New Business Announcement

RNS Number : 4230M

Hansard Global plc

29 January 2009

 



Hansard Global plc

Trading update and new business results

for the six months ended 31 December 2008

Hansard Global plc ('Hansard' or 'the Group'), the specialist long-term savings provider, issues a trading update and new business results for the six months ended 31 December 2008.

Highlights

• First half IFRS profits marginally ahead of last year, including foreign exchange gains of £2.8 million (2007: £1.4 million)
• The Group's financial position remains strong with no debt, and well capitalised at 15.7 times minimum solvency requirements 
• Retention of Assets under Administration is strong. At 31 December 2008 Assets are £1.11 billion, down only 2.1% since 30 June 2008 and up 11.3% since 31 October 2008
• Resilient new business flows at industry leading margins:
• • New business PVNBP for the six months ended 31 December 2008 is £93.0m (2007: £130.5m, a decrease of 28.7%)

  • Margins of approximately 7% on PVNBP basis, restrained by new business volumes
• Positive operating cash flows, despite continuing financial market uncertainty
• Continued strengthening of sales management team with five senior appointments since 1 January 2008.

Leonard Polonsky, Chief Executive of Hansard Global, commented:

'The performance of the Group in the first six months of this financial year remained resilient despite the unprecedented volatility in global market conditions. New business flows have been achieved at industry-leading margins and the Group has continued to generate net positive cash flows from policyholders. The financial position of the Group remains very strong with no borrowings.

We expect first half IFRS profits to be marginally ahead of last year. While it remains difficult to forecast accurately at present, Hansard expects that new business flows will continue to be significantly restrained in the short term. Hansard also expects that IFRS and EEV results for the second half will be in line with the underlying profits of the first half. Hansard is confident that its business model and prospects remain strong, expects continued profitability and maintains a positive outlook for a resumption in new business growth in the longer term.'

For further information 

Hansard Global                         01624 688000        

Leonard Polonsky, Chief Executive            

Gordon Marr, Director                    

Bell Pottinger                            020 7861 3232

Ben Woodford                        

Daniel de Belder

Hansard Global plc

Trading update and new business results 

for the six months ended 31 December 2008

Financial Performance

International Financial Reporting Standards ('IFRS')

The performance of the Group under IFRS in the first six months of this financial year remained resilient despite the unprecedented volatility in global capital markets. We anticipate that the profit after tax for the period will be marginally ahead of the corresponding period last year.

Fees from investment contracts are expected to be marginally lower than in the first half of the previous financial year, as a result of reductions in asset values. Decreases in Central Bank base rates towards the end of the period will cause declines in investment income and in asset-based income streams during the period. However, we expect that profits will be favourably impacted by approximately £2.8m as a result of the weakness of Sterling against major currencies, principally US Dollar and Euro, which have gained 38% and 20% respectively against Sterling over the period (2007: £1.4m gain).

Expense levels reflect continued investment in the Group's infrastructure and in its sales proposition. Total expenses are expected to be marginally higher than in the first half of the previous financial year.

European Embedded Value ('EEV')

The Group's EEV continues to climb despite reductions in EEV Operating Profit caused by restrained new business flows, and the payment of the dividend referred to below. EEV profits for the period have been increased by the effects of Sterling weakness and a reduction in the risk-free discount rate used, following reductions in interest rates in the latter part of the period. We anticipate that the EEV at 31 December 2008 will be slightly ahead of the EEV at 30 June 2008.

Cash Flows

Cash flow from operations remains positive. 

A final ordinary dividend of 7p per share was paid on 27 November 2008. This amounted to £9.6m, funded by operating cashflows. Total ordinary dividends in respect of the year ended 30 June 2008 were 12p per share. 

The Group has no borrowings at the date of this report, nor at any time since 1 January 2008.  

Capitalisation and solvency

The Group remains very strongly capitalised for its product range, and for policyholders' and Regulators' expectations. At 31 December 2008, following the payment of the dividend referred to above, the Regulators' minimum solvency requirements were covered 15.7 times by the Group's free assets (30 June 2008: 16.3 times).

The Group's solvency position is well insulated against the current challenging capital market conditions. The Group's excess capital resources are invested in a wide range of deposit institutions, in AAA-rated money market liquidity funds and UK Treasury Stock. Exposure to euro exchange rate fluctuations within the Group's capital base was reduced during Q1 by converting a proportion of euro deposits to sterling. 

Additionally, the in-force portfolio has no investment options or guarantees.

