Interim Management Statement

RNS Number : 7123Q

Hansard Global plc

09 November 2012

 



9 November 2012

Hansard Global plc

Interim Management Statement

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its Interim Management Statement for the period from 1 July 2012 to date. All figures refer to the three months ended 30 September 2012 ("Q1 2013"), except where indicated.

Summary

·    Overall new business margin of 10.7% (Q1 2012: 9.7%) reflects the continued increase in the proportion of regular premium business, in line with the Group's stated strategy;

·    Regular premium new business flows remain resilient: £30.3m PVNBP in the quarter (Q1 2012: £33.9m), arising primarily from the growth market of the Far East;

·    Single premium flows of £8.8m have reduced from £10.6m received in Q1 2012. This reflects the impact of volatile markets, which are affecting the timing of investment decisions and the Group's strategy of focussing on more profitable regular premium new business;

·    Through profitable new business and improved market conditions, EEV at 30 September 2012 has increased marginally from £224.3m at 30 June 2012;

·    The value of Assets under Administration as at 30 September 2012 has increased to £1.05bn (30 June 2012: £1.03bn);

·    From 1 January 2013 Gordon Marr will assume the position of Group CEO, whilst the Group's founder, Dr Leonard Polonsky, will take the role of non-executive Chairman.

Leonard Polonsky, Chairman of Hansard Global plc, commented:

"Whilst new business levels are below those of the comparative period, the investment in distribution relationships means that the Group is well placed for continued growth in new business for the remainder of the year and over the longer term, despite current economic uncertainties.

I congratulate Gordon on his forthcoming appointment as Group Chief Executive Officer. For some time I have been considering separating the roles of Chairman and Chief Executive.  I see this as important for achieving Hansard's ambitions in the future.  This development will enable Gordon to focus on the execution of Hansard's strategy during the next phase of our growth, and I remain committed to supporting Gordon and the Board in my new capacity of non-executive Chairman."

For further information:

Hansard Global plc                                                                            [phone]

Leonard Polonsky, Chairman                                    

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer

Pelham Bell Pottinger                                                                      [phone]

Daniel de Belder                                                                                                                                            

Hansard Global plc

INTERIM MANAGEMENT STATEMENT

OVERVIEW

Despite continued volatility in global markets in the quarter ended 30 September 2012 (Q1 2013), new business levels remain resilient. Hansard's strategy to acquire more profitable regular premium new business continues to be rewarded. Whilst overall new business levels of £39.1m PVNBP are 12.1% lower than a very strong comparative quarter last year (Q1 2012), regular premium flows of £30.3m are buoyant and represent a 78% increase over Q1 2011. New business flows since 30 September 2012 have been higher than those of the same period last year on the Group's internal metric.

New business margins on the PVNBP basis have risen to approximately 10.7% (30 June 2012: 9.6%), primarily as a result of an increased proportion of regular premium new business.

We believe that our strategic decision to focus on non-EU markets, and the Far East and Latin America in particular, has been vindicated given the continuing instability in the eurozone.

Increases in capital market values in the quarter have been reflected in the increases in value of policyholder Assets under Administration and in the Group's embedded value at 30 September 2012, when compared with 30 June 2012.

BoaRd Changes

The Board has agreed that Gordon Marr will assume the role of Group Chief Executive Officer with effect from 1 January 2013. Dr Polonsky will remain as Chairman of the Board, with his role becoming non-executive. Mr Marr will chair the Group's Executive Committee from 1 January 2013.

As previously reported, Philip Gregory, an Independent Non-Executive Director, took over the roles of Senior Independent Director, Chairman of the Remuneration Committee and Chairman of the Nominations Committee from Bernard Asher with effect from 24 September 2012.

FINANCIAL PERFORMANCE AND POSITION - 3 MONTHS TO 30 SEPTEMBER 2012

·           International Financial Reporting Standards ("IFRS")

During the period, the Group has continued to invest in distribution and other infrastructure and to generate IFRS profits backed by strong positive cash flows. Income streams remain stable and are in line with Q1 2012. Profit after tax for Q1 2013 is marginally above Q1 2012 which reflects a reduction in unrealized foreign exchange losses from those incurred in the comparative period.

·           European Embedded Value ("EEV")

EEV operating profit continues to be generated through profitable new business written during the period, the persistency of cash flows and the lack of option instruments, guarantees or other such features within the products issued by the Group. The effect of the increases in major capital market levels in Q1 2013 has been to increase our expectations of future asset-based income streams and therefore to contribute to a marginal improvement in EEV at 30 September 2012, when compared with 30 June 2012.

·           Capitalisation and Solvency

The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory, intermediary and policyholder expectations. At 30 September 2012 the aggregate minimum regulatory margin remains covered approximately 14 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.

