative total EEV profit by about £5m from the position at 31 December 2008. 

In the event that the current experience of premium reductions continues over the next few months, then the Group, as part of its regular annual review of its experience assumptions, will consider reducing its estimate of future margins to be derived from activities by a further £6-8m. If implemented, this would reduce the estimated full year EEV operating profit by that amount, relative to guidance given when reporting the half-year results. If experience should improve, then these margins would be recovered and increase EEV operating profit over time. 

All things considered, the Group expects embedded value at 30 June, barring significant movements in foreign exchange rates, to be in line with consensus. 

Cash Flows and Dividends

Cash flow from operations remains positive in the nine months to 31 March 2009. The Group has no borrowings at the date of this report (2008: £nil).

An interim ordinary dividend of 5.25p per share was paid on 1 April 2009. This amounted to £7.2m, funded by operating cashflows. Total ordinary dividends paid in the year to date are 12.25p per share. 

Capitalisation and Solvency

The Group continues to be strongly capitalised to enable it to satisfy operational, regulatory and Policyholder expectations. At 31 March 2009 the aggregate minimum regulatory margin is covered approximately 17.3 times (2008:15.7 times) by the Group's capital resources.

The Group's solvency position is well insulated against the current challenging capital market conditions. At the date of this report, the Group's liquid assets are held with a wide range of deposit institutions and in highly-rated money market liquidity funds. Additionally, the in-force portfolio has no investment options or guarantees.

NEW BUSINESS FLOWS - TEN MONTHS ENDED 1 MAY 2009

Despite the turmoil in global financial markets, the Group's new business margins are industry-leading. Hansard benefits from the geographical spread of the intermediaries with whom it deals and the diversity of their client base.

Volatile market conditions and global economic concerns affecting investor confidence throughout the ten-month period ended 1 May 2009 have continued to significantly restrain new business flows, in common with other industry participants. New business for the period is approximately 30% below the levels of the corresponding period of the previous financial year, mitigated in part by the implementation of localised incentive arrangements. While new business margins are narrower at approximately 6.5% on a PVNBP basis as a result of lower volumes, localised incentives and continued investment in distribution relationships, the Group believes that the actions it has taken to preserve the existing business will stand it in good stead for the future. 

The Group has retained its focus on profitability and positive cash flow generation and continued to generate strong inflows from policyholders' investments in their contracts.

The flow of single premium business in the ten months to 1 May 2009, on a PVNBP basis, is 28% below the level of the corresponding period. Regular premium business for the period was £59.6m, a decrease of 33% from the corresponding period. Since the half year-ended 31 December 2008, market conditions have further restrained the rate of new business flows, in common with industry peers. 

Whilst we expect continuing uncertainty in the financial markets to restrain new business flows in the near term, the apparent strengthening of global capital markets over the last few weeks has, however, caused an increased level of interest in Hansard's products among intermediaries and their clients. While we remain cautious as to certainty and timing of outcomes, we have been advised of a number of large investments that are being considered. Any of those issued by the Group prior to 30 June 2009 may have a significant impact on new business levels. It should also be noted that comparative new business figures for the year ended 30 June 2008 include a particular contract issued in the final week of June 2008 that accounted for £21.7m PVNBP (or 8% of PVNBP in that financial year). This demonstrates the sensitivity of the Group's results to very large Single Premium business.

Any continued strengthening of Sterling against Euro and US Dollar in the remainder of the financial year will impact on reported new business figures.

New business flows for the ten months to 1 May 2009 (comparative period: ten months to 1 May 2008) are summarised as follows (comparisons on actual currency basis), and detailed in tables 1 to 5 in the Appendix.

	2009	2008
Basis	£m	£m	% change
Compensation Credit	£9.7m	£13.9m	(30.2%)
Present Value of New Business Premiums	£138.7m	£197.9m	(29.9%)
Annualised Premium Equivalent	£18.3m	£26.4m	(30.7%)

Compensation Credit

Compensation Credit ('CC') is an indication of new business activity that is used by the Group to manage its business. CC measures the relative value of each piece of new business to allow the Group to maintain margins and protect capital. The Directors consider CC to be a more meaningful measure of new business volume than Annualised Premium Equivalent ('APE'), which has limited correlation with the profitability of new business.