New Business Flows 

Despite the turmoil in global financial markets, which deteriorated during the last quarter of 2008, the Group has achieved resilient new business flows at industry-leading margins. Hansard benefits from the geographical spread of the intermediaries with whom it deals and the diversity of their client base.

The flow of single premium business remains significantly restrained as a result of continued volatile market conditions and economic concerns affecting investor confidence. This has particularly impacted new business flows from Europe and Scandinavia, despite the implementation of localised incentive arrangements. Strong growth in Regular premium flows has been achieved in Latin America although deteriorating economic conditions have impacted new business production in the Far East, when compared with the corresponding period.

New business flows for the six-month period ended 31 December 2008 are detailed in tables 1 to 5 below and summarised as follows (comparisons on actual currency basis).

	6 months ended
	31 December
	2008	2007
Basis	£m	£m	% change
Compensation Credit	6.7	9.0	(25.6)%
Present Value of New Business Premiums	93.0	130.5	(28.7)%
Annualised Premium Equivalent	12.3	17.1	(28.1)%

New business flows for the three-month period ended 31 December 2008 are detailed in tables 6 to 10 below. 

New business flows in the second quarter were significantly lower than the first quarter affected, in line with other industry participants, by the further deterioration in market conditions and the global economic downturn. Q2 flows were approximately 20% down on Q1, on an actual currency basis, and 30% down year-on-year.

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 APE, which has limited correlation with the profitability of new business.

New business flows on this basis totalled £6.7m for the period compared with £9.0m in the corresponding period of the last financial year.

New business flows in the second quarter were lower than the first quarter. Q2 CC flows were approximately 19% down from Q1, affected by the deterioration in economic conditions.

Present Value of New Business Premiums

New business premiums on the PVNBP basis during the six months to 31 December 2008 totalled £93.0m. This represents a decrease of 28.7% compared with £130.5m in the same period in the last financial year.

Regular premium business for the period was £40.7m (2007: £53.6m). The Latin American market continued to develop, growing by 17.6%. Deteriorating economic conditions impacted new business production in the Far East. 

Regular premium flows account for 43.8% of new business in the period (2007: 41.1%).

Single premiums in the six months to 31 December were £52.3m on a PVNBP basis, or 32.0% lower than in the corresponding period as a result of continuing volatile market conditions and economic concerns affecting investor confidence. Single premiums totalling approximately £9.0m were issued in the first month of the period under an incentive arrangement established in the previous financial year. 

New business flows in the second quarter were lower than the first quarter. Q2 PVNBP flows were approximately 17% down from Q1, affected by the further deterioration in economic conditions.

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 six months ended 31 December) are set out below.

	2008	2007
Currency	%	%
US Dollars	44.0	46.0
Euro	36.0	29.0
Sterling	13.0	6.0

The strengthening of the US Dollar and Euro against Sterling in the last quarter of 2008 has had a positive impact on the reported new business figures.

New business margins for the period, whilst narrowing to approximately 7% 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

New business premiums on an APE basis during the six months to 31 December 2008 totalled £12.3m, compared with £17.1m APE in the corresponding period.

Regular premium flows for the period total £7.0m (2007: £9.4m), or 56.9% of new business in the period (2007: 54.9%). The composition of APE regular premium business reflects continued development of the Latin American market with flows growing by 19.2%. Deteriorating economic conditions have impacted new business production in the Far East. Single premiums in the six months to 31 December were £5.3m APE or 31.2% lower than in the corresponding period. 

New business flows in the second quarter were lower than the first quarter. Q2 APE flows were approximately 19% down from Q1, affected by the further deterioration in economic conditions.

Distribution Infrastructure

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 International Limited Far East Branch

Hansard International Limited has recently established a branch in Labuan as part of the Group's strategy to expand and diversify its business in the Far East region. This further positions the Company as a leading provider of investment solutions to intermediaries and is expected to provide a number of key benefits to the Group, including:  

Improving proximity to existing intermediaries in the region,

Increasing access to new intermediaries and policyholders; and 

Providing medium to long-term savings in servicing costs.  

Recruitment of Account Executives

Recruitment of Account Executives continues, in line with the Group's policy of expanding its reach amongst suitable intermediaries. Since 1 January 2008, five senior Account Executives have been appointed. At 31 December 2008 the Group has a total of 19 Account Executives (30 June 2008: 18) providing local language and other support to intermediaries in the Group's target markets. Despite the current global market volatility, selective recruitment is expected to continue.

