Interim Management Statement

RNS Number : 0217D

Hansard Global plc

10 May 2012

 



10 May 2012

Hansard Global plc

("Hansard" or "the Group")

Interim Management Statement

Hansard Global plc, the specialist long-term savings provider, issues its second interim management statement in this financial year, covering the nine month period ended 31 March 2012 ("Q3 2012"), except where indicated.

Summary

·     Overall new business margin of 9.8% (Q3 2011: 8.0%) reflects the continued increase in regular premium business, in line with the Group's stated strategy;

·      Regular premium new business to Q3 2012 is £97.2m on the basis of Present Value of New Business Premiums ("PVNBP"), primarily from the growth markets of the Far East and Latin America, an increase of 19.9% over Q3 2011 (£81.1m);

·     As a result of the Group's strategy of focusing on more profitable regular premium new business together with uncertain economic conditions, single premium new business flows of £35.7m in the period have fallen by 55.9% from Q3 2011;

·     EEV at 31 March 2012 of £239m after paying £19.1m of dividends in current  financial year;

·     IFRS profit after tax (before foreign exchange losses) continued its momentum and is line pro-rata with the rate in H1 2012;

·     Assets under Administration of £1.1bn as at 31 March 2012 are marginally above the position at 31 December 2011;

·     Over 1,500 policies have been introduced electronically in the period to Q3 2012 using the online new business facility through Hansard OnLine;

·     Increased interim dividend of 5.9p per share paid on 29 March 2012 (2011: 5.75p).

Leonard Polonsky, Chairman of Hansard Global plc, commented:

"The performance of the Group since the start of the financial year has been resilient despite the increased market volatility, particularly in the Eurozone. While global conditions remain challenging and uncertain we believe that the Group's focus on the growth markets of the Far East and Latin America and our continuing investment in distribution infrastructure, systems and online platform, will position us well for the future."

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

The Group's strategic focus on growth markets, coupled with continued investment in Hansard OnLine, has been rewarded by increasing volumes of regular premium new business volumes. On the basis of Present Value of New Business Premiums ("PVNBP"), regular premium flows of £97.2m in the nine month period ended 31 March 2012 are almost 20% above the corresponding period.

Despite increased regular premium flows, total new business flows of £132.9m in the nine months to 31 March 2012 are 18% below the corresponding period. This reflects a reduction in the number of larger, single premium, policies driven primarily by market volatility and investor uncertainty in Europe.

New business margins for the nine month period are approximately 9.8% on the PVNBP basis and have increased from 8.0% for the equivalent period last year, largely as a result of increased volumes of regular premium new business.

IFRS profit after tax (before foreign exchange losses) for the nine month period, underpinned by positive cash flows from existing policies, has continued pro rata in line with figures reported at H2 2012. As the Sterling: Euro exchange rate remained relatively stable throughout Q3 2012 no additional foreign exchange losses were incurred in the quarter relating to the Group's Euro exposures in Hansard Europe.

EEV operating profit after tax in the period is underpinned by strong new business margins from the increased levels of regular premium flows. Some improvements in capital markets values in Q3 have reversed some of the negative investment variances incurred in H1 2012. EEV at 31 March 2012 is approximately £239m, after paying dividends of £19.1m since 30 June 2011.

New Business Flows

The Group's strategic focus on growth markets, as well as continued investment in Hansard OnLine functionality and further development of relationships with financial advisors, particularly in the Far East, has contributed to increased volumes of more profitable regular premium sales in the nine month period. Regular premium new business flows are almost 20% above the level at Q3 2011, and approximately 70% of total new business flows on the PVNBP basis.

Based on current new business flows, we anticipate that the total regular premium flows for the full financial year will exceed the record level of £112.0m achieved in the financial year ended 30 June 2011.

Despite increased regular premium flows, total new business flows of £132.9m in the nine months to 31 March 2012 are 18% below the corresponding period. This reflects a reduction in the number of single premium policies driven primarily by market volatility and investor uncertainty in Europe. Single premiums in the period are £35.7m compared with £81.0m in 2011. As reported previously, large single premium cases totalling £20.0m issued in Q1 2011 have distorted the comparison to last year.

While continuing market volatility, the ongoing euro crisis and the effects of national festivities in Latin America have caused a reduction of 4% in new business in Q3 2012 from the level of Q2 2012, new business levels for the nine months based on Compensation Credit, the Group's internal metric, remain marginally above those of the corresponding period.