New Business Flows - THREE months ended 30 September 2012

New business flows for Q1 2013 are summarised as follows (comparisons to Q1 2012 are on actual currency basis):

	Q1 2013	Q1 2012	%
Basis	£m	£m	change
Compensation Credit	3.9	4.3	(9.3)%
Present Value of New Business Premiums	39.1	44.5	(12.1)%
Annualised Premium Equivalent	6.0	6.7	(10.4)%

·    Present Value of New Business Premiums ("PVNBP")

In line with the Group's strategy to acquire regular premium new business from the growth markets of the Far East and Latin America, regular premium new business levels in the quarter of £30.3m constitute some 78% of total new business (Q1 2012: 76%).  This has been achieved despite the volatile market conditions during the quarter which, among other factors, has restrained single premium investments.

This increased proportion of regular premium new business has contributed to an increase in new business margins to 10.7% (Q1 2012: 9.7%).

Reflecting the strategic focus on regular premium business, volatile market conditions and deferred investor appetite for lump-sum investing, single premium new business levels of £8.8m remain lower than the levels of the last few quarters and are 17% below Q1 2012.

	Q1 2013	Q1 2012	%
PVNBP by Premium type	£m	£m	change
Regular premium	30.3	33.9	(10.6)%
Single premium	8.8	10.6	(17.0)%
	39.1	44.5	(12.1)%

	Q1 2013	Q1 2012	%
PVNBP by residence of policyholder	£m	£m	change
Far East	19.6	16.4	19.5%
Latin America	7.0	13.1	(46.6)%
EU and EEA	8.6	9.9	(13.1)%
Rest of world	3.9	5.1	(23.5)%
	39.1	44.5	(12.1)%

Despite recent economic weaknesses in Latin America, over 68% of new business in the period is sourced from the Far East and Latin America regions (Q1 2012: 66%). We launched a new regular premium product in Latin America in early October with a view to recapturing interest from selected intermediaries in that region. We remain confident that we can build on existing relationships to enhance new business flows.

·    New business margins

The Group's strategy is to focus on generating new single and regular premium business on terms that meet target returns and contribute to profit. The new business margin is sensitive to the product mix. As a result of the higher  regular premium component of new business issued in the period, which is more profitable to the Group than single premium business, the overall new business margin is approximately 10.7% (Q1 2012: 9.7%).

HANSARD ONLINE

The Group is continuing to develop Hansard OnLine in order to implement new business initiatives. In particular, over 4,500 regular premium new business cases have been processed online by the Group since piloting commenced in November 2009, and approximately 70% of investment dealing transactions are currently processed OnLine (an increase from 60% in June this year).

Assets under Administration

A continued flow of regular premiums underpins Assets under Administration ("AuA") and are reflected in an increase of 1.3% in AuA since 30 June 2012 to £1.05bn.

The overall movement in AuA before market and currency effects illustrates the group's focus on higher margin, regular premium new business.  Future withdrawals from matured existing single premium contracts are expected to continue, with new regular premium contracts replenishing AuA at a slower rate.  We believe that moving the balance of new business towards regular premium contracts will be value enhancing in the longer term.

	Unaudited
	Q1 2013	Q1 2012
	£m	£m
Deposits to investment contracts	29.0	33.7
Withdrawals from contracts and charges	(42.8)	(48.4)
Effect of market and currency movements	27.6	(151.1)
Increase in period	13.8	(165.8)
At 1 July	1,033.8	1,229.6
Assets under Administration	1,047.6	1,063.8

There have been no significant changes since the year end in the volumes of illiquid assets or impaired fund structures held in AuA, nor in the currency composition of AuA.

LITIGATION AND POLICYHOLDER COMPLAINTS

Even though the Group does not give any investment advice, we havebeen subject to a number of policyholder complaints in relation to the selection and performance of assets linked to policies. Writs totalling €4.3m (approximately £3.5m) were served on Hansard Europe Limited during the period since the balance sheet date and to the date of this report. At time of writing, writs totalling approximately £11.5m have been served on that company. We estimate that current complaints may result in an additional £9m of legal actions in due course.

We remain confident that we will be successful following our appeal against the initial ruling in the Norwegian litigation and we anticipate continuing additional expenditure to address this and other cases.

Based on the pleadings and advice received to date from legal counsel the Group has not made any provision in respect of any complaints. The Group intends to defend itself against all claims strenuously.

Results for the half-year ENDING 31 December 2012

New business results for the half-year ending 31 December 2012 are expected to be announced on 29 January 2013. Trading results for the half-year are expected to be announced on 28 February 2013.

Outlook

We are optimistic that the Group's focus on non-EU markets including the Far East and Latin America and our continuing investment in distribution infrastructure, systems and Hansard OnLine, will position us for further growth.

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.

 

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