Assets under Administration

Retention of Policyholders' Assets under Administration ('AUA') remains strong. Despite the significant declines in global capital markets over the six months ended 31 December 2008, the value of AUA at that date, at £1.11 billion, has fallen by only 2.1% since 30 June 2008. AUA has risen by 11.3% since 31 October 2008. 

Positive net cash flows into investment contracts and strengthening currencies have underpinned AUA, while the ability of Policyholders to rotate assets held within those contracts has reduced the level of withdrawals relative to those experienced by retail funds over the period. Since 31 December 2007, AUA have fallen by 8.6% on an actual currency basis, compared with a decline of 31% in the MSCI World index over that period and 24% decline in the FTSE 100 index. 

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

Protected Funds

The impact of the volatility in global capital markets and the sharp falls in asset values had the anticipated impact on the composition of the Protected funds administered by the Group insurance companies. These funds, totalling approximately £200m, met their objectives in protecting policyholder investments and are currently invested largely in cash. Second-generation protected funds to further support policyholders' and intermediaries' requirements will be launched in February.

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 31 December are as follows:

	2008	2007
Currency	%	%
US Dollars	39.0	39.0
Euro	38.0	31.0
Sterling	16.0	19.0

The strengthening of the US Dollar and Euro against Sterling in the last quarter of 2008 has had a positive impact on the value of AUA.

Results for the half-year ended 31 December 2008

Results for the half-year ended 31 December 2008 are expected to be announced on 26 February 2009. 

Outlook

We expect first half IFRS profits to be marginally ahead of last year. While it remains difficult to forecast accurately in the current volatile market conditions, Hansard expects that new business flows will continue to be significantly restrained in the short term. Hansard also expects that IFRS and EEV results for the second half will be in line with the underlying profits of the first half. 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. 

  HANSARD GLOBAL PLC

NEW BUSINESS RESULTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2008

1.    New business premiums - Compensation Credit

	Unaudited Six months ended 31 December
	2008 £m	2007 £m	Change %
Actual Exchange Rate Basis (CC)(1)	6.7	9.0	(25.6)%
Constant Currency Basis (CC)(1)(2)	6.7	10.5	(36.2)%

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

	Unaudited Six months ended 31 December
	2008 £m	2007 £m	Change  %
PVNBP (3)
Regular	40.7	53.6	(24.1)%
Single	52.3	76.9	(32.0)%
	93.0	130.5	(28.7)%
PVNBP (3)(5)
EU and EEA	40.1	56.9	(29.5)%
Latin America	19.4	16.5	17.6 %
Far East	17.5	39.4	(55.6)%
Rest of World	16.0	17.7	(9.6)%
	93.0	130.5	(28.7)%

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

	Unaudited Six months ended 31 December
	2008 £m	2007 £m	Change  %
PVNBP (3)(4)
Regular	40.7	65.2	(37.6)%
Single	52.3	86.3	(39.4)%
	93.0	151.5	(38.6)%
PVNBP (3)(4)(5)
EU and EEA	40.1	63.9	(37.2)%
Latin America	19.4	20.0	3.0 %
Far East	17.5	48.0	(63.5)%
Rest of World	16.0	19.6	(18.4)%
	93.0	151.1	(38.6)%

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

	Unaudited Six months ended 31 December
	2008 £m	2007 £m	Change  %
APE (6)
Regular	7.0	9.4	(25.5)%
Single	5.3	7.7	(31.2)%
	12.3	17.1	(28.1)%
APE (5)(6)
EU and EEA	4.2	6.0	(30.0)%
Latin America	3.1	2.6	19.2 %
Far East	2.9	6.0	(51.7)%
Rest of World	2.1	2.5	(16.0)%
	12.3	17.1	(28.1)%

5.    New business premiums - APE on a constant currency basis

	Unaudited Six months ended 31 December
	2008 £m	2007 £m	Change  %
APE (6)(7)
Regular	7.0	11.2	(37.5)%
Single	5.3	8.8	(39.8)%
	12.3	20.0	(38.5)%
APE (5)(6)(7)
EU and EEA	4.2	6.9	(39.1)%
Latin America	3.1	3.1	0.0 %
Far East	2.9	7.2	(59.7)%
Rest of World	2.1	2.8	(25.0)%
	12.3	20.0	(38.5)%

HANSARD GLOBAL PLC

NEW BUSINESS RESULTS FOR THE THREE-MONTH PERIOD ENDED 31 DECEMBER 2008

6.    New business premiums - Compensation Credit

	Unaudited Three months ended 31 December
	2008 £m	2007 £m	Change %
Actual Exchange Rate Basis (CC)(1)	3.0	4.6	(34.8)%
Constant Currency Basis (CC)(1)(2)	3.0	5.5	(45.5)%