New business flows on this basis totalled £9.7m for the ten months period compared with £13.9m in the corresponding period of the last financial year.

Present Value of New Business Premiums ('PVNBP')

New business premiums on the PVNBP basis during the period totalled £138.7m. This represents a decrease of 30% compared with £197.9m in the same period in the last financial year.

Hansard receives business from a well-diversified portfolio of intermediaries around the world, which results in new business being received in a range of currencies. The principal currency receipts (as a percentage of PVNBP for the ten months ended 1 May) are set out below.

	2009	2008
Currency	%	%
US Dollars	44.0	46.0
Euro	33.0	8.0
Sterling	19.0	31.0

New business margins for the period, whilst narrowing to approximately 6.5% on a PVNBP basis, remained well above industry average. Restrained new business flows, continued investment in the Group's distribution infrastructure to improve its sales proposition, and localised incentive arrangements have contributed to the reduction in the margin from the level of 7.1% reported for the first quarter of this financial year. 

Annualised Premium Equivalent ('APE')

New business premiums on an APE basis during the ten months period totalled £18.3m, compared with £26.4m APE in the corresponding period.

DISTRIBUTION AND ACCOUNT EXECUTIVE RECRUITMENT

We continue to develop further intermediary relationships with a view to building our distribution platform and expanding the range of investment opportunities for Policyholders. Hansard OnLine continues to be developed to meet the needs of intermediaries and Policyholders.

Recruitment of Account Executives continues, in line with the Group's policy of expanding its reach amongst suitable intermediaries by providing local language and other support to intermediaries in the Group's target markets. Since 1 July 2008, five Account Executives have been appointed, principally in the Far East and Latin America. At 1 May 2009 the Group has a total of 18 Account Executives, including two individuals supporting the Group's operations in Malaysia. Despite current global market volatility, selective recruitment is continuing and we expect to recruit additional individuals before year-end.

ASSETS UNDER ADMINISTRATION

Retention of Policyholders' Assets under Administration ('AUA') remains strong. Despite the significant declines in global capital markets over the ten months ended 1 May 2009, the value of AUA at that date, at £1.03 billion, has fallen by only 5.9% since 31 December 2008. 

Strong cash flows into investment contracts throughout the financial year and strengthening currencies have underpinned AUA, while the ability of Policyholders to rotate assets held within those contracts has maintained the persistency of AUA relative to withdrawals experienced by retail funds over the period. Since 1 July 2008, AUA have fallen by 9.5% on an actual currency basis, compared with a decline of 36% in the MSCI World index over that period and 25% decline in the FTSE 100 index. 

The value of AUA is impacted by the global credit crisis. As a result of the diversified portfolio of investments held to cover financial liabilities, the value of AUA is not materially impacted by the volumes of illiquid assets or impaired fund structures in the market. 

Over the last three months the rate of notifications of illiquid assets or impaired fund structures has reduced, and we have been advised of a number of such structures being placed in liquidation or where full redemption of units in issue is being proposed. This reduces the uncertainty over the value of the asset. Write-downs of such assets totalling £32m are included within 'effect of market and currency movements' in table 7 to reflect the reductions in value in the period. 

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. Continued reductions in AUA will cause declines in the Group's asset-based income but will not affect the Group's capital position.

AUA Currency Composition

The value of AUA is linked directly to policyholder investment choices, new business flows and prevailing market conditions. The investment choices of policyholders and their agents generally reflect the currency of the territories in which they are resident. The accumulated asset values are therefore subject to currency rate fluctuations. 

The principal currencies in which assets are designated at 1 May are as follows:

	2009	2008
Currency	%	%
US Dollars	43.0	44.0
Euro	32.0	36.0
Sterling	17.0	13.0

Protected Funds 

A range of protected funds to further support policyholders' and intermediaries' requirements were launched during Q3 replacing earlier funds that are now closed to new business. 

OFFSHORE TAX HAVENS

Recent uncertainties over the status of the Isle of Man as an 'Offshore Tax Haven' have been clarified by the OECD. The Island's inclusion on the OECD 'white list' of countries complying with the global standard for tax co-operation and exchange of information represents an endorsement of the Isle of Man Government and its long-term regulatory strategy, and may present further opportunities for the Group.

OUTLOOK

We believe that the Group will continue to generate positive cash flows, despite market conditions that will continue to restrain new business flows and EEV growth in the near term. 

