New Business Results

RNS Number : 1233L

Hansard Global plc

27 July 2011

 



27 July 2011

Hansard Global plc

New business results for the year ended 30 June 2011

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, today announces its new business results for the year ended 30 June 2011. 

Summary

·     Strong growth in new business volumes at industry leading margins:

-      Present Value of New Business Premiums ("PVNBP") up 33% to £221.1m for the year (2010: £166.3m);

-      New business margins of approximately 8.0% on the PVNBP basis for the year (2010: 6.9%);

·     Regular premium new business of £112.0m PVNBP for the year is 62.3% above the level of the previous year (2010: £69.0m); 

·     Assets under Administration at 30 June 2011 of £1.2 billion have increased by 7.4% since 30 June 2010;

·     Embedded Value at 30 June 2011 is in line with expectations, although EEV operating profit is affected by increased expenses as previously reported and is expected to be approximately 15% below last year (2010: £15.5m).

·     Continued investment in distribution and other infrastructure to implement new business initiatives and improve operational effectiveness.

Leonard Polonsky, Chairman of Hansard Global plc, commented:

"The performance of the Group remains encouraging despite the volatile markets and uncertain economic outlook.  New business momentum has continued and new business volumes have now returned to levels that we had achieved prior to the global financial crisis.   In line with our strategy we have seen particularly good growth in regular premium flows, therefore providing a more consistent and predictable income stream.

In the absence of further deterioration in macroeconomic conditions, we are confident that the outlook for sustained growth in new business and profitability remains positive for the Group.

Increased new business flows from Latin America and the Far East reflect the increased marketing activity in those regions, and whilst growth has eased from the rates seen earlier in the year, we remain confident of continuing momentum."

For further information

Hansard Global plc                                                                     [phone]

Leonard Polonsky, Chairman                                    

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer                                                          

Pelham Bell Pottinger                                                               [phone]

Ben Woodford / Duncan Mayall

HANSARD GLOBAL plc

New business performance in the year ended 30 June 2011

OVERVIEW

Despite challenging economic conditions the Group has continued to generate strong levels of new business flows.  On the basis of Present Value of New Business Premiums ("PVNBP"), new business flows of £221.1m in the year are 33% above the previous year, reflecting continuing levels of interest in Hansard's products among independent financial advisors and their clients, aided by developments in Hansard OnLine. Reflecting the increased levels of interest and the Group's continued investment in distribution infrastructure, the annual volume of new business has returned to levels that were being achieved prior to the global financial crisis.

New business in the last quarter of this financial year was £59.0m PVNBP, an increase of 24% over the previous quarter (Q3 2011). The Group's focus on growth markets has been rewarded by strong levels of higher margin regular premium business.

New business volumes for the quarter and the year ended 30 June 2011 on the Group's internal metric and on two metrics widely used by the market aresummarised as follows. Comparisons are on an actual currency basis.

	Three months ended			Twelve months ended
	30 June			30 June
	2011	2010	%	2011	2010	%
Basis	£m	£m	change	£m	£m	change
Compensation Credit	4.5	3.7	37.0 %	16.5	11.9	38.7 %
Present Value of New Business Premiums	59.0	48.3	22.1 %	221.1	166.3	33.0 %
Annualised Premium Equivalent	8.1	6.9	17.4 %	30.1	22.3	35.0 %

New business flows on the PVNBP basis

The Group continues to generate the majority of its new business from Latin America and the Far East, demonstrating the success of the increased marketing efforts in those regions. This is predominantly regular premium business introduced by Independent Financial Advisors, many of whom use the Hansard OnLine new business functionality introduced in the early part of this financial year. Increasing levels of new business from these growth markets are reflected in the increased proportion of regular premium flows and, therefore, in the increased new business margin. 

Regular premium flows of £112.0m PVNBP for the year are 62.3% above the £69.0m of the previous year. Regular premium products accounted for 50.7% of the Group's PVNBP in the year (2010: 41.5%) and 52.4% of the total PVNBP in the final quarter. This is consistent with our strategy of attracting a greater mix of regular versus single premium flows.

New business in Q4 2011 was £59.0m PVNBP, an increase of 22.1% over Q4 2010, as shown in the tables below. Regular premium flows in Q4 2011, at £30.9m PVNBP, are 53.7% above the flows of Q4 2010, while single premium flows of £28.1m, including one EU case of £7.4m, are fractionally below the level of the corresponding period.

	Three months ended			Twelve months ended
	30 June			30 June
	2011	2010	%	2011	2010	%
	£m	£m	change	£m	£m	change
Regular premium	30.9	20.1	53.7 %	112.0	69.0	62.3 %
Single premium	28.1	28.2	(0.4)%	109.1	97.3	12.1 %
PVNBP	59.0	48.3	22.1 %	221.1	166.3	33.0 %

New business flows by region

	Three months ended			Twelve months ended
	30 June			30 June
	2011	2010	%	2011	2010	%
	£m	£m	change	£m	£m	change
EU and EEA	21.7	20.2	7.4 %	64.0	72.2	(11.4)%
Far East	18.2	7.7	136.4 %	60.7	31.1	95.2 %
Latin America	14.2	11.4	24.6 %	51.4	37.6	36.7 %
Rest of World	4.9	9.0	(45.6)%	45.0	25.4	77.2 %
PVNBP	59.0	48.3	22.1 %	221.1	166.3	33.0 %

Premium flows from the EU and EEA are predominantly single premium business and the reduced new business flows shown above reflect the continuing difficult market environment that impacts on investor confidence, and regulatory uncertainty. New business from the Rest of the World incorporates a small number of high value cases issued in the first half of the financial year.