New business flows are summarised as follows (comparisons are on an actual currency basis):

	Nine months ended			Three months ended
	31 March			31 March
	2012	2011	%	2012	2011	%
Basis	£m	£m	change	£m	£m	change
Compensation Credit	12.5	12.1	3.3 %	3.9	4.2	(7.1)%
Present Value of New Business Premiums	132.9	162.1	(18.0)%	43.2	47.6	(9.2)%
Annualised Premium Equivalent	19.8	22.0	(10.0)%	6.3	7.0	(10.0)%

New business flows on the PVNBP basis are analysed as follows:

	Nine months ended			Three months ended
	31 March			31 March
	2012	2011	%	2012	2011	%
	£m	£m	change	£m	£m	change
Regular premium	97.2	81.1	19.9 %	29.6	33.2	(10.8)%
Single premium	35.7	81.0	(55.9)%	13.6	14.4	(5.6)%
Total	132.9	162.1	(18.0)%	43.2	47.6	(9.2)%

	Nine months ended			Three months ended
	31 March			31 March
	2012	2011	%	2012	2011	%
	£m	£m	change	£m	£m	change
Far East	52.2	42.6	22.5 %	16.6	17.5	(5.1)%
EU and EEA	32.9	42.2	(22.0)%	11.9	12.0	(0.8) %
Latin America	31.2	37.2	(16.1)%	8.1	12.4	(34.7)%
Rest of world	16.6	40.1	(58.6)%	6.6	5.7	15.8%
Total	132.9	162.1	(18.0)%	43.2	47.6	(9.2)%

New business margins

Higher levels of regular premium business from growth markets are reflected in the increased new business margin, when compared to Q3 2011. New business margins on the PVNBP basis for the nine month period were approximately 9.8% (H1 2012: 10.4%, Q3 2011: 8.0%). These margins are well above the industry average, principally due to the Group's continued focus on the value of new business.  The marginal reduction in the volume of new business since Q2 2012 and in the proportion of regular premium business compared with the previous quarters has caused a slight reduction in the cumulative margin since H1 2012.

Hansard OnLine

The Group continues to invest in distribution and other infrastructure in order to access additional sources of regular premium new business, and to enhance existing relationships with IFAs and other intermediaries in the Group's target markets. In particular the online new business facility through Hansard OnLine continues to be implemented and over 1,500 policies have been introduced electronically to Q3 2012 by those financial advisors using the functionality. This represents approximately 75% of regular premium policies in the period to Q3 2012.

Functionality to support OnLine dealing and OnLine fund switching continues to be piloted with a number of intermediaries.

FINANCIAL PERFORMANCE AND POSITION - NINE MONTHS TO 31 MARCH 2012

·           International Financial Reporting Standards ("IFRS")

IFRS profit, before foreign exchange losses, for Q3 has continued pro rata in line with the results reported in H2 2012. As the Sterling: Euro exchange rate remained relatively stable throughout Q3 2012 no additional foreign exchange losses were incurred in the quarter relating to the Group's Euro exposures in Hansard Europe. Continued uncertainty in the Eurozone may result in additional unrealised foreign exchange losses in Q4, to the extent that Sterling continues to strengthen against the Euro.

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.  An initial hearing into particular complaints was held in Norway in the last week of April. While judgement in this case is not expected to be delivered until the end of May 2012, based on the pleadings and advice received to date, the Group has not made any provision in respect of any complaints. Additional legal and professional fees of approximately £0.3m in relation to these actions will impact on IFRS results in Q4.

·           European Embedded Value ("EEV")

The 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, have continued to generate EEV operating profits. EEV operating profit after tax in the three month period to 31 March 2012, underpinned by strong new business margins from the increased levels of regular premium flows, continued to increase, although at a rate marginally lower than that experienced in the first half of the financial year.

Some improvements in capital market values in the period to 31 March 2012 has reversed some of the negative investment variances incurred in H1 2012 and, following the increased dividend of 5.9p per share paid on 29 March 2012, EEV at 31 March 2012 was approximately £239m (Q3 2011: £255m).

·           Capitalisation and Solvency

The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory and shareholder expectations. At 31 March 2012 the aggregate minimum regulatory margin remains covered approximately 12.5 times (Q3 2011: 12.7 times) by the Group's capital resources.

The Group's solvency position is well insulated against uncertain capital market conditions. The Group's liquid assets are held with a wide range of deposit institutions and in highly-rated money market liquidity funds.

Assets under Administration

The value of Assets under Administration ("AuA") at 31 March 2012 is £1.1bn, a decrease of 14.3% since 30 June 2011. The improvement in market levels seen in Q3 2012 is reflected in the positive £26.7m movement in AuA values. As discussed previously, the change in the mix of new business towards more profitable regular premiums is reflected in predictable positive cash flows that are offset by withdrawals of larger single premium contracts.

	Nine months ended		Three months ended
	31 March		31 March
	2012	2011	2012	2011
	£m	£m	£m	£m
Deposits to investment contracts	101.6	139.8	35.6	32.9
Withdrawals from contracts and charges	(151.6)	(153.5)	(57.6)	(63.0)
Effect of market and currency movements	(125.8)	146.0	26.7	(6.2)
Increase in period	(175.8)	132.3	4.7	(36.3)
Opening balance	1,229.6	1,134.7	1,049.1	1,303.3
Assets under Administration	1,053.8	1,267.0	1,053.8	1,267.0

There have been no significant changes since 31 December 2011 in the volumes of illiquid assets or impaired fund structures held in AUA, nor in the currency composition of AUA.

Results for the FINANCIAL year

New business results for the year ending 30 June 2012 are expected to be announced on 31 July 2012. Trading results for the year are expected to be announced on 27 September 2012.

Outlook

While global conditions remain challenging and uncertain we believe that the Group's sustained focus on the growth markets of the Far East and Latin America and our continuing investment in distribution infrastructure, systems and online platform, will position us well for the future.

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 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 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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