Having invested in distribution infrastructure and taken action to secure continuing regular premium flows, expense levels at current volumes of activity will continue to result in comparatively narrow new business margins in the short term.

Hansard is confident that its business model and prospects remain strong, expects continued profitability and maintains a positive outlook for resumption in new business growth in the longer term. The Board remains confident in maintaining its dividend policy, underpinned by the Group's strong balance sheet.

RESULTS FOR THE YEAR ENDING 30 JUNE 2009

Results for the year ending 30 June 2009 will be announced on 24 September 2009.

New business results for the year ending 30 June 2009 will be reported on 30 July 2009.

HANSARD GLOBAL PLC

NEW BUSINESS RESULTS FOR THE TEN MONTHS ENDED 1 MAY 2009

1.    New business premiums - Compensation Credit

	Unaudited
	Ten months ended 1 May			Four months ended 1 May
	2009 £m	2008 £m	Change %	2009 £m	2008 £m	Change %
Actual Exchange Rate Basis (CC)(1)	9.7	13.9	(30.2)%	3.0	4.9	(38.8)%
Constant Currency Basis (CC)(1)(2)	9.7	16.7	(41.9)%	3.0	6.2	(51.6)%

2.    New business premiums - PVNBP on an actual exchange rate basis

	Unaudited
	Ten months ended 1 May			Four months ended 1 May
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
PVNBP (3)
Regular	59.6	88.6	(32.7)%	18.9	35.0	(46.0)%
Single	79.1	109.3	(27.6)%	26.8	32.4	(17.3)%
	138.7	197.9	(29.9)%	45.7	67.4	(32.2)%
PVNBP (3)(7)
EU and EEA	59.4	82.4	(27.9)%	19.3	25.5	(24.3)%
Far East	28.1	61.2	(54.1)%	5.6	10.8	(48.1)%
Rest of World	26.2	27.0	(3.0)%	10.2	9.3	9.7 %
Latin America	25.0	27.3	(8.4)%	10.6	21.8	(51.4)%
	138.7	197.9	(29.9)%	45.7	67.4	(32.2)%

3.    New business premiums - PVNBP on a constant currency basis

	Unaudited
	Ten months ended 1 May			Four months ended 1 May
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
PVNBP (3)
Regular	59.6	88.6	(32.7)%	18.9	44.4	(57.4)%
Single	79.1	109.3	(27.6)%	26.8	41.2	(35.0)%
	138.7	197.9	(29.9)%	45.7	85.6	(46.6)%
PVNBP (3)(4)(7)
EU and EEA	59.4	82.4	(27.9)%	19.3	30.7	(37.1)%
Far East	28.1	61.2	(54.1)%	5.6	14.0	(60.0)%
Rest of World	26.2	27.0	(3.0)%	10.2	12.1	(15.7)%
Latin America	25.0	27.3	(8.4)%	10.6	28.8	(63.2)%
	138.7	197.9	(29.9)%	45.7	85.6	(46.6)%

4.    New business premiums - APE on an Actual Exchange Rate basis

	Unaudited
	Ten months ended 1 May			Four months ended 1 May
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
APE (5)
Single	7.9	11.2	(29.5)%	2.6	3.5	(25.7)%
Regular	10.4	15.2	(31.6)%	3.4	5.8	(41.4)%
	18.3	26.4	(30.7)%	6.0	9.3	(35.5)%
APE (5)(7)
EU and EEA	6.2	9.0	(31.1)%	2.0	2.9	(31.0)%
Far East	4.6	9.5	(51.6)%	1.7	3.4	(50.0)%
Rest of World	3.4	3.6	(5.6)%	1.3	1.3	0 %
Latin America	4.1	4.3	(4.7)%	1.0	1.7	(41.2)%
	18.3	26.4	(30.7)%	6.0	9.3	(35.5)%

