New Business Results

RNS Number : 2911W

Hansard Global plc

27 July 2009

 



Hansard Global plc

('Hansard' or the 'Group')

New business results for the year ended 30 June 2009

Hansard Global plc, the specialist long-term savings provider, today announces its new business results for the year ended 30 June 2009.  

SUMMARY

• New business performance in line with expectations, at approximately 32% below previous year

• Industry-leading new business margins of approximately 5.7% in difficult markets

• Regular Premium business flows remain strong at £12.0m APE (2008: £18.5m)

• Assets under Administration down only 12% to £1.0bn (30 June 2008: £1.13bn) despite a fall of 28% in MSCI World Index over the year

• Continued investment in distribution infrastructure and Hansard OnLine

Leonard Polonsky, Chief Executive of Hansard Global, commented:

'New business levels and policyholder activity in the year ended 30 June 2009 reflected volatile market conditions. Although the continued interest in Hansard's products has recently produced a number of larger cases and gives us cause for optimism for a resumption of increased new business flows, we expect difficult market conditions in the near term and have reflected this in our estimates of the value of new business and European Embedded Value at 30 June 2009. 

 'Retention of Policyholders' Assets under Administration remains strong; however market conditions have contributed to a reduction of 12% since 30 June 2008.

'Hansard receives business from a well-diversified portfolio of intermediaries around the world. Continued investment in these relationships and our proposition, together with the Group's robust balance sheet, means that Hansard has the strength to withstand current market conditions and is well positioned for growth in volume and profitability when the environment improves.'

For further information 

Hansard Global plc                                        01624 688000

Leonard Polonsky, Chief Executive            

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer

Bell Pottinger                                                020 7861 3232

Ben Woodford / Dan de Belder / Laura Pope                        

New business performance in the year ended 30 June 2009

Against the backdrop of volatile market conditions and global economic concerns affecting investor confidence, new business for the year is approximately 32% below the levels of the previous financial year, as previously indicated. In common with industry peers, market conditions have continued to restrain new business flows since the Group issued its Interim Management Statement ('IMS') in May 2009. The value of new business premiums and new business margins have been impacted by changes in EEV assumptions concerning premium reductions and other factors that were indicated in the IMS.

In the last two months of the financial year the Group issued new business totalling £1.9m Compensation Credit ('CC') (£34m PVNBP; £4.1m APE), including two particular contracts with combined single premiums totalling approximately €16m (£13.75m). This illustrates both the continuing level of interest in Hansard's products among intermediaries and their clients, as well as the sensitivity of the Group's results to very large Single Premium cases. 

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.

New business flows for the year ended 30 June 2009 are summarised as follows (comparisons on actual currency basis) and detailed in tables 1 to 5 below. 

	2009	2008
Basis	£m	£m	% change
Compensation Credit ('CC')	£11.6m	£17.0m	(31.8%)
Present Value of New Business Premiums ('PVNBP')	£166.2m	£261.8m	(36.5%)
Annualised Premium Equivalent ('APE')	£22.4m	£33.7m	(33.5%)

The Group continues to generate the majority of its new business cases from Latin America and the Far East. These are predominantly Regular Premium policies. Regular premium products accounted for 53.6% (2008: 54.9%) of the Group's APE in the year. Hansard benefits from the geographical spread of the intermediaries with whom it deals and the diversity of their client base.

Despite the turmoil in global financial markets, and the impact this has had on new business margins, the Group's margins remain industry-leading. 

The reported flows for the year ended 30 June 2008 include the effect of a contract issued in June 2008 that accounted for £21.7m PVNBP (or 8% of total PVNBP in that financial year), or £2.2m APE. 

Compensation Credit

Compensation Credit ('CC') is the Group's prime indication of new business activity. CC measures the relative value of each piece of new business to allow the Group to maintain margins and protect capital. The Directors consider CC to be a more meaningful measure of new business volume than APE which has limited correlation with the profitability of new business.

New business flows totalled £11.6m CC compared with £17.0m in the previous financial year.

Present Value of New Business Premiums ('PVNBP')

New business premiums on the PVNBP basis during the year totalled £166.2m. This represents a decrease of 36.5% compared with £261.8m in the last financial year. Single premium contracts totalled £103.8m or 62.4% of new business flows on this basis (2008: 58%).

The value of new business premiums is influenced, among other factors, by the Group's expectations of future premium collections on regular premium contracts issued during the year. The Group's experience of premium reductions during the year has been incorporated into the estimate of value from that business, causing a total reduction in PVNBP for this year of £7m, or 4%, compared with the assumptions used in the previous 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 year) are set out below. 