Hansard receives business from a strong and well-diversified range of financial advisors around the world. This geographical spread results in new business being received in a number of currencies. The principal currency denominations (as a percentage of PVNBP) in the year are set out below. The growth in regular premium new business flows from target markets outside of the EU is reflected in the increasing proportions of new policies denominated in US Dollars and Japanese Yen, and reflects increasing diversification of Hansard's business and Assets under Administration.

	2011	2010
Currency	%	%
US Dollars	40.5	37.9
Euro	27.1	29.2
Sterling	15.0	23.0
Japanese Yen	12.7	6.5
Other	4.7	3.4
Total	100.0	100.0

NEW BUSINESS MARGINS

Despite market conditions, the Group has retained its focus on profitability. Increased regular premium flows, which earn higher margins than single premium business, have contributed to the growth in the new business margin to 8.0% on the PVNBP basis (2010: 6.9%).

These margins are well above the industry average, principally due to the Group's continued focus on the value of new business, and are now at a similar level to the margin at the time of the IPO.

INVESTMENTS IN DISTRIBUTION AND OTHER INFRASTRUCTURE

The Group's investments in distribution and other infrastructure, in order to improve relationships with IFAs and policyholders, further automate processes and develop scaleability, have continued throughout the financial year, and have underpinned increasing regular premium flows from the growth markets of Latin America and the Far East. Amounts totalling £1.0m have been spent in this financial year (2010: £0.7m) and a further £0.8m is expected to be spent next year.

·    Hansard OnLine new business functionality introduced earlier in this financial year is finding favour with increasing numbers of IFAs in target markets and the functionality has continued to develop in response to feedback. The refresh of Hansard OnLine to incorporate modern internet techniques has been completed, to widespread satisfaction from IFAs.

·    The first test instance of policyholders changing their own data online has been piloted successfully and rolled out. In addition, all routine client communication is posted to client sites (along with a suitable email alert). This provides the foundation for removing physical post in those territories where this is permitted. The authentication method for client site access has been updated and steps to support online application for a client site are being developed.

·    The unit pricing systems have been replaced and, after a period of parallel running, are now fully active.

As previously announced, the increased investments in distribution and infrastructure, together with additional administrative, regulatory and risk management costs has had and will continue to have an impact on the recurring cost base of the business. While new business profit for the year has increased by approximately 54% over the previous year as a result of increased new business flows, the EEV operating profit for the year has been restrained by increases in assumptions for those future expenses and is expected to be approximately 15% below the EEV operating profit of the previous financial year (2010: £15.5m). Despite this, EEV at 30 June 2011 is expected to be in line with market expectations.

Assets under Administration

Increased new business flows from Latin America and the Far East have underpinned the level of policyholders' Assets under Administration ("AUA"). Policyholder deposits in the year increased by 12.2% to £186.4m.

While retention of AUA remains strong, certain assets selected by policyholders in previous financial years remain impacted by the global financial crisis. During the first six months of this financial year we saw an increase in liquidations and other efforts to resolve uncertainty over those policyholder asset values but in the last quarter we have been advised that a further small number of funds held by policyholders have ceased offering redemptions on normal terms. This has caused us to apply a prudent valuation by writing down those assets by £30m in Q4, in accordance with the practice introduced in H2 2008. The impact of the write-down is reflected in "Effect of market and currency movements" shown in the table below.

This write-down, as well as prudent valuations on other assets similarly affected, has reduced asset-based fees in the current financial year.

Despite the falls in value in Q4, the overall value of AUA has increased by 7.4% over the year to £1,218.2m.

	Three months  ended		Twelve months ended
	30 June		30 June
	2011	2010	2011	2010
	£m	£m	£m	£m
Deposits to investment contracts	46.6	53.0	186.4	166.1
Withdrawals from contracts	(47.2)	(54.1)	(200.7)	(180.4)
Effect of market and currency movements	(48.1)	(95.0)	97.9	146.9
(Decrease) / increase in period	(48.7)	(96.1)	83.5	132.6
Opening balance	1,266.9	1,230.8	1,134.7	1,002.1
Assets under Administration	1,218.2	1,134.7	1,218.2	1,134.7

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 (arising for example from the suspension of pricing of certain assets) will cause declines in the Group's future asset-based income streams but will not affect the Group's capital position.

As reported previously, the Group has been subject to a number of policyholder complaints in relation to the selection and performance of assets linked to policies.  A Group company has been served with a number of writs arising from these complaints.  Based on the pleadings and advice received to date, the Group has not made any provision in respect of these actions, which it intends to defend strenuously.

AUA Currency Composition

The investment choices of policyholders and their agents generally reflect the currency of the territories in which they are resident. However, the value of a policyholder's assets is subject to currency rate fluctuations and therefore the proportion of AUA held in any given currency can change as a result of currency movements and other factors.

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

	2011	2010
Currency	%	%
US Dollar	50.3	49.0
Euro	27.8	28.3
Sterling	15.8	15.3
Other	6.1	7.4
Total	100.0	100.0

Results for the year ended 30 June 2011

Trading results for the year are expected to be announced on 22 September 2011.

Outlook

In the absence of further deterioration in macroeconomic conditions, we are confident that the outlook for sustained growth in new business and profitability remains positive for the Group. Increased new business flows from Latin America and the Far East reflect the increased marketing activity in those regions, and whilst growth has eased from the rates seen earlier in the year, we remain confident of continuing momentum.

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 low-cost distribution model by selling policies exclusively through 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 scaleable.

·    The principal geographic markets in which the Group currently services financial advisors 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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