5.    New business premiums - APE on a Constant Currency Basis

	Unaudited
	Ten months ended 1 May			Four months ended 1 May
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
APE (5)
Single	7.9	13.0	(39.2)%	2.6	4.2	(38.1)%
Regular	10.4	18.9	(45.0)%	3.4	7.7	(55.8)%
	18.3	31.9	(42.6)%	6.0	11.9	(49.6)%
APE  (5)(6)(7)
EU and EEA	6.2	10.3	(39.8)%	2.0	3.4	(41.2)%
Far East	4.6	11.9	(61.3)%	1.7	4.7	(63.8)%
Rest of World	3.4	4.4	(22.7)%	1.3	1.6	(18.8)%
Latin America	4.1	5.3	(22.6)%	1.0	2.2	(54.6)%
	18.3	31.9	(42.6)%	6.0	11.9	(49.6)%

6.    Assets under Administration as at 1 May 2009

	Unaudited as at 1 May 2009	Unaudited  as at 31 December 2008	Change	Audited as at 30 June 2008
	£m	£m	%	£m
Assets under Administration (8)	1,029	1,093	(5.9)%	1,137

7.    Movement in Assets under Administration

	Unaudited for the period ended 1 May 2009	Unaudited  for the period ended 31 December 2008	Audited  for the year ended 30 June 2008
	£m	£m	£m
Opening Assets under Administration	1,137	1,137	1,130
Net deposits to investment contracts	100	67	171
Withdrawals from contracts	(100)	(61)	(166)
Effect of market and currency movements	(108)	(50)	2
Assets under Administration (8)	1,029	1,093	1,137

1. New business from long-term savings is calculated on the Group's internal measurement basis, Compensation Credit ('CC'). CC is an indication of new business activity that is used by the Group to manage its business. CC measures the relative value of each piece of new business to allow the Group to maintain margins and protect capital. The values reflected in table 1 above on an actual exchange rate basis are calculated in a manner consistent with the prior period. Premiums arising in foreign currencies are translated to sterling at the rates of exchange ruling at the transaction date.

2. CC in the period ended 1 May 2008 is also presented in table 1 above on a constant currency basis. Premiums arising in foreign currencies are translated to sterling at the average rates of exchange applicable to the relevant period ended 1 May 2009.

3. New business from long-term savings is calculated on the basis of the Present Value of New Business Premiums ('PVNBP'). PVNBP in table 2 above is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine new business contribution. Premiums arising in foreign currencies are translated to sterling at the rates of exchange ruling at the transaction date.

4. PVNBP in the period ended 1 May 2008 is also presented in table 3 above on a constant currency basis. Premiums arising in foreign currencies are translated to sterling at the average rates of exchange applicable to the relevant period ended 1 May 2009.

5. New business from long-term savings is calculated on an Annualised Premium Equivalent ('APE') basis in accordance with the life assurance industry convention by adding new regular premiums and one tenth of single premiums. Premiums arising in foreign currencies reflected in table 4 above are translated to sterling at the rates of exchange ruling at the transaction date.

6. APE in the period ended 1 May 2008 is presented in table 5 above on a constant currency basis. Premiums arising in foreign currencies in the period are translated to sterling at the average rates of exchange applicable to the relevant period ended 1 May 2009. 

7. The geographical split of new business premiums is based on the country of residence of the policyholder.

8. Assets under Administration are valued at market values at the relevant date, using closing exchange rates against sterling.  

9. The principal exchange rates applied are as follows:

	U.S. Dollar	Euro
As at 1 May 2009	£1 = $1.48	£1 = €1.10
As at 30 June 2008	£1 = $2.00	£1 = €1.26
As at 1 May 2008	£1 = $1.97	£1 = €1.26
Average for ten months to 1 May 2009	£1 = $1.62	£1 = €1.18
Average for four months to 1 May 2009	£1 = $1.45	£1 = €1.10
Average for ten months to 1 May 2008	£1 = $2.01	£1 = €1.39
Average for four months to 1 May 2008	£1 = $1.98	£1 = €1.30

Notes to editors:

• Hansard Global plc is the holding company of the Hansard Group of companies. The Company was listed on the London Stock Exchange on 18 December 2006. The Group is a specialist long-term savings provider, based in the Isle of Man.

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

• The Group utilises a low-cost distribution model by selling policies exclusively through a network of financial services intermediaries, independent financial advisers and the retail operations of certain financial institutions (collectively 'Intermediaries'), who provide access to their clients in more than 170 countries. The Group's distribution model is supported by an award-winning, multi-language internet platform, Hansard Online, and is scaleable. 

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

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

Forward-looking statements:

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

 

END

 

 

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