	2009	2008
Currency	%	%
US Dollars	37.0	42.0
Euro	37.0	37.0
Sterling	18.0	8.0

Annualised Premium Equivalent ('APE')

New business premiums on an APE basis during the year totalled £22.4m, compared with £33.7m APE in the previous year.

An analysis of APE by region is contained in Tables 4 and 5 below.

NEW BUSINESS MARGINS

Despite market conditions, the Group has retained its focus on profitability. While limited, localised, incentive arrangements are in place from time to time which encourage intermediaries to maintain new business inflows at the cost of new business margins, business written continues to deliver an appropriate return on capital. Expense levels at the current volume of new business activity, continued investment in distribution infrastructure, premium reductions, and an incentive to secure continuing regular premium flows have contributed to a narrowing of new business margins.

New business margins for the year, whilst narrowing to approximately 5.7% on a PVNBP basis from 7.0% at 31 December 2008, remained well above the industry average. 

Reduced new business volumes and other factors have contributed to a drop in the estimated EEV operating profit after tax. In addition we will, as part of our annual review, be amending our assumptions of future income as a result of premium reductions exercised by policyholders. This is expected to reduce EEV operating profit for the year by approximately £8m, which is at the higher end of the estimated range of £6-8m provided in the IMS in May. As a result of this, and other factors, the anticipated range of EEV operating profit after tax is £7-£11m for the year.

DISTRIBUTION INFRASTRUCTURE

Hansard Development Services Limited

Hansard Development Services Limited, the Group's distribution company, continues to develop further intermediary relationships with a view to building our distribution platform and expanding the range of investment opportunities for Policyholders. With effect from 1 July 2009 the management structure of that Company was revised to improve distribution opportunities and Group initiatives.

Account Executive recruitment

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, six Account Executives have been appointed, principally in the Far East and Latin America. As at 30 June 2009 the Group had a total of 19 Account Executives, including two individuals supporting the Group's operations in Malaysia. Despite current global market conditions, selective recruitment is continuing.

Hansard OnLine

Hansard OnLine continues to be developed to meet the needs of intermediaries and Policyholders. A Secure Upload facility has recently been introduced to allow intermediaries to upload business process related documents directly to Head Office, considerably reducing the time and cost of processing instructions. Additionally language support for users in target markets continues to be enhanced.

Assets under Administration 

Retention of Policyholders' Assets under Administration ('AUA') remains strong. Despite the significant declines in global capital markets over the year ended 30 June 2009, the value of AUA at that date, at £1.0 billion, has fallen by only 12% since 30 June 2008, compared with a decline of 28% in the MSCI World Index over that period and a 21% decline in the FTSE All-Share index. 

Positive net cash flows into investment contracts throughout the financial year have underpinned AUA, while the ability of Policyholders to rotate assets held within those contracts has maintained the consistent level of AUA and further emphasises the strength of the life insurance wrapper. 

We continue to monitor the impact of the global credit crisis on assets selected by Policyholders. While a significant number of fund structures have suspended dealing or are restructuring to counter illiquidity, the value of AUA has not been materially affected. Write-downs of such assets totalling £40m are included within 'effect of market and currency movements' in table 7 to reflect the reductions in value in the year. 

Under the terms of the unit-linked contracts issued by the Group, the Policyholder bears the financial risk attaching to assets to which the contracts are linked. Any continued reductions in AUA will cause declines in the Group's future asset-based income streams 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 and have been restrained by the strengthening of sterling over the last two months against Euro and the US Dollar.

The principal currencies in which assets are designated at 30 June are as follows:

	2009	2008
Currency	%	%
US Dollars	42.0	38.0
Euro	34.0	33.0
Sterling	16.0	18.0

Outlook 

The continued decline in the VIX index over the last few months, and the apparent strengthening of global capital markets in that period have contributed to an increased level of interest in Hansard's products among intermediaries and their clients that gives cause for optimism for a resumption of increased new business flows. However, we expect continuing uncertainty in the financial markets to restrain new business flows in the near term.

Having invested in its distribution infrastructure and online platform, Hansard is confident that its business model and prospects remain strong. The Group expects continued profitability and maintains a positive outlook for resumption in new business growth in the longer term.

Hansard expects IFRS profits for the year to be slightly below, but in line with, market expectations. We believe that the Group will continue to generate positive cash flows and the Board remains confident in maintaining its dividend policy, underpinned by the Group's strong balance sheet. The Group's aggregate minimum regulatory margin is covered approximately 16 times by the Group's capital resources at 30 June 2009.