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

	Unaudited Three months ended 31 December
	2008 £m	2007 £m	Change %
PVNBP (3)
Regular	18.0	27.3	(34.1)%
Single	24.1	32.9	(26.7)%
	42.1	60.2	(30.1)%
PVNBP (3)(5)
EU and EEA	16.8	24.7	(32.0)%
Far East	7.6	19.3	(60.6)%
Latin America	7.6	9.2	(17.4)%
Rest of World	10.1	7.0	44.3 %
	42.1	60.2	(30.1)%

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

	Unaudited Three months ended 31 December
	2008 £m	2007 £m	Change  %
PVNBP (3)(4)
Regular	18.0	36.0	(50.0)%
Single	24.1	38.1	(36.7)%
	42.1	74.1	(43.2)%
PVNBP (3)(4)(5)
EU and EEA	16.8	27.5	(38.9)%
Far East	7.6	25.9	(70.7)%
Latin America	7.6	12.0	(36.7)%
Rest of World	10.1	8.7	16.1%
	42.1	74.1	(43.2)%

9.    New business premiums - APE on an actual exchange rate basis

	Unaudited Three months ended 31 December
	2008 £m	2007 £m	Change %
APE (6)
Regular	3.1	4.9	(36.7)%
Single	2.4	3.3	(27.3)%
	5.5	8.2	(32.9)%
APE (5)(6)
EU and EEA	1.8	2.6	(30.8)%
Far East	1.3	2.9	(55.2)%
Latin America	1.2	1.5	(20.0)%
Rest of World	1.2	1.2	0.0 %
	5.5	8.2	(32.9)%

10.    New business premiums - APE on a constant currency basis

	Unaudited Three months ended 31 December
	2008 £m	2007 £m	Change  %
APE (6)(7)
Regular	3.1	6.2	(50.0)%
Single	2.4	4.0	(40.0)%
	5.5	10.2	(46.1)%
APE (5)(6)(7)
EU and EEA	1.8	3.0	(40.0)%
Far East	1.3	3.9	(66.7)%
Latin America	1.2	1.9	(36.8)%
Rest of World	1.2	1.4	(14.3)%
	5.5	10.2	(46.1)%

HANSARD GLOBAL PLC

ASSETS UNDER ADMINISTRATION AS AT 31 DECEMBER 2008

10.    Assets under Administration

	Unaudited As at	Unaudited As at		Audited As at
	31 December 2008 £m	31 October 2008 £m	Change  %	30  June 2008 £m
Assets under Administration (8)	1,113	1,000	11.3%	1,137

11.    Movement in Assets under Administration

	For the period ended 31 December 2008 (unaudited)	For the period ended 31 October 2008 (unaudited)	For the year ended 30 June 2008 (audited)
	£m	£m	£m
Opening Assets under Administration	1,137	1,137	1,130
Net deposits to investment contracts	66	43	171
Withdrawals from contracts	(61)	(42)	(166)
Effect of market and currency movements	(29)	(138)	2
Assets under Administration (8)	1,113	1,000	1,137

Notes

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 tables 1 & 6 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 31 December 2007 is also presented in tables 1 & 6 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 31 December 2008.

3. New business from long-term savings is calculated on the basis of the Present Value of New Business Premiums ('PVNBP'). PVNBP in tables 2 & 7 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 31 December 2007 is also presented in tables 3 & 8 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 31 December 2008.

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

6. 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 tables 4 & 9 above are translated to sterling at the rates of exchange ruling at the transaction date.

7. APE in the period ended 31 December 2007 is presented in tables 5 & 10 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 31 December 2008. 

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 31 December 2008	£1 = $1.45	£1 = €1.05
As at 30 June 2008	£1 = $2.00	£1 = €1.26
As at 31 December 2007	£1 = $1.99	£1 = €1.48
Average for year to 30 June 2008	£1 = $2.01	£1 = €1.39
Average for six months to 31 December 2008	£1 = $1.74	£1 = €1.23
Average for three months to 31 December 2008	£1 = $1.58	£1 = €1.20
Average for six months to 31 December 2007	£1 = $2.03	£1 = €1.44
Average for three months to 31 December 2007	£1 = $2.05	£1 = €1.41

Notes to editors:

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

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, and is scaleable. 

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

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

 

 

TSTSEMFAASUSEIF