Interim Results

RNS Number : 9014N

Hansard Global plc

26 February 2009

 



Hansard Global plc

Results for the six months ended 31 December 2008

Hansard Global plc ('Hansard' or 'the Group'), the specialist long-term savings provider, issues its results for the six months ended 31 December 2008. In unprecedented market conditions the Group has achieved a resilient profit performance during the six-month period, with positive cash flows underpinning dividend payment capability. The EEV has increased by 10.2% to £267.9 million at 31 December.

Highlights

• IFRS profit after tax up 0.8% to £12.7 million (31 December 2007: £12.6 million)

• IFRS earnings per share up 1.1% to 9.3 pence (2007: 9.2 pence)

• Interim dividend per share increased by 5% to 5.25 pence (April 2008: 5.0 pence)

• Assets under Administration resilient at £1.09 billion, down 4.4% from £1.14bn at 30 June 2008. (31 December 2007: £1.22 billion)

• Strong cash flows and liquid assets of £73.2 million (30 June 2008: £69.7 million) with no borrowings

• EEV profit after tax up 20.3% to £34.4 million (2007: £28.6 million)

• EEV at 31 December of £267.9 million, up 10.2% from £243.1 million at 30 June 2008

• New business premiums of £93.0 million on PVNBP basis (2007: £130.5 million)

• Industry-leading new business margins of 7.0% on PVNBP basis

Leonard Polonsky, Chief Executive of Hansard Global, commented:

'Performance in the six months to 31 December 2008 underlined the resilience of the Hansard business model. In unprecedented financial market conditions, we increased pre-tax IFRS profits by 3% to £13.1m and have continued to generate positive operating cash flows. The financial position of the Group remains very strong with no borrowings.

The Group's confidence in its future prospects is reflected in the Board's decision to increase the interim dividend by 5% to 5.25 pence per share.

EEV at 31 December 2008 is £267.9m, 10% ahead of the EEV at 30 June 2008. The Group's EEV has increased despite reductions in EEV operating profit caused by restrained new business flows, and the payment of a dividend of £9.6m in November 2008.

The volatility in global stock markets and deteriorating economic indicators have led to the most challenging environment for the wealth management sector for many years. We have, however, retained our focus on profitability and positive cash flow generation. Whilst new business was, in common with other industry participants, significantly restrained, new business flows have been achieved at industry-leading margins, and the Group has continued to generate net positive inflows from policyholders. 

Retention of Assets under Administration has been encouraging. At 31 December 2008 assets under administration were £1.09bn, down only 4.4% since 30 June 2008. Reflecting the global distribution of our policyholder base, market value reductions have been partially offset by positive currency movements.

We expect that IFRS profits and EEV operating results for the second half will be in line with the underlying profits of the first half. While it remains difficult to forecast new business accurately at present, we also expect that new business flows will continue to be significantly restrained in the short term. We are confident that our business model and prospects remain strong, expect continued profitability and maintain 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

Chairman's Statement

I am pleased to report that the performance of the Group in the first six months of this financial year underlined the resilience of the Hansard business model. Against the backdrop of challenging financial markets, we increased pre-tax IFRS profits by 3% to £13.1 million. We have continued to generate positive operating cash flows and we have increased our interim dividend by 5% to 5.25 pence per share. The financial position of the Group remains very strong with no borrowings.

New business flows have been achieved at industry-leading margins and the Group has continued to generate net positive inflows from policyholders. 

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER 2008

The IFRS profit after tax for the period was £12.7m, including foreign exchange gains of £2.7m (2007: £1.4m), marginally higher than the profit of £12.6m earned in the corresponding period of the previous financial year. Given global stock market volatility and our increased investment in distribution infrastructure and ancillary activities in the period, these results serve to illustrate the strength of our business model. Earnings per share are 9.3 pence (2007: 9.2p).

Throughout the period under review the Group has written new business on profitable terms and has maintained new business margins that meet the Group's return requirements. The EEV of the Group, following the payment of dividends totalling £9.6m in November 2008, has risen to £267.9m, an increase of 10.2% from the value at 30 June 2008. 

The EEV profit for the period is £34.4m, an increase of 20.3% over the corresponding period. EEV profits for the period have been increased by the effects of Sterling's weakness, and a reduction in the risk-free discount rate used (reflecting current interest rates in the market). 

DIVIDENDS

The Board has considered the results and the Group's continued cash flow generation and, despite the ongoing global economic frailties, has resolved to increase the interim dividend by 5% to 5.25 pence per share (April 2008: 5p). This will be paid on 1 April 2009 to those shareholders on the Register at the close of business on 5 March 2009.

Shareholders will be aware that on 27 November 2008 the Company paid a final dividend of 7p per share. Including the interim dividend referred to above, this results in amounts totalling 12.25p per share or £16.8m being paid during this financial year.

We have made arrangements to allow shareholders to receive the proposed dividend in US Dollars, if they require.

NEW BUSINESS

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

The volatile global stock markets and deteriorating economic indicators have led to the most challenging environment for the wealth management sector for many years. We have however retained our focus on profitability and positive cash flow generation. Whilst new business was, in common with other industry participants, significantly restrained, new business flows have been achieved at industry-leading margins and the Group has continued to generate net positive inflows from policyholders' investments in their contracts.

New business flows for the six-month period ended 31 December 2008 are summarised as follows (comparisons on actual currency basis).

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

Recruitment and other activity continues to provide new distribution capability for the Group in new markets, strengthen existing relationships and expand the range of investment opportunities for policyholders.

FINANCIAL INVESTMENTS

The value of financial investments to cover liabilities under investment contracts as at 31 December 2008, at £1.09 billion, has fallen by only 10.7% since 31 December 2007, despite the fall in capital markets throughout 2008 that is reflected in a decline of 31% in the MSCI World index over that period and 24% decline in the FTSE 100 index. 

The retention of these investments reflects positive cash flows and the flexible nature of our products allowing policyholders the ability to determine the investment mix held within policy contracts. This has reduced the level of withdrawals relative to those experienced by a number of retail funds over the period. The diverse nature of assets under administration has helped to protect the Group from the worst of the market uncertainties during the period.

We continue, however, to be advised of instances in which fund structures selected by policyholders have been affected by market volatility, illiquidity and other factors that might impact on the redemption value of those funds, and therefore on the value of the Group's liability to the policyholder. 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, and so the Group itself is not directly exposed to these factors. 

CAPITALISATION AND SOLVENCY

The Group continues to be substantially capitalised to satisfy operational, regulatory and Policyholder expectations. At the balance sheet date the aggregate minimum regulatory margin was covered 15.7 times (2007:15.6 times) by the Group's capital.

The Group's liquid assets are held with a wide range of deposit institutions and in highly-rated money market liquidity funds. . These investments are made in accordance with established policies regarding minimum credit rating profile. The Group had no borrowings during the period or at the period end (31 December 2007: £Nil).

EMPLOYEES AND INTERMEDIARIES

The volatile world stock markets and deteriorating economic indicators throughout the period have led to the most challenging environment for employees, Account Executives, investors and intermediaries for many years.  On behalf of the Board and shareholders I would like to thank everyone connected with Hansard for their dedication and contribution to the first half of this financial year.

SIGNIFICANT SHAREHOLDINGS

At the date of this report I have the largest beneficial shareholding in the Company, being approximately 42% of the issued share capital. The Polonsky Foundation has 5.4%. Other significant shareholdings notified to us at the date of this report are F&C Asset Management with 5.3% and Lloyds Banking Group Plc with 5.0%.

OUTLOOK

We expect that IFRS profits and EEV operating results for the second half will be in line with the underlying profits of the first half. While it remains difficult to forecast new business accurately at present, we also expect that new business flows will continue to be significantly restrained in the short term. We will continue to manage our cost base effectively.

We are confident that our business model and prospects remain strong, expect continued profitability and maintain a positive outlook for a resumption in new business growth in the longer term. 

Dr L S Polonsky

Chairman

25 February 2009

Interim Management Report

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER 2008

Introduction

Financial results for the six months ended 31 December 2008 are presented on two reporting bases: International Financial Reporting Standards, as adopted by the EU ('IFRS'), and European Embedded Value (''EEV''). IFRS is the primary accounting basis and commentary on the Group's IFRS results for the period under review, is set out in section 1 below.

In addition to IFRS reporting, the Group prepares embedded value information in accordance with the EEV methodology. In the Directors' opinion, the EEV information, read in conjunction with the other financial information produced by the Group, provides a helpful insight into the financial performance of the Group year on year. Commentary on the Group's results for the period under review, reported on the EEV basis, is set out in section 2 below.

1.    Results for the six months ended 31 December 2008

The performance of the Group under IFRS remained resilient despite the unprecedented volatility in global capital markets. The profit for the period before tax is £13.1 million, an increase of 3.1% over the profit of £12.7m for the corresponding period of the previous financial year.

Taxation for the period, attributable largely to the operations of Hansard Europe Limited, is £0.4m (2007: £0.1m). Profit after taxation for the period is £12.7m, (2007: £12.6m), an increase of 0.8%. Earnings per share are 9.3 pence, (2007: 9.2p).

1.1    Income

Fees and commissions for the period are £25.7m, compared with £26.9m for the corresponding period of the previous financial year, a decrease of 4.5%.

Fees and charges earned from investment contracts are 3.7% lower than in the corresponding period, as a result of reductions in asset values. Decreases in Central Bank base rates have caused declines in asset-based income streams and in interest income during the period but, as expected, provided a positive impact on the valuation of the UK Treasury Stock held by a subsidiary company. Group investment income for the period incorporates £1.0m from this source. 

Capital market falls have lowered investment income derived from policyholder assets under administration and from Group activities and so investment income is reflected as negative, reducing policyholder assets under administration by £50.0m.

As a result of the weakness of Sterling against major currencies, principally the US Dollar and Euro, which gained 38% and 20% respectively against Sterling over the period, amounts totalling approximately £2.7m (2007: £1.4m) are reflected as foreign exchange gains in the period following revaluation of net operating assets.

1.2    Expenses 

Total origination, administrative and other expenses for the period are £19.0m, an increase of 2.2% over the level of those expenses incurred in the corresponding period.

In line with the reporting of expenses for the year ended 30 June 2008, origination costs for the corresponding period have been restated to include certain new business related costs of £1.1m expensed as incurred in that period and previously disclosed under administrative and other expenses. There has been no impact on prior period profit as a result of the restatement.

Set out below is a summary of expense performance during the period:

1.2.1 Origination costs

Origination costs include new business commissions, intermediary incentives and other distribution-related expenditure.

Origination costs and other directly attributable incremental costs incurred on the issue of a policy are deferred and amortised over the life of the relevant contract.

New business costs are largely as expected having regard to new business levels during the period and incentive arrangements in place. Other origination costs incurred reflects investment in Account Executives and supporting distribution resources in line with our stated strategy.

1.2.2 Administrative and other expenses

A summary of Administrative and other expenses is set out below:

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Employee costs	4.7	4.1	8.6
Other expenses and professional fees	4.0	3.4	7.2
Investment management fees	2.0	2.0	3.7
	10.7	9.5	19.5

The increase in administrative expenses for the period is largely a reflection of investment in contract servicing and product development resources and ancillary activities in the previous year.

The Group maintains a rigorous focus on expense levels. In recognition of the continued decline in investor confidence and the impact on new business levels, the Group has implemented initiatives to reduce administrative and other expenses by approximately £1m over the course of the next 15 months, without reducing headcount. The need to maintain these, or other, initiatives will be reviewed as market conditions determine.

1.3    Taxation

The Group's profits arising from its Isle of Man-based operations continue to be taxable at zero percent. A provision of £0.4m for Corporation Tax has been included in these financial statements, based primarily on the tax rate of 12.5% levied in the Republic of Ireland on the taxable income for the period. 

1.4     Cash Flows 

Operating cash flows in the period were strongly positive, allowing the Group to fund new business from its own resources, continue to invest in its sales force and support teams, and pay dividends. Cash and cash equivalent balances, excluding those held to cover liabilities under investment contracts, at 31 December 2008 stood at £59.3m. Following the dividend payment totalling £9.6m in November 2008, this represents an increase of £2.7m since 30 June 2008, highlighting the strength of the positive cash flows arising from Group's book of business.

1.5    Dividends

The Board has considered the results and the Group's continued cash flow generation and, despite the ongoing global economic frailties, has resolved to increase the interim dividend by 5% to 5.25 pence per share (4 April 2008: 5p). This will be paid on 1 April 2009 to those shareholders on the Register at the close of business on 5 March 2009.

Shareholders who elect, prior to the record date, to receive the proposed dividend in US Dollars, will be paid using the exchange rate on 5 March 2009.

1.6    Financial investments

Retention of Assets under Administration ('AUA') remains strong. Positive net inflows 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. 

Note 10 to the consolidated financial statements summarises the composition of net assets held to cover financial liabilities, and indicates an increase in policyholder deposits and liquid assets to £170.4m at 31 December 2008 from £109.6m at 30 June 2008. This reflects the flight to safety from volatile equity markets and the diversity of fund choice offered by Hansard to policyholders. 

Despite the significant declines in global capital markets over the six months ended 31 December 2008, the value of AUA at that date, at £1.09 billion, has fallen by only 4.4% from £1.14bn at 30 June 2008. 

As a result of the diversified portfolio of investments held to cover financial liabilities, the value of AUA at the balance sheet date has not been materially impacted by the increasing volumes of illiquid assets or impaired fund structures in the market 

In the period since the balance sheet date, Group insurance companies have been notified of a number of instances in which fund structures selected by policyholders have been adversely affected by market volatility, illiquidity and other factors that might impact on the redemption value of those fund structures. The value of funds held at the balance sheet date for which such notifications have been received is £42.2m or less than 4% of AUA. The impact of any value adjustments to these holdings will be immaterial to the value of investments.

Reductions in AUA arising from any value adjustments will cause declines in the Group's future asset-based income streams, but will not affect the Group's capital position. 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 value adjustments will result in a corresponding adjustment to financial liabilities under investment contracts.

1.7 Protected Funds

Volatility in global capital markets and the sharp falls in asset values had the anticipated impact on the composition of the Protected funds totalling approximately £200m administered by the Group insurance companies. These funds offered downside protection in volatile capital markets and have been successful in protecting policyholder investment values since launch. At 31 December 2008 these funds were invested largely in cash and cash equivalents. A new tranche of protected funds to further support policyholders' and intermediaries' requirements was launched in February 2009.

1.8 Shareholder cash and liquid assets

As indicated above, cash and cash equivalents disclosed on the consolidated balance sheet include amounts held within policyholders' AUA. The following table analyses cash and cash equivalents in the consolidated balance sheet between those balances relating to policyholder activity and those of the Group. Despite the payment of dividends, the Group's liquid assets continue to increase to meet operational, regulatory and policyholder expectations.

	31 December		30 June
	2008	2007	2008
	£m	£m	£m
Shareholder cash and cash equivalents	59.3	56.0	56.6
Policyholder AUA	170.4	88.6	109.6
Cash and cash equivalents	229.7	144.6	166.2

The Group had no borrowings during the period or at the period end (2007: £Nil).

2.    EEV Information

The EEV is an estimate of the value of the shareholders' interest in the life and related businesses of the Group, represented by the total of the Net Worth of the Group and the value of future profits from business written by the Group as at the relevant valuation date (in-force business). The methodology used to derive the EEV at 31 December 2008 and at 31 December 2007 is consistent with the methodology used in the consolidated financial statements in respect of the year ended 30 June 2008. 

2.1    EEV Profit

The EEV profit after tax provides a measure of the Group's performance over the period.  

EEV profit for the period has been impacted by market conditions affecting the level of new business. After an adjustment of £2.7m for the effect of premium reductions, the EEV operating profit for the six months is £11.3m (2007: £17.3m), a decrease of 34.7%. The EEV operating profit was underpinned by the profitable new business written during the period, the relative persistency of cash flows and the lack of options, guarantees or other such features within the products issued by the Group. 

Extreme market conditions during the six months caused declines in market values, leading to a reduction of £27.8m (2007: £2.5m gain) in EEV profit, reflecting a lower level of fund growth than expected, offset by gains of £44.6m (2007: £6.8m gain) from the Group's diversified exposure to different currencies. The EEV profit for the period is £34.4m (2007: £28.6m). 

A summary of the effect of the factors impacting on the calculation of EEV is set out later in these condensed consolidated half-yearly financial statements.

2.2    Analysis of Embedded Value

Throughout the period, the Group has written new business on profitable terms and at industry-leading margins. These factors have contributed to the growth in the Group's EEV. The EEV of the Group, following the payment of dividends totalling £9.6m in November 2008, has risen to £267.9m, an increase of 10.2% from the value at 30 June 2008. 

The table below provides a summarised breakdown of the EEV at the reporting dates.

	31 December		30 June
	2008	2007	2008
	£m	£m	£m
Net Worth	61.4	53.0	56.9
Value of future profits	206.5	178.5	186.2
European Embedded Value	267.9	231.5	243.1

Net Worth is the market value of shareholders' funds adjusted to exclude certain accounting items such as deferred origination costs and deferred income reserve. At the balance sheet date, cash and cash equivalents and short-term UK Treasury stocks represent the Net Worth of the Group. 

3.    New business 

Despite the turmoil in global financial markets, which deteriorated during the last quarter of 2008, the Group has achieved 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 during the period was 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, mitigated in part by 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, compared with the corresponding period.

We continue to develop institutional and other relationships with a view to building our distribution and expanding the range of investment opportunities for Policyholders.

3.1    New business volume for the six months ended 31 December 2008

New business sales volumes are expressed in terms of the Group's internal metric, Compensation Credit ('CC'), Annualised Premium Equivalent ('APE') and the Present Value of Future New Business Premiums (''PVNBP''). 

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. New business premiums received in currencies other than Sterling are translated at the rates of exchange ruling on the transaction date. 

A summary of new business flows on each metric is set out below. Comparisons against the corresponding period are on an actual currency basis. 

	Six months ended			Year ended
	31 December	31 December		30 June
	2008	2007	Change	2008
	£m	£m	%	£m
CC	6.7	9.0	(25.6)%	17.0
APE	12.3	17.1	(28.1)%	33.7
PVNBP	93.0	130.5	(28.7)%	261.8

3.1.1 New business summary

The tables below provide a summarised breakdown of New Business APE, analysed between single and regular premium cases, and also by residence of policyholder, with comparisons on an actual currency basis:

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
By type of product
Annualised regular premiums	7.0	9.4	18.5
Single premiums	5.3	7.7	15.2
	12.3	17.1	33.7

By geographical area
EU and EEA	4.2	6.0	12.9
Latin America	3.1	2.6	5.4
Far East	2.9	6.0	10.8
Rest of world	2.1	2.5	4.6
	12.3	17.1	33.7

In line with the Group's principal new business production areas, approximately half of new business premiums continue to be received in US Dollar, with a further 30% received in Euro. 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.

The calculation of APE is in accordance with the life assurance industry convention of adding new annualised regular premiums and one tenth of single premiums.

3.1.2 New business margin 

The new business margin, being the contribution from new business expressed as a percentage of PVNBP in sterling terms, has narrowed to 7.0%, but remains 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 7.8% reported for the previous financial year.

The calculation of PVNBP is equal to total single premium sales in the period plus the discounted value of premiums expected to be received over the term of new regular premium policies, and is calculated at the point of sale. 

3.2    New business developments

The Group continues to develop further intermediary relationships with a view to building our distribution platform and expanding the range of investment opportunities for policyholders.

3.2.1    Hansard International Limited Far East Branch

Hansard International Limited, the Isle of Man-based subsidiary, established a branch in Labuan in January 2009 as part of the Group's strategy to expand and diversify its business in the Far East region. This 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.  

 3.2.2    Recruitment of Account Executives

Despite global market volatility, selective recruitment of Account Executives (AEs) continues, in line with the Group's policy of expanding its reach amongst suitable intermediaries in the Group's target markets. At 31 December 2008 the Group has a total of 19 AEs (31 December 2007: 14) providing local language and other support to intermediaries.

Since 1 January 2009 a certain amount of resource has been reallocated following the resignation of 2 AEs. An individual has been recruited to service the Far East, while we intend to recruit a further individual for Latin America in the near future. Recruitment activity continues in various markets to increase the number of AEs by year-end.

3.2.3    Development of Hansard OnLine

The development of Hansard OnLine has continued, with reports now available in Chinese and Japanese. Brokers can now upload scanned documents directly to the company, reducing the need (and eliminating the cost) in a number of cases for copies to be faxed or couriered. Clients can now see copies of correspondence issued by the life companies via their client sites.

4.    Net Asset Value

The net asset value per share ('NAV') at 31 December 2008, on an IFRS basis, is 40.4p. Following the payment of interim and final dividends totalling 12p per share since 31 December 2007, this represents an increase of 14.2% from the NAV at that date. The NAV is based upon the consolidated shareholders' funds at the balance sheet date divided by the number of shares in issue at that date, being 137,281,202 ordinary shares.

On the EEV basis, the NAV at 31 December 2008 is 195.1p. This represents an increase of 15.7% or 26.5p from 31 December 2007.

5.    Capitalisation and Solvency

The Group continues to be substantially capitalised to satisfy operational, regulatory and Policyholder expectations. At the balance sheet date the Group's capital position in relation to the regulatory requirements of subsidiary companies is as set out below. The aggregate minimum regulatory margin is covered 15.7 times (2007:15.6 times) by the Group's capital resources.

	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Shareholder cash and cash equivalents	59.3	56.0	56.6
UK Treasury Stock	13.9	9.9	12.9
Other net assets	0.1	2.8	2.4
Total capital available to meet regulatory capital requirements	73.3	68.7	71.9
Aggregate minimum regulatory margin	4.4	4.4	4.4

The following factors are relevant to an understanding of the Group's capital position:

• The relatively low minimum solvency requirement reflects the fact that the group does not have options or guarantees on its investment portfolio, is not exposed to longevity risk through an annuity book and uses a prudent reassurance programme to manage the mortality and morbidity risks of the life businesses.
• Assets supporting solvency requirements are prudently managed.
• The Group had no borrowings during the period or at the period end.

6.    Operational and financial risks

6.1    Risks relating to the Group

The Board believes that the principal risks facing the Group are those relating to the operation of the Group's business model and to the environment within which the Group operates. The Group has designed its products, distribution methods and cost base with a view to reducing operational and financial risk. The principal risks facing the Group are those identified in the Annual Report & Accounts for the year ended 30 June 2008 (on pages 6 to 7). 

An Enterprise-wide Risk Management framework for managing the significant risks faced by the Group is in place. Details of the framework are contained in the Corporate Governance section of the Annual Report & Accounts.

6.2 Risk profile

The factors affecting the Group's risk profile are kept under continual review.

Despite the adverse economic, political and market factors experienced during the period, there have been no significant changes in the Group's risk profile. The market factors are however likely to persist throughout the remainder of the financial year and will continue to challenge the Group in terms of levels of new business, valuation and retention of Assets under Administration and in the operational response to market activity.

A summary of the principal financial risks faced by the Group, and an estimate of potential financial impact on IFRS results, is set out in note 15 to the financial statements. Additionally, the EEV Information includes a summary of the sensitivity of the Group's EEV results to economic and other factors.

Condensed consolidated financial statements for the half-year ended 31 December 2008 (Unaudited)

Consolidated Income Statement
					Six months ended		Year ended
					31 December	31 December	30 June
					2008	2007	2008
				Notes	£m	£m	£m
Fees and commissions				5	25.7	26.9	53.3
Investment income					(43.8)	78.8	9.9
Other operating income					0.2	0.3	0.5
					(17.9)	106.0	63.7
Investment contract benefits				11	50.0	(74.7)	(2.5)
Origination costs					(8.3)	(9.1)	(18.1)
Administrative and other expenses					(10.7)	(9.5)	(19.5)
					31.0	(93.3)	(40.1)
Profit on ordinary activities before taxation				6	13.1	12.7	23.6
Taxation on profit on ordinary activities				7	(0.4)	(0.1)	(0.3)
Profit for the period after taxation					12.7	12.6	23.3

Earnings Per Share
				Six months ended		Year ended
				31 December	31 December	30 June
				2008	2007	2008
			Note	(p)	(p)	(p)
Basic			8	9.3	9.2	17.0
Diluted			8	9.3	9.2	17.0

Consolidated Statement of Changes in Equity for the six months ended 31 December 2008
			Share	Other	Retained
			capital	reserves	earnings	Total
		Note	£m	£m	£m	£m
Shareholders' equity at 30 June 2007			68.6	(48.5)	31.0	51.1
Profit for the financial period, being total recognised income for the period			-	-	12.6	12.6
Dividends		9	-	-	(15.1)	(15.1)
Shareholders' equity at 31 December 2007			68.6	(48.5)	28.5	48.6

			Share	Other	Retained
			capital	reserves	earnings	Total
		Note	£m	£m	£m	£m
Shareholders' equity at 30 June 2008			68.6	(48.5)	32.3	52.4
Profit for the financial period, being total recognised income for the period			-	-	12.7	12.7
Dividends		9	-	-	(9.6)	(9.6)
Shareholders' equity at 31 December 2008			68.6	(48.5)	35.4	55.5

Consolidated Balance Sheet
					31 December		31 December	30 June
						2008	2007	2008
				Notes		£m	£m	£m
Assets
Deferred origination costs						104.6	98.9	102.5
Property, plant and equipment						1.2	1.0	0.9
Financial investments						928.8	1,130.2	1,034.1
Equity securities						63.2	100.8	50.6
Investments in collective investment schemes						805.5	970.7	920.2
Fixed income securities						60.1	58.7	63.3
Other receivables						23.5	25.7	21.7
Cash and cash equivalents						229.7	144.6	166.2
Total assets						1,287.8	1,400.4	1,325.4
Liabilities
Financial liabilities under investment contracts				10, 11		1,093.4	1,217.4	1,137.4
Deferred income reserve						121.0	113.8	116.5
Amounts due to investment contract holders						10.3	12.9	11.0
Other payables						7.6	7.7	8.1
Total liabilities						1,232.3	1,351.8	1,273.0
Net assets						55.5	48.6	52.4
Shareholders' equity
Called up share capital				12		68.6	68.6	68.6
Other reserves						(48.5)	(48.5)	(48.5)
Retained earnings						35.4	28.5	32.3
Total shareholders' equity						55.5	48.6	52.4

Consolidated Cash Flow Statement
						Six months ended		Year ended
						31 December	31 December	30 June
						2008	2007	2008
						£m	£m	£m
Cash flow from operating activities
Profit before tax for the period						13.1	12.7	23.6
Adjustments for:
Depreciation						0.3	0.2	0.5
Dividends receivable						(1.6)	(1.5)	(3.1)
Foreign exchange gains						(2.7)	(1.4)	(2.5)
Interest receivable						(4.1)	(3.6)	(7.2)
Unrealised (gain) / loss on shareholder investments						(1.0)	(0.1)	0.2
Changes in operating assets and liabilities
(Increase) / decrease in debtors						(3.6)	(3.9)	0.7
Dividends received						1.6	1.5	3.1
Interest received						4.1	3.2	6.9
Increase in deferred origination costs						(2.1)	(4.3)	(7.9)
Increase in deferred income reserve						4.5	3.9	6.6
(Decrease) / increase in creditors						(1.7)	1.6	(0.1)
Decrease/ (increase) in financial investments						66.3	(67.4)	31.7
(Decrease) / increase in financial liabilities						(21.4)	83.6	(0.1)
Cash generated from operations						51.7	24.2	52.4
Cash flows from investing activities
Purchase of tangible assets						(0.5)	(0.4)	(0.6)
Purchase of investments						-	(9.9)	(13.2)
Net cash flows from investing activities						(0.5)	(10.3)	(13.8)
Cash flows from financing activities
Dividends paid						(9.6)	(15.1)	(22.0)
Net increase / (decrease) in cash and cash equivalents						41.6	(1.2)	16.6
Cash and cash equivalents at beginning of period						166.2	140.9	140.9
Effect of exchange rate changes						21.9	4.9	8.7
Cash and cash equivalents at period end						229.7	144.6	166.2

The notes form an integral part of these condensed consolidated half-yearly financial statements.

Notes to the Condensed Consolidated Financial Statements

1    General information

The principal activity of the Company is to act as the holding company of the Hansard Group of companies. The activities of the principal operating subsidiaries include the transaction of life assurance business and related activities. 

The Company has its primary listing on the London Stock Exchange.

These condensed consolidated half-yearly financial statements were approved for issue on 25 February 2009.

These condensed consolidated half-yearly financial statements do not comprise statutory accounts and are unaudited. The board of directors approved the statutory accounts for the year ended 30 June 2008 on 23 September 2008. The report of the auditor on those accounts was unqualified and did not contain an emphasis of matter paragraph.

2    Basis of presentation

These condensed consolidated half-yearly financial statements for the half-year ended 31 December 2008 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority ('DTR') and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated half-yearly financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2008, which were prepared in accordance with International Financial Reporting Standards, as adopted by the EU.

Except where otherwise stated, all figures included in the condensed consolidated half-yearly financial statements are stated in pounds sterling, which is also the functional currency of the Company, rounded to the nearest hundred thousand pounds.

In line with the reporting of expenses for the year ended 30 June 2008, origination costs for the period ended 31 December 2007 have been restated to include certain new business related costs of £1.1m expensed as incurred in that period and previously disclosed under administrative and other expenses. There has been no impact on prior period profit as a result of the restatement.

3    Accounting policies

Except as described below, the significant accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2008 and can be accessed on the Company's website: www.hansard.com.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

4    Segmental information

In the opinion of the directors, the Group operates in a single business segment, that of the distribution and servicing of long-term investment products through the Group's subsidiaries. 

A summary of APE by region is contained in the Interim Management Report. Other segmental information is provided below. Revenues and expenses allocated to those locations reflect the revenues and expenses generated in or incurred by the legal entities in those locations.

4.1 Geographical analysis of fees and commissions by origin

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Isle of Man	19.3	20.9	41.8
Republic of Ireland	6.4	6.0	11.5
	25.7	26.9	53.3

4.2 Geographical analysis of profit before taxation

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Isle of Man	8.9	9.8	18.3
Republic of Ireland	4.2	2.9	5.3
	13.1	12.7	23.6

4.3       Geographical analysis of gross assets

	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Isle of Man	822.7	952.4	873.0
Republic of Ireland	465.1	448.0	452.4
	1,287.8	1,400.4	1,325.4

4.4       Geographical analysis of gross liabilities

	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Isle of Man	786.2	916.2	833.5
Republic of Ireland	446.1	435.6	439.5
	1,232.3	1,351.8	1,273.0

5     Fees and commissions 

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Contract fee income	17.6	17.9	35.4
Fund management charges	6.1	6.7	13.0
Commission receivable	2.0	2.3	4.9
	25.7	26.9	53.3

6      Profit on ordinary activities before taxation

Profit is after the following:

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Unrealised gains / (losses) on Shareholder investment assets	1.0	0.1	(0.2)
Foreign exchange gains on revaluation of net operating assets	2.7	1.4	2.5

7    Taxation

The Group's profits arising from its Isle of Man-based operations are taxable at zero percent. Corporation tax for the Republic of Ireland-based operations is based on the effective annual rate for taxable income of 12.5%, applied to the expected taxable profits for the period. 

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Corporation tax	0.4	0.1	0.3

The charge of £0.1m in the corresponding period, and of £0.3m for the year ended 30 June 2008, reflects the utilisation of prior period tax losses of £0.9m in that financial year.

8     Earnings per share

Earnings per share is based upon the profit for the period after taxation divided by the average number of shares in issue throughout the period. There is no significant difference between earnings per share and fully-diluted earnings per share.

		Six months ended		Year ended
		31 December	31 December	30 June
		2008	2007	2008
Profit after tax (£m)		12.7	12.6	23.3
Weighted average number of shares in issue		137,281,202	137,281,202	137,281,202
Earnings per share in pence		9.3	9.2	17.0

9      Dividends

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Final dividend of 7p per share paid on 27 November 2008	9.6	-	-
Interim dividend of 5p per share paid on 4 April 2008	-	-	6.9
Final dividend of 6p per share paid on 23 November 2007	-	8.2	8.2
Special dividend of 5p per share paid on 23 November 2007	-	6.9	6.9
Total	9.6	15.1	22.0

The directors have resolved to pay an interim dividend of 5.25 pence per share. This amounts to £7.2m and will be paid on 1 April 2009 to shareholders on the register at 3 March 2009. This interim dividend has not been recognised as a liability in these half-yearly financial statements.

10    Financial investments held to cover liabilities

The following investments, other assets and liabilities are held to cover financial liabilities under investment contracts. They are included within the relevant headings on the consolidated balance sheet.

	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Assets
Equity securities	63.2	100.8	50.6
Investment in collective investment schemes	805.2	970.6	920.1
Fixed income securities	46.2	48.8	50.4
Cash and cash equivalents	170.4	88.6	109.6
Other receivables	10.5	10.4	8.8
Total	1,095.5	1,219.2	1,139.5
Other payables	(2.1)	(1.8)	(2.1)
Financial investments held to cover liabilities	1,093.4	1,217.4	1,137.4

11    Financial liabilities under investment contracts

		31 December	31 December	30 June
		2008	2007	2008
		£m	£m	£m
At 1 July		1,137.4	1,130.2	1,130.2
Deposits to investment contracts		66.8	84.7	170.6
Benefits paid		(60.8)	(72.2)	(165.9)
Investment contract benefits		(50.0)	74.7	2.5
Closing balance		1,093.4	1,217.4	1,137.4

The value of these financial liabilities is determined by the fair value of financial investments held to cover liabilities at the balance sheet date.

12    Called up share capital    

	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Authorised:
200,000,000 ordinary shares of 50p	100	100	100
Issued and fully paid:
137,281,202 ordinary shares of 50p	68.6	68.6	68.6

13    Foreign exchange rates

The closing exchange rates used by the Group for the translation of balance sheet items from US$ and € to sterling were as follows:

	31 December	31 December	30 June
	2008	2007	2008
US Dollar	1.45	2.00	2.00
Euro	1.05	1.36	1.26

14    Related party transactions 

Intra-Group transactions are eliminated on consolidation and are not disclosed separately here. 

There have been no significant changes to related parties or related party transactions in the period. Related party transactions affecting the results of previous periods and an understanding of the Group's financial position at previous balance sheet dates are as disclosed in the Annual Report & Accounts for the year ended 30 June 2008.

There have been no awards during the period under the Save As You Earn (SAYE) share-save programme for employees implemented during the previous financial year. The estimated fair value of the scheme and the imputed cost for the period under review is not material to these financial statements. 

15    Financial risk management

The Group's operations expose it to a variety of financial risks. The Group's objective in the management of financial risk is to minimise, where practicable, its exposure to such risk, except when necessary to support other objectives. The principal method by which the Group seeks to manage risk is through the operation of unit-linked business, whereby the policyholder bears the financial risk relating to the financial assets and liabilities arising from such contracts.

Information concerning the operation of the frameworks to manage financial and other risk is contained in the Corporate Governance and Risk Management and Internal Control sections of the Report & Accounts for the year ended 30 June 2008, and in note 25, 'Financial risk management'. There have been no significant changes to the frameworks in the period to 31 December 2008.

While there have been no significant changes to the frameworks during the period under review, the volatility in global stock markets and deteriorating economic indicators have led to the most challenging environment for the wealth management sector for many years. The more significant financial risks to which the Group is exposed, and an estimate of the potential financial impact of each on the Group's IFRS earnings, are set out below. 

Under the unit-linked investment contracts that are written by the Group, policyholders bear the financial risks relating to the financial assets and liabilities arising from such contracts and these risks are therefore excluded from this assessment of risks affecting the Group's business.

15.1 Market risk

This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, analysed between price, interest rate and currency risk.

(a) Price risk

An overall change in the market value of the unit-linked funds would affect the annual management charges accruing to the Group since these charges, which are typically 1% pa, are based on the market value of assets under administration. Similarly, due to the fact that some of these charges may be deducted from policies in foreign currency, a change in foreign exchange rates relative to Sterling can result in fluctuations in management fee income and expenses reflected in these financial statements. The approximate impact on shareholder profits and equity of a 10% change in unit-linked fund values, either as a result of price or currency fluctuations, is £1.5m (2007: £1.6m) in a financial year.

At the balance sheet date the analysis of financial investments by currency denomination is as follows:

	31 December		30 June
	2008	2007	2008
Currency	%	%	%
US Dollars	39.0	39.0	38.0
Euro	38.0	31.0	33.0
Sterling	16.0	19.0	18.0

(b) Interest rate risk

Interest rate risk is the risk that the Group is exposed to lower returns or loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets arising from changes in underlying interest rates.

The Group is primarily exposed to interest rate risk on the balances that it holds with credit institutions and in Money market funds. The Group controls its exposure to interest rate risk by managing its treasury balances on a short-term basis.

A reduction in interest rates of 1% would reduce interest income by approximately £0.5m in a financial year.

(c) Currency risk

The Group is exposed to currency risk on the foreign currency denominated bank balances and other net operating assets that it holds to the extent that they do not match liabilities in those currencies. The Group's currency risk is minimised by frequent repatriation of excess foreign currency funds to sterling. At the balance sheet date the Group had exposures in the following currencies:

	31 December
	2008	2008	2007	2007
	US$m	€m	US$m	€m
Gross assets	12.1	19.5	15.2	27.4
Matching currency liabilities	(6.4)	(6.2)	(10.7)	(3.6)
	5.7	13.3	4.5	23.8

Amounts totalling €5.1m held at the balance sheet date (2007: €13.7m) represent capital in Hansard Europe Limited held in currency to meet regulatory and other commitments.

15.2 Credit risk

Credit risk is the risk that the Group is exposed to lower returns or loss if another party fails to perform its financial obligations to the Group.

The Group's main exposure to credit risk is in relation to deposits with credit institutions and investments in highly-rated Money market funds. These investments are made in accordance with established policy regarding minimum credit rating profile. 

An analysis of the Shareholders' cash and cash equivalent balances and liquid investments is as follows:

	31 December		30 June
	2008	2007	2008
	£m	£m	£m
Deposits with institutions	11.5	24.0	14.9
Money market funds	47.8	32.0	41.7
	59.3	56.0	56.6
UK Government stock	13.9	9.9	12.9
	73.2	65.9	69.5

Subsequent to the balance sheet date, the UK Government Stock has been sold.

Maximum counterparty exposure limits are set both at an individual subsidiary company level and on a Group wide basis. There have been no changes to fair value as a result of credit risk.

15.3     Liquidity risk

Liquidity risk is the risk that the Group, though solvent, does not have sufficient financial resources to enable it to meet its obligations as they fall due, or can only secure them at excessive cost. The Group's exposure to liquidity risk is considered to be low since it maintains a high level of liquid assets to meet its liabilities.

16    Events occurring subsequent to the balance sheet date

In the period since the balance sheet date, Group insurance companies have been notified of a number of instances in which fund structures selected by policyholders have been affected by market volatility, illiquidity and other factors that might impact on the redemption value of those fund structures. The value of funds held at the balance sheet date for which such notifications have been received is £42.2m.The impact of any value adjustments to these holdings will be immaterial to the value of investments.

Reductions in AUA arising from any value adjustments will cause declines in the Group's future asset-based income streams, but will not affect the Group's capital position. 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 value adjustments will be reflected in a corresponding adjustment to financial liabilities under investment contracts.

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, this condensed set of consolidated half-yearly financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8: namely, 

• An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
• Material related-party transactions in the first six months and any material changes in the related-party transactions in the last annual report.

The directors of Hansard Global plc are as listed in the Hansard Global plc Annual Report & Accounts for the year ended 30 June 2008. A list of current directors is maintained on the Group's website: www.hansard.com.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By order of the Board

R E G Hall

Chief Operating Officer

G S Marr

Director

25 February 2009

Results of operations on the European Embedded Value Basis for the six months ended 31 December 2008 (Unaudited)

EUROPEAN EMBEDDED VALUE INFORMATION

The European Embedded Value ('EEV') information covers the entire business of the Group, including its life assurance companies and subsidiaries providing administration, distribution and other services. EEV excludes the value of any future new business that the Group's life assurance companies may write after the valuation date, and it is calculated net of corporation tax.

1.    EEV profit

EEV operating profit for the period has been impacted by market conditions affecting the level of new business. However, as a result of 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, the EEV operating profit remains strong. After a deduction of £2.7m for the effect of premium reductions, and for more policies becoming paid-up in the period than expected, the EEV operating profit for the six months was £11.3m, compared with £17.3m in the corresponding six months of 2007, a decrease of 34.7%.

EEV profit before dividends was £34.4m in the six months ended 31 December 2008, an increase of 20.3% over the corresponding period. This is equivalent to a half-yearly return of 14.2% (2007: 13.1%) on the opening EEV.

A major source of EEV profit in the six months is the contribution of £44.6m from foreign exchange movements (2007: £6.8m). Investment performance of policyholder funds over the six months has led to a lower expectation of fund-based income in future years, which in turn has reduced the EEV by £27.8m (2007: £2.5m gain).

The main components of the EEV profit are as follows:

Six months                                                            ended		Six months           Year ended                  ended
31 December		31 December	30 June
2008		2007	2008
£m		£m	£m
New business contribution	6.5	10.5	20.3
Expected return on existing business	4.8	4.3	9.4
Experience variances	(2.7)	1.1	(3.1)
Operating assumption changes	0.0	0.0	2.8
Expected return on Net Worth	1.4	1.4	2.8
Model changes	1.3	0.0	15.7
EEV OPERATING PROFIT	11.3	17.3	47.9
Investment return variances	17.6	10.0	(0.2)
Economic assumption changes	5.5	1.3	(0.6)
EEV PROFIT	34.4	28.6	47.1

1.1     New Business Contribution

The New Business Contribution ('NBC') for the six months is £6.5m (2007: £10.5m). The effect of the credit crisis on the insurance long-term savings market has impacted on sales activity and, along with the majority of the market, the Group has reported a decline in new business premiums. This has resulted in a fall in NBC. The underlying profitability of new business written by the Group, at 7.0% for the period, remains consistently above levels enjoyed by a majority of the Group's competitors.

1.2    Expected Return on Existing Business

The expected return on existing business of £4.8m (2007: £4.3m) is the increase in the value of future profits over the six months and in new business between the point of sale and the end of the period due to the time value of money. It is based on the 5.0% assumption for the risk discount rate at the previous financial year-end and the earned rate on assets.

1.3    Experience Variances

Experience variances arise where the Group's actual experience in areas such as expenses, policy persistency, mortality and fees from policyholder activity differ during the period from the assumptions used to calculate the EEV at the previous year-end.

Experience variances gave rise to an EEV loss of £2.7m in the year (2007: £1.1m profit). This loss arose mainly from policyholders reducing their premiums on regular premium products and more policies becoming paid-up in the period than expected. However, the lapse experience was positive with fewer than expected lapses in the period.

1.4     Operating Assumption Changes

Experience continues to be broadly in line with assumptions and hence no changes were required to the assumptions set at the previous year-end.

1.5    Expected Return on Net Worth

The expected return on Net Worth of £1.4m (2007: £1.4m) reflects the anticipated increase to shareholder assets over the period due to the time value of money and its calculation is based on the 5.0% risk discount rate at the start of the period. 

1.6     Model Changes

During the six months, a number of minor improvements made to the model resulted in a small increase to the EEV of £1.3m (2007: £Nil). This is a one-off adjustment, which is not expected to recur in future years.

1.7    Investment Return Variances

The impact of market and other external conditions gave rise to EEV investment return gains of £17.6m in the six months (2007: £10.0m gain). Losses arising from poor investment performance of policyholder assets were mitigated by gains arising from the diversified exposure to different currencies together with the weakening of sterling over the period.

The main elements contributing to this profit are as follows:

	Six months ended		Year ended
	31 December		30 June
	2008	2007	2008
	£m	£m	£m
Investment performance of policyholder assets under administration	(27.8)	2.5	(12.7)
Exchange rate movements	44.6	6.8	11.4
Commissions receivable	(0.1)	0.2	1.3
Other	0.9	0.5	(0.2)
Investment return variances	17.6	10.0	(0.2)

1.8     Economic Assumption Changes

The net effect of economic assumption changes resulted in an increase of £5.5m to EEV (2007: £1.3m increase), largely as a result of the reduction in interest rate swap yields over the six months. Changes in these yields had the effect of reducing both the risk discount rate, and the rate of investment return, by 2.0%. The risk discount rate reduced from 5.0% at 30 June 2008 to 3.0% at 31 December 2008, increasing the value of future cash flows. 

2.    Detailed analysis of EEV profit

The analysis set out below shows the sources of change in each of the components of EEV over the period and, in particular, helps to illustrate the emergence of expected cash flows into cash during the period and provides a link between EEV and IFRS accounts. EEV Net Worth is defined as the market value of the shareholders' funds, determined on an IFRS basis, and adjusted to exclude certain assets such as the deferred origination costs and liabilities such as the deferred income reserve.

		Six months ended 31 December 2008										Six months ended 31 December 2007
		Movement In										Movement In
						Net		Non-Market		Frictional						Net		Non-Market		Frictional
		EEV		VIF		Worth		Risk		Costs		EEV		VIF		Worth		Risk		Costs
		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
New business contribution (NBC)		6.5		6.5		0.0		0.0		0.0		10.5		10.5		0.0		0.0		0.0
Expected return on existing business		4.8		(8.9)		13.8		(0.1)		0.0		4.3		(5.4)		9.7		0.0		0.0
Experience variances		(2.7)		0.0		(2.7)		0.0		0.0		1.1		2.7		(1.6)		0.0		0.0
Operating assumption changes		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Expected return on Net Worth		1.4		0.0		1.4		0.0		0.0		1.4		0.0		1.4		0.0		0.0
Model changes		1.3		1.3		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
EEV operating profit		11.3		(1.1)		12.5		(0.1)		0.0		17.3		7.8		9.5		0.0		0.0
Investment return variances		17.6		16.1		1.6		0.0		(0.1)		10.0		7.9		2.1		0.0		0.0
Economic assumption changes		5.5		5.5		0.0		0.0		0.0		1.3		1.3		0.0		0.0		0.0
EEV profit after tax		34.4		20.5		14.1		(0.1)		(0.1)		28.6		17.0		11.6		0.0		0.0

3.    Reconciliation of EEV

A reconciliation between opening and closing EEV is presented below for the six months ended 31 December 2008, the six months ended 31 December 2007 and the financial year ended 30 June 2008.

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Opening EEV	243.1	218.0	218.0
EEV profit after tax	34.4	28.6	47.1
	277.5	246.6	265.1
Dividends paid	(9.6)	(15.1)	(22.0)
EEV	267.9	231.5	243.1

4.    EEV balance sheet

The EEV has grown to £267.9m at 31 December 2008 from £243.1m at 30 June 2008, an increase of 10.2%. 

The EEV balance sheet is presented below.

	31 December	31 December	30 June
	2008	2007	2008
	£m	£m	£m
Free Surplus	47.9	41.3	45.6
Required Capital	13.5	11.7	11.3
Net Worth	61.4	53.0	56.9
Value of In-Force Business	212.5	183.8	192.0
Cost of Required Capital	(0.6)	(0.3)	(0.5)
Reduction for Operational Risk	(5.4)	(5.0)	(5.3)
Value of Future Profits	206.5	178.5	186.2
EEV	267.9	231.5	243.1

As at 31 December 2008, the value of future profits is £206.5m. Over a quarter of these profits are expected to convert into Net Worth within 2 years, half within 5 years and three quarters within 10 years.

5.    New business margin and profitability 

The underlying profitability of new business written by the Group remains consistently above levels enjoyed by competitors. Set out below are indicators of the Group's profitability on a range of market metrics.

5.1    New business margin

New Business Margin is defined as NBC divided by PVNBP.

The NBC during the period is the present value of the expected stream of shareholder cash flows after tax from new business written in that period. The Group's NBC has been calculated using the same economic assumptions as those used to determine the EEV as at the start of the period and the same operating assumptions used to determine the EEV as at the end of the period. NBC is shown after allowing for the cost of required capital, calculated on the same basis as for in-force business. 

PVNBP is equal to total single premium sales in the period under review plus the discounted value of regular premiums expected to be received over the term of new regular premium policies, and is calculated at the point of sale. 

New business margins were restrained by new business shortfalls, however, at 7.0% on a PVNBP basis they remain consistently above levels enjoyed by a majority of competitors.

	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
Present Value of New Business Premiums	£93.0m	£130.5m	£261.8m
New Business Contribution	£6.5m	£10.5m	£20.3m
New business margin	7.0%	8.0%	7.8%

5.2     Internal rate of return

Internal rate of return (IRR) is defined as the discount rate at which the present value of expected cash flows over the life the new business written in the period is equal to the total capital invested to support the writing of that business. The assumptions for future investment and operating performance are the same as those used in the calculation of the NBC. The average IRR on new business written during the six months ended 31 December 2008 is in excess of 15% per annum.

5.3    Break-even point

Break-even point (BEP) is defined as the point at which initial capital invested to support the writing of new business in the period (including its share of overhead expenses) is recouped from revenue. The average BEP for new business written during the six months ended 31 December 2008 is 36 months (3.0 years).

6.    EEV sensitivity analysis 

Sensitivities provide an indication of the impact of changes in particular assumptions on the EEV at 31 December 2008 and the NBC for the six months then ended. In each sensitivity calculation, all other assumptions remain unchanged except where indicated.

Given current market turbulence, a number of additional sensitivities have been included this time, together with deeper sensitivities around market and currency movements.

Impact on	EEV £m	NBC £m
At 31 December 2008	267.9	6.5
Operating Sensitivities - EEV operating profit
10% increase in expenses	(5.4)	(0.3)
100bp increase in expense inflation	(4.1)	(0.2)
100bp increase in charge inflation	3.6	0.2
100bp increase in expense & charge inflation	(0.4)	0.0
10% decrease in lapse rates	5.0	0.2
10% increase in paid-up rates	(1.9)	(0.1)
10% decrease in mortality rates	0.5	0.0
Economic Sensitivities - EEV profit
100bp decrease in risk discount rate	11.4	0.8
100bp decrease in investment return	(7.4)	(0.3)
100bp decrease in both risk discount rate & investment return	3.2	0.4
10% decrease in the value of equities and property	(9.5)	0.0
25% decrease in the value of equities and property	(23.6)	0.0
10% increase in sterling exchange rates	(18.9)	(0.8)
25% increase in sterling exchange rates	(47.1)	(2.0)
10% decrease in commissions receivable	(3.3)	(0.1)
10% increase in Required Capital	(0.1)	0.0

The sensitivity analysis indicates that the Group is exposed, through the impact on the level of future fund-based management income, primarily to movements in equity, property and currency values.

NOTES TO THE EUROPEAN EMBEDDED VALUE INFORMATION

1.    BASIS OF PREPARATION

The half-yearly supplementary information shows the Group's results for the six months ended 31 December 2008 as measured on the EEV basis.

In preparing this EEV information, the board considered the EEV Principles published by the CFO Forum, a group comprising the Chief Financial Officers of certain major listed and unlisted European assurance companies, in May 2004 and extended by additional guidance published in October 2005. The EEV information has been prepared using a ''market consistent'' basis in respect of the economic assumptions, in line with the EEV Principles.

Additional disclosures have been provided in certain areas to reflect developing market practice and the Group continues to monitor developments at the CFO Forum.

Comparative figures have not been restated for subsequent model changes.

2.    METHODOLOGY AND ASSUMPTIONS

2.1     Methodology

The methodology used to derive the EEV at the valuation date is consistent with the methodology used in relation to the consolidated financial statements in respect of the year ended 30 June 2008.

Under the EEV methodology, profit is recognised as margins are released from policy related balances over the lifetime of each policy within the Group's in-force business. The total profit recognised over the lifetime of a policy under EEV methodology is the same as reported under IFRS, but the timing of recognition is different. 

2.2    Assumptions

Operational assumptions remained unchanged from those used to calculate the EEV at 30 June 2008. As a result of external factors, certain economic assumptions have changed, as set out below.

The principal economic assumptions used in the EEV calculations are based on risk free rates. The risk discount rate used to value future expected shareholder cash flows is assumed to be the risk free rate plus a margin for any risks that are not allowed for elsewhere in the valuation. Since non-market risk is allowed for separately through a reduction to the EEV of £5.4m, the risk margin is nil. 

In line with CFO Forum Principles, risk free rates are based on interest rate swaps of comparable term to the policy cash flows at the end of the reporting year. A proportion of the Group's income and expenditure is contracted in currencies other than sterling, in particular US$ and €. In practice, the discount rate used in the valuation is based on a weighted average of the interest rate swaps pertaining to each relevant currency.

The calculation of risk free rates based on interest rate swaps of comparable term was introduced to the EEV calculations performed at 30 June 2008. EEV results for the six months to 31 December 2007 included within the EEV Information were calculated using a risk-free rate based on the yield on government fixed interest securities. The EEV results for the period ended 31 December 2007 have not been restated as the estimated impact on EEV and NBC as a result of the change is immaterial (approximately £1.0m lower and £0.2m lower, respectively than the results originally presented).

All investments are assumed to provide a return equal to the investment return on interest rate swaps, less external fund manager investment charges.

The principal economic assumptions used are set out below:

Rates per annum	Six months ended		Year ended
	31 December	31 December	30 June
	2008	2007	2008
Yield on government fixed interest securities	2.5%	4.1%	4.3%
Yield on interest rate swaps	3.0%	4.6%	5.0%
Risk discount rate (VIF calculation)	3.0%	4.1%	5.0%
Risk discount rate (NBC calculation)	5.0%	5.0%	5.0%
Future expense inflation	5.0%	5.0%	5.0%
Corporation Tax - Isle of Man	0%	0%	0%
Corporation Tax - Republic of Ireland	12.5%	12.5%	12.5%

 

END

 

 

IR SEDESISUSESE