Results for the year ended 30 June 2009

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

HANSARD GLOBAL PLC

NEW BUSINESS RESULTS FOR THE YEAR ENDED 30 JUNE 2009

1.    New business premiums - Compensation Credit

	Unaudited
	Year ended 30 June			Quarter ended 30 June
	2009 £m	2008 £m	Change %	2009 £m	2008 £m	Change %
Actual Exchange Rate Basis (CC)(1)	11.6	17.0	(31.8)%	2.7	4.6	(41.3)%
Constant Currency Basis (CC)(1)(2)	11.6	20.4	(43.1)%	2.7	5.4	(50.0)%

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

	Unaudited
	Year ended 30 June			Quarter ended 30 June
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
PVNBP (3)
Regular	62.4	109.9	(43.2)%	13.6	30.2	(54.9)%
Single	103.8	151.9	(31.7)%	32.0	52.6	(39.2)%
	166.2	261.8	(36.5)%	45.6	82.8	(45.0)%

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

	Unaudited
	Year ended 30 June			Quarter ended 30 June
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
PVNBP (3) (4)
Regular	62.4	135.1	(53.8)%	13.6	37.0	(63.2)%
Single	103.8	174.0	(40.4)%	32.0	58.6	(45.3)%
	166.2	309.1	(46.2)%	45.6	95.6	(52.3)%

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

	Unaudited
	Year ended 30 June			Quarter ended 30 June
	2009 £m	2008 £m	Change  %	2009 £m	2008 £m	Change  %
APE (5)
Regular	12.0	18.5	(35.1)%	2.6	5.1	(49.0)%
Single	10.4	15.2	(31.6)%	3.2	5.4	(40.7)%
	22.4	33.7	(33.5)%	5.8	10.5	(44.8)%
APE (5)(7)
EU and EEA	8.5	12.9	(34.9)%	2.6	4.9	(46.9)%
Far East	4.8	10.8	(55.6)%	1.3	2.5	(48.0)%
Rest of World	3.8	4.6	(17.4)%	0.9	1.4	(35.7)%
Latin America	5.3	5.4	( 1.9)%	1.0	1.7	(41.2)%
	22.4	33.7	(33.5)%	5.8	10.5	(44.8)%

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

	Unaudited
	Year ended 30 June			Quarter ended 30 June
	2009 £m	2008 £m	Change %	2009 £m	2008 £m	Change %
APE (5)
Regular	12.0	22.8	(47.4)%	2.6	6.2	(58.1)%
Single	10.4	17.4	(40.2)%	3.2	5.9	(45.8)%
	22.4	40.2	(44.3)%	5.8	12.1	(52.1)%
APE  (5)(6)(7)
EU and EEA	8.5	14.6	(41.8)%	2.6	5.3	(50.9)%
Far East	4.8	13.6	(64.7)%	1.3	3.0	(56.7)%
Rest of World	3.8	5.3	(28.3)%	0.9	1.7	(47.1)%
Latin America	5.3	6.7	(20.9)%	1.0	2.1	(52.4)%
	22.4	40.2	(44.3)%	5.8	12.1	(52.1)%

6.    Assets under Administration as at 30 June 2009

	Unaudited as at 30 June 2009	Unaudited as at 1 May 2009	Change	Audited as at 30 June 2008
	£m	£m	%	£m
Assets under Administration (8)	1,000	1,029	(2.8)%	1,137

7.    Movement in Assets under Administration

	Unaudited for the period ended 30 June 2009	Unaudited for the period ended 1 May  2009	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	126	100	171
Withdrawals from contracts	(121)	(100)	(166)
Effect of market and currency movements	(142)	(108)	2
Assets under Administration (8)	1,000	1,029	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 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 30 June 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 30 June 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 30 June 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 30 June 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 30 June 2008 is also 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 30 June 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 30 June 2009	£1 = $1.65	£1 = €1.18
As at 31 December 2008	£1 = $1.45	£1 = €1.05
As at 30 June 2008	£1 = $2.00	£1 = €1.26
Average for year ended 30 June 2009	£1 = $1.62	£1 = €1.18
Average for quarter ended 30 June 2009	£1 = $1.54	£1 = €1.13
Average for year ended 30 June 2008	£1 = $2.01	£1 = €1.39
Average for quarter ended 30 June 2008	£1 = $1.97	£1 = €1.26

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, 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

